3.1 Money and banking
Topic
3.1.1 money
3.1.2 banking
Guidance
The forms, functions and characteristics of money.
The role and importance of central banks and commercial banks for government, producers and consumers.
3.2 Households
Topic
3.2.1 the influences on spending, saving and borrowing
Guidance
Including income, the rate of interest and confidence – between different households and over time.
3.3 Workers
Topic
3.3.1 factors affecting an individual’s choice of occupation
3.3.2 wage determination
3.3.3 reasons for differences in earnings
3.3.4 division of labour/specialisation
Guidance
Wage and non-wage factors.
The influences of demand and supply, relative bargaining power and government policy, including minimum wage.
How changes in demand and supply, relative bargaining strengths, discrimination and government policy can all influence differences in earnings between workers whether they are:
skilled/unskilled; primary/secondary/tertiary; male/ female; private sector/public sector.
Definition, drawing and interpretation of diagrams that illustrate the effects of changes in demand and supply in the labour market.
Advantages and disadvantages for workers, firms and the economy.
3.4 Trade unions
Topic
3.4.1 definition of a trade union
3.4.2 the role of trade unions in the economy
3.4.3 the advantages and disadvantages of trade union activity
Guidance
Including engaging in collective bargaining on wages, working hours and working conditions; protecting employment; and influencing government policy.
Factors influencing the strength of trade unions. From the viewpoint of workers, firms and the government.
3.5 Firms
Topic
3.5.1 classification of firms
3.5.2 small firms
3.5.3 causes and forms of the growth of firms
3.5.4 mergers
3.5.5 economies and diseconomies of scale
Guidance
In terms of primary/secondary/tertiary sectors and private/public sector, and the relative size of firms.
Note: detailed knowledge of different types of structure of a firm is not required.
The advantages and disadvantages of small firms, the challenges facing small firms and reasons for their existence.
Internal growth, for example increased market share. External growth, for example mergers.
Examples, advantages and disadvantages of different types of mergers: horizontal, vertical, and conglomerate.
How internal and external economies and diseconomies of scale can affect a firm/industry as the scale of production changes.
3.6 Firms and production
Topic
3.6.1 demand for factors of production
3.6.2 labour-intensive and capital-intensive production
3.6.3 production and productivity
Guidance
Influences to include demand for the product, the price of different factors of production, their availability and their productivity.
The reasons for adopting the different forms of production and their advantages and disadvantages.
The difference between, and influences on, production and productivity.
3.7 Firms’ costs, revenue and objectives
Topic
3.7.1 definition of costs of production
3.7.2 calculation of costs of production
3.7.3 definition of revenue
3.7.4 calculation of revenue
3.7.5 objectives of firms
Guidance
Total cost (TC), average total cost (ATC), fixed cost (FC), variable cost (VC), average fixed cost (AFC), average variable cost (AVC).
Note: marginal cost is not required.
Calculation of TC, ATC, FC, VC, AFC and AVC.
Definition, drawing and interpretation of diagrams that show how changes in output affect costs of production.
Total revenue (TR) and average revenue (AR).
Note: marginal revenue is not required.
Calculation of TR and AR.
The influence of sales on revenue.
Survival, social welfare, profit maximisation and growth.
3.8 Market structure
Topic
3.8.1 competitive markets
3.8.2 monopoly markets
Guidance
The effect of having a high number of firms on price, quality, choice, profit.
Note: the theory of perfect and imperfect competition and diagrams are not required.
Characteristics, advantages and disadvantages of monopoly.
Note: diagrams are not required.
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