Economics lessons
A level & IB Economics: markets, elasticity, market failure, macro objectives, government policy, and the global economy.
Key topics
- Markets: demand & supply
- Elasticity
- Market failure
- Macro objectives
- Government policy
- The global economy
Lesson course
Work through each lesson, run the interactive practice, and tick it off as you go.
1. The market
Micro
Scarcity & choice
Explain scarcity and opportunity cost.
Resources are scarce but wants are unlimited, so every choice has an opportunity cost — the next best alternative given up.
Give three real opportunity-cost examples.
Demand & supply
Explain demand, supply and their shifts.
Demand falls as price rises; supply rises as price rises. Non-price factors (income, costs, tastes) shift the whole curve.
Draw shifts caused by three non-price factors.
Market equilibrium
Find and interpret market equilibrium.
Equilibrium is where demand meets supply. A surplus pushes price down; a shortage pushes price up until the market clears.
Show how a shortage and a surplus correct.
2. Elasticity
Micro
Price elasticity of demand
Calculate and interpret PED.
PED = %ΔQd ÷ %ΔP. Demand is elastic if the magnitude is greater than 1 (responsive), inelastic if less than 1.
Calculate PED and link it to revenue.
Income & cross elasticity
Use YED and XED.
YED measures the response to income (normal vs inferior goods); XED measures the response to another good's price (substitutes vs complements).
Classify goods using YED and XED signs.
Price elasticity of supply
Explain what makes supply elastic.
PES measures how responsive supply is to price. Supply is more elastic with spare capacity, stock, and over longer time periods.
Explain two factors affecting PES.
3. Market failure
Micro
Externalities
Analyse external costs and benefits.
Externalities are spillover costs or benefits on third parties — e.g. pollution (negative) or vaccination (positive) — causing markets to over- or under-produce.
Draw an externality diagram for pollution.
Public goods
Explain why markets under-provide some goods.
Public goods are non-rival and non-excludable, so markets under-provide them because of the free-rider problem.
Explain the free-rider problem with an example.
Government intervention
Evaluate ways to correct market failure.
Governments correct failure with taxes, subsidies, regulation and tradable permits — but risk government failure (unintended effects).
Evaluate a tax versus a subsidy for one market.
4. Macro objectives
Macro
Growth & GDP
Explain growth and the business cycle.
Economic growth is a rise in real GDP. The business cycle moves through boom, slowdown, recession and recovery.
Annotate a business-cycle diagram.
Inflation & unemployment
Define and measure both objectives.
Inflation is a sustained rise in the general price level (measured by CPI). Unemployment counts those willing and able to work but without a job.
Explain two causes of inflation.
Balance of payments
Interpret the current account.
The current account records trade in goods and services plus income flows; a deficit means imports exceed exports.
Explain one cause of a current-account deficit.
5. Government policy
Macro
Fiscal policy
Use spending and taxation to manage demand.
Fiscal policy uses government spending and taxation to influence demand; a budget deficit means spending exceeds tax revenue.
Explain how fiscal policy can close an output gap.
Monetary policy
Explain interest rates and the money supply.
Central banks set interest rates and may use quantitative easing to hit an inflation target; lower rates encourage borrowing and spending.
Explain how a rate cut affects demand.
Supply-side policy
Explain measures to raise capacity.
Supply-side policies (education, infrastructure, deregulation, tax incentives) aim to raise productive capacity and long-run growth.
Give two supply-side policies and their effects.
6. The global economy
Macro
International trade
Explain specialisation and trade.
Countries specialise by comparative advantage and trade, raising total output. Trade can be restricted by tariffs and quotas.
Explain one benefit and one cost of free trade.
Exchange rates
Explain how exchange rates affect trade.
An exchange rate is the price of one currency in another. A weaker currency makes exports cheaper and imports dearer.
Explain the effect of a depreciation on exports.
Development
Explain measures and barriers to development.
Development means rising living standards (HDI combines income, health and education). Barriers include debt, weak institutions and reliance on primary exports.
Evaluate one strategy to promote development.
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