The allocation of resources: how the market works; market failure

Candidates should be able to:

• describe the allocation of resources in market and mixed economic systems; describe the terms primary, secondary and serivce (tertiary) sector in an economy
• demonstrate the principle of equilibrium price and analyse simple market situations with changes in demand and supply
• describe the causes of changes in demand and supply conditions and analyse such changes to show effects in the market
• define price elasticity of demand and supply and perform simple calculations
• demonstrate the usefulness of price elasticity in particular situations such as revenue changes, consumer expenditure
• evaluate the merits of the market system
• describe the concept of market failure and explain the reasons for its occurrence
• define private and social costs and benefits and discuss conflicts of interest in relation to these costs and benefits in the short-term and long-term through studies of the following issues:
  • conserving resources versus using resources
  • public expenditure versus private expenditure.