The allocation of resources

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Sample objectives

What this unit covers

• Microeconomics and macroeconomics: Understand the distinction between microeconomics and macroeconomics, along with the roles of various decision makers in each area.
• Microeconomics and macroeconomics: Recognize the key aspects of macroeconomics and its relevance to the broader economic context.
• The role of markets in allocating resources: Understand how a market system operates, including the roles of buyers and sellers, the distribution of limited resources, and concepts of market equilibrium and disequilibrium.
• The role of markets in allocating resources: Recognize that the economic problem leads to three fundamental questions regarding resource allocation: what to produce, how to produce it, and for whom it should be produced.
• Demand: Understand the concept of demand, including how to define it and create relevant diagrams to illustrate it.
• Demand: Learn how price affects demand and quantity, including how to draw a demand curve and explain movements along it using terms like extensions and contractions in demand.
• Supply: Understand the concept of supply, including how to define it and create relevant diagrams to illustrate it.
• Supply: Learn how price affects supply and quantity, including how to draw and interpret a supply curve, and understand terms like extensions and contractions in supply.
• Price determination: Understand the concept of market equilibrium, including how to define, illustrate, and interpret demand and supply schedules and curves to determine the equilibrium price and quantity sold in a market.
• Price determination: Learn about market disequilibrium, including how to define, illustrate, and interpret demand and supply schedules and curves to recognize prices that indicate disequilibrium, as well as situations of shortages (where demand exceeds supply) and surpluses (where supply exceeds demand).
• Price changes: Identify the factors that lead to changes in prices, focusing on how shifting market conditions can influence these changes.
• Price changes: Discuss the effects of price changes, using demand and supply diagrams to demonstrate how these changes impact equilibrium price and sales levels.
• Price elasticity of demand (PED): Understand the concept of price elasticity of demand (PED).
• Price elasticity of demand (PED): Calculate price elasticity of demand using the appropriate formula and explain what the results indicate. Create and analyze demand curve diagrams to illustrate varying levels of PED.
• Price elasticity of supply (PES): Understand the meaning of price elasticity of supply (PES).
• Price elasticity of supply (PES): Calculate the price elasticity of supply using the appropriate formula and explain what the results indicate. Create and analyze supply curve diagrams to illustrate varying levels of PES.
• Market economic system: Explain what a market economic system is.
• Market economic system: Discuss the benefits and drawbacks of a market economic system, including examples from various countries.
• Market failure: Understand the concept of market failure and recognize key terms related to it, including public goods, merit goods, demerit goods, social benefits, external benefits, private benefits, social costs, external costs, and private costs.
• Market failure: Identify the factors that lead to market failure, focusing on public goods, merit and demerit goods, external costs and benefits, monopoly power abuse, and factor immobility, along with relevant examples.
• Mixed economic system: Explain what a mixed economic system is.
• Mixed economic system: Discuss how government actions can correct market failures, including definitions and diagrams for maximum and minimum pricing, indirect taxes, and subsidies. Also, consider the effects of regulations, privatisation, nationalisation, and direct provision of goods, as well as how effective these interventions are in addressing the limitations of a market economy.