Year 13 — Economics

Term 1 : Theme 3: The global economy

3.1 Globalisation. The term ‘globalisation’ describes a range of economic developments that enhance the ability of nations and firms to trade within a rules-based system. Topics: Growing Economies, Trade and Growth, Trading Blocs, Trade policy and trade negotiations, Exchange Rates

3.2 Economic factors in business expansion. Firms need to be able to assess the relative merits of competing potential locations for market growth and production. Topics: Conditions that prompt trade, assessing the potential of different economies

3.3 Impact of globalisation on global companies. Firms need to understand the differences between consumers in different countries and cultures. Topics: Responding to global demand, demand-side factors in global markets

EOU assessment, AS papers biweekly to refresh theme 1 and theme 2

Rationalisation

A reorganisation in the scale of a firm’s operations in order to increase efficiency

Nominal value

Prices that have not been adjusted for inflation

Real value

Prices that have been adjusted for inflation.

Index numbers

An index measures changes in a representative group of data.

Specialisation

Occurs when economic units such as individuals, businesses, regions or countries concentrate on producing specific goods or services

Division of labour

Specialised use of workers within an organisation

Foreign Direct Investment

Investment made by a business or other entity from one country into the production capacity of a business or other entity from another country e.g. factories.

Trading blocs

Governments of a group of countries agree to trade together freely i.e. normally with no trade barriers

Protectionism

When a country takes action to protect its own industries by restricting trade with other countries

Consumer surplus

The difference between the price a consumer is willing to pay for a product and the price that they actually pay.

Producer surplus

The difference between the price a producer is willing to supply a product at and the price actually received for the product.

Embargoes

A total ban on imported products

IMF

The International Monetary Fund (IMF) is comprised of 189 member countries that looks to promote monetary cooperation e.g. exchange rates and international payments and to facilitate trade globally

Push factors

Factors that force a business to leave the market in which they currently operate to look for new income streams in the future

Saturated markets

Markets where nearly all potential customers already have the product that a business sells, or a close substitute of it

Pull factors

Factors that attract a business to a global market

Off-shoring

A business that relocates production to another country

Outsourcing

When a business contracts out production to another business.

Disposable income

Total income an individual has available to spend after paying income taxes and any other statutory payments.

EPG model

A framework that can used to look at marketing approaches used by global firms

Geocentricity

A marketing approach is where the promotion of the product is undertaken based on a global or worldly point of view.

Polycentricity

A marketing approach is where the promotion of the product is undertaken based on the beliefs of the nation in which the business is operating.

MNC

A multinational corporation is a business that, although operated from one country, has facilities and assets in more than one country

  • Spiritual
  • Moral
  • Social
  • Cultural

Develop the individual:

Individuals will be able to develop an understanding of trade between countries and discuss the impacts

Create a supportive community:

Through group work and discussions students will be able to form their own idea of what makes good economic policy

Term 2 : Theme 3: The global economy

3.4 Impact of globalisation on local and national economies. Large firms can wield significant market power and can have both positive and negative effects in the countries in which they operate. Topics: The impact of multinational corporations (MNCs), ethical issues, controlling MNCs

3.5 Global labour markets. Globalisation has opened up labour markets, giving firms access to a greater number of potential employees. Production has sometimes moved to where labour is cheaper and this has had an impact on both pay and job opportunities. Topics Covered: Employment patterns, wage rates, minimum wage legislation

3.6 Inequality and re-distribution globalisation has helped to reduce the number of people living in absolute poverty and has had an impact on inequality between and within nations. Topics Covered: Poverty and inequality, reducing poverty, the impact of inequality on economics agents, re-distribution of income and wealth

EOU assessment, AS papers biweekly to refresh theme 1 and theme 2

  • Spiritual
  • Moral
  • Social
  • Cultural

Develop the individual:

Individuals will be able to develop an understanding of trade between countries and discuss the impacts

Create a supportive community:

Through group work and discussions students will be able to form their own idea of what makes good economic policy

Term 3 : Theme 3: The global economy

4.1 Competition and market power. Firms operate in markets with varying degrees of competition and this affects their decisions and the way in which resources are used. Topics: Spectrum of competition, barriers to entry, oligopoly, business objectives and pricing decisions, productive and allocative efficiency.

4.2 Market power and market failure. Firms do not always behave in a way that benefits all economic agents and governments may intervene to regulate the power these firms have. Topics: Market failure, business regulation, arguments for and against regulation.

4.3 Market failure across the economy. Markets may not produce outcomes that are always considered socially desirable. This may prompt governments to intervene in an attempt to change the outcomes. Topics: Market failure in society externalities, policies to deal with market failure

EOU online assessment

Monetary factors

Financial rewards for a worker supplying their labour to a firm

Non-monetary factors

Non-financial rewards for a worker supplying their labour to a firm

Labour immobility

Difficulty for labour to be put to alternative uses due to lack of skills or experience

Marginal revenue

The addition to revenue of selling an additional unit of output

Marginal revenue product

The change in total revenue from the employment of an extra unit of labour

Minimum income standards

A measurement of what is required to achieve a minimum acceptable standard of living

Material deprivation

How affordable a basket of goods and services is in order for individuals to have an acceptable standard of living in their own country

Headcount ratio

The percentage of the population below the poverty line

Non-governmental organisation

A non-governmental organisation (NGO) is one that is not-for-profit and is independent of government

Poverty Trap

Any mechanism that stops those on low incomes from getting out of poverty

Proportional tax

Also known as a flat tax. A tax with a constant marginal rate

Progressive tax

A progressive tax means that a higher rate of tax is paid as incomes increase.

Regressive tax

A regressive tax is one where a lower rate of tax is paid as incomes increase.

  • Spiritual
  • Moral
  • Social
  • Cultural

Develop the individual:

Students will be able to develop arguments dealing with poverty and legislation to help them form evaluations in context

Create a supportive community:

Through group work and independent research students will be able to discuss the different legislation in place to govern the economy and formulate their own views on the impact on poverty

Term 4 : Theme 4: Making markets work

4.1 Competition and market power. Firms operate in markets with varying degrees of competition and this affects their decisions and the way in which resources are used. Topics: Spectrum of competition, barriers to entry, oligopoly, business objectives and pricing decisions, productive and allocative efficiency.

4.2 Market power and market failure. Firms do not always behave in a way that benefits all economic agents and governments may intervene to regulate the power these firms have. Topics: Market failure, business regulation, arguments for and against regulation.

4.3 Market failure across the economy. Markets may not produce outcomes that are always considered socially desirable. This may prompt governments to intervene in an attempt to change the outcomes. Topics: Market failure in society externalities, policies to deal with market failure

EOU online assessments

Monopoly

Monopoly occurs when one firm dominates the market

Concentration ratio (CR)

The concentration ratio (CR) tells us the number of firms that dominate the market

Oligopoly

Oligopoly occurs when a few firms dominate the market.

Monopolistic competition

Monopolistic competition occurs when there are many firms in the market but there is some form of product differentiation

Non-price competition

Non-price competition occurs when a firm distinguishes or differentiates its product from that of its competitors

Sunk costs

Start-up costs or sunk costs are costs that the firm cannot recover if it were to exit the market

N-firm concentration ratios

The n-firm concentration ratio (CR) is a measurement of the market share of the n firms that dominate the market

Tacit agreement

Tacit agreement can occur in oligopolies where firms agree to manipulate the market in some form e.g. pricing strategies or geographically sharing out the market in order to create higher profits.

Non-collusive oligopoly

Non-collusive oligopoly occurs when firms do not collude when undertaking decision-making

Fixed cost

Fixed cost (FC) or Total fixed cost (TFC) does not vary with output. This might include rent, capital goods such as factories and machinery, or marketing costs.

Variable cost

Variable cost (VC) varies with output. As output increases so does variable cost and vice versa.

Marginal cost

Marginal cost (MC) is the cost of producing an additional unit of output.

Average cost (AC)

Average cost (AC) or average total Cost (ATC) is the average cost of producing a unit of output: total cost/output.

Average total cost

Average total cost (ATC) is total cost divided by output.

Collusion

Collusion occurs when firms in an oligopolistic market agree to act as one firm in order to benefit from elements of monopoly.

Cartels

A cartel is a formal agreement between firms to collude in the operation of the market

Monopsony

Monopsony occurs when there is only one buyer in the market.

Privatisation

Privatisation is the transference of assets from the government to privately owned businesses.

Externalities

Externalities are the costs and benefits to a third party created by economic agents when undertaking their activities

Demerit goods

A demerit good is one that is deemed to be bad for society but is over provided by the market.

Marginal private benefit

Marginal private benefit (MPB) is the additional amount of satisfaction that a consumer gains from an additional unit of a good or service

Marginal private cost

Marginal private cost (MPC) is the cost to a producer of producing an additional unit

Marginal social benefits

Marginal social benefits (MSB) are those benefits of consuming or producing an additional unit of goods or services that are received by society.

Marginal social costs

Marginal social costs (MSC) are those costs of consuming or producing an additional unit of goods or services that are paid for by society.

Ad valorem tax

An ad valorem tax is a percentage of the price of the good or service

  • Spiritual
  • Moral
  • Social
  • Cultural

Develop the individual:

Students will develop analytical and evaluative skills through looking at market failures and demand for goods and services

Create a supportive community:

Through group work students will be able to debate the reasons for market failures allowing them to develop their own point of view with evidence and therefore support their ability to analyse and evaluate a piece of work

Term 5: Theme 4: Making markets work

4.5 Risk and the financial sector. Firms and individuals require access to credit to meet their respective needs. The financial sector provides a system that facilitates growth and development; economic policies regulate that system in the hope of ensuring stability. Topics: Risks and uncertainty, the role of the financial sector, the role of the central bank, the global financial crisis.

Revision for all themes, Paper 1,2 and 3 preparation on pre-release material.

EOU and Mock exams

Real national output

Real national output is the output of the economy taking into account inflation.

Fiscal Policy

The manipulation of government spending, taxation and government borrowing to influence the level of economic activity.

Monetary policy

The manipulation of the rate of interest, the money supply and exchange rates to influence the level of economic activity.

Negative output gaps

A negative output gap occurs when actual output is below the trend rate.

Positive output gaps

A positive output gap occurs when actual output is above the trend rate.

Supply-side Policy

Policies that seek to improve the long run productive potential of the economy.

Marginal tax

Marginal tax is the percentage of tax paid on an additional £1 of earnings

Deregulation

Opening markets to freer competition and removing barriers to entry should help to drive productivity gains and boost supply

Privatisation

Minimisation of state control which can often be inefficient

Demand side policies

Demand Side Policies are attempts to increase or decrease aggregate demand to affect output, employment, and inflation.

Classical economists

Classical economists believed in a laissez faire approach to the economy with little government involvement

Neo-classical economists

Neo-classical economists believe that the focus of economic policy should be based on demand and supply, with both individuals and firms behaving rationally to maximise utility and profits

Keynesian economists

Keynesian economists believe that in the long run the economy can operate below full employment

Supply-side shock

A supply-side shock will impact on the provision of a good or service and will effect price

Demand-side shock

A demand-side shock will impact on the consumption of a good or service and will effect price

Forward markets

A forward market is one that allows economic agents to set the price of an asset today for delivery in the future

Financial markets

A financial market is a one where buyers and sellers exchange financial assets (securities) such as shares (equities), currency or bonds

Commercial banks

These are known as high street or retail banks e.g. Barclays, HSBC & NatWest

Investment Banks

Unlike commercial banks they do not directly serve households

Working capital

Working capital is the finance used for the day-to-day running of the business.

Liquidity

A business requires liquidity e.g. cash to survive and this is enabled by the financial sector.

Prudential Regulation Authority

The PRA was created as a part of the Bank of England by the Financial Services Act 2012 and is responsible for the prudential regulation and supervision of around 1,700 banks, building societies, credit unions, insurers and major investment firms

Financial Policy Committee

The FPC is charged with a primary objective of identifying, monitoring and taking action to remove or reduce systemic risks with a view to protecting and enhancing the resilience of the UK financial system

Financial Conduct Authority

The FCA is a body which aims to improve the workings of financial markets and ensure consumers get a fair deal. In essence, to act as a consumer champion

Liquidity Ratios

Liquidity ratios measure a company’s liquid assets against its short-term liabilities and as such are a gauge of a banks ability to meet its short-term liabilities

Capital Ratios

Capital in a financial sense is best thought of as the difference between a banks assets and its liabilities, in other words its net worth to shareholders who have a stake in the bank

Sub-prime mortgages

Mortgages that have been sold to individuals with poor credit records

Moral hazard

Any situation in which one person makes the decision about how much risk to take, while someone else bears the cost if things go badly

Market bubbles

Typically means that the price of an asset, usually property, stocks or gold, has deviated significantly from its intrinsic value and prices rise very quickly in the short term.

Speculation

Speculation is the act of trading in an asset, or conducting a financial transaction, that has a significant risk of losing most or all of the initial outlay.

Shadow Banking

Lending and other financial activities conducted by unregulated institutions or under unregulated conditions

  • Spiritual
  • Moral
  • Social
  • Cultural

Develop the individual:

Students will be able to work out Micro and Macro economic impacts on individuals and use this to develop analytical and evaluative skills

Create a supportive community:

Through group work and independent research students will be able to form their own ideas of what are the impact of decisions on individuals and groups

Term 6: Theme 4: Making markets work

4.5 Risk and the financial sector. Firms and individuals require access to credit to meet their respective needs. The financial sector provides a system that facilitates growth and development; economic policies regulate that system in the hope of ensuring stability. Topics: Risks and uncertainty, the role of the financial sector, the role of the central bank, the global financial crisis.

Revision for all themes, Paper 3 preparation on pre-release material.

Mock Papers and final examination

  • Spiritual
  • Moral
  • Social
  • Cultural

Develop the individual:

Students will be able to develop practice in using case studies to answer questions

Create a supportive community:

Through group work and discussion individual students will learn how to structure an exam question in a way that allows the to gain the highest marks through analysis and evaluation