2. The role of markets and money

2.1 The role of markets

• explain what is meant by a market
• explain the features of the primary, secondary and tertiary sectors, including the difference between the production of products and services
• explain the difference between factor and product markets, including their interdependence
• evaluate the costs and benefits of specialisation and exchange in markets including for producers, workers, regions and countries

2.2 Demand

• explain what is meant by demand
• draw and explain a demand curve using data, including individual and market demand
• draw shifts of, and movements along, the demand curve
• analyse the causes and consequences for consumers and producers, of shifts of, and movements along, the demand curve
• explain price elasticity of demand
• draw demand curves of different elasticity
• evaluate the importance of price elasticity of demand for consumers and producers

2.3 Supply

• explain what is meant by supply
• draw and explain a supply curve using data, including individual and market supply
• draw shifts of, and movements along, the supply curve
• analyse the causes and consequences for consumers and producers, of shifts of, and movements along, the supply curve
• explain price elasticity of supply
• draw supply curves of different elasticity
• evaluate the importance of price elasticity of supply for consumers and producers

2.4 Price

• explain price as a reflection of worth and its role in determining an efficient distribution of resources
• explain what is meant by equilibrium price and quantity
• draw and analyse the interaction of demand and supply
• explain the role of markets in the determination of price and the allocation of resources
• analyse how the market forces of demand and supply affect equilibrium price and quantity

2.5 Competition

• explain competition between producers in a market economy, including the reasons why producers compete
• analyse how competition affects price
• evaluate the economic impact of competition on producers and consumers
• explain the meaning of monopoly and oligopoly and how they differ from competitive markets

2.6 Production

• explain the role of producers, including individuals, firms and the government 
• evaluate the importance of production and productivity for the economy
• calculate and explain total cost, average cost, total revenue, average revenue, profit and loss
• evaluate the importance of cost, revenue, profit and loss for producers, including how costs and revenues affect profit and supply
• explain what is meant by economies of scale

2.7 The labour market

• explain the role and operation of the labour market, including the interaction between workers and employers
• analyse the determination of wages through supply and demand, including factors affecting the supply and demand of labour
• explain and calculate gross and net pay, including deductions through income tax, national insurance and pension contributions

2.8 The role of money and financial markets

• explain the role of money as a medium of exchange
• explain the role of the financial sector for the economy, including financial institutions such as banks, building societies and insurance companies
• evaluate the importance of the financial sector for consumers, producers and government
• analyse how different interest rates affect the levels of saving, borrowing and investment
• calculate the effect on savings and borrowings of changes in the rate of interest

3. Economic objectives and the role of government

3.1 Economic growth

• explain what is meant by economic growth
• calculate and explain how economic growth is measured with reference to Gross Domestic Product (GDP) and GDP per capita
• analyse recent and historical GDP data
• analyse the determinants of economic growth, including investment, changes in technology, size of workforce, education and training, availability of natural resources and government policies
• evaluate the costs and benefits of economic growth, including the impact on economic, social and environmental sustainability

3.2 Low unemployment

• explain what is meant by employment and unemployment
• explain how unemployment is measured using the Claimant Count
• calculate the unemployment rate
• analyse recent and historical unemployment figures
• explain the types of unemployment, including cyclical, frictional, seasonal and structural unemployment
• evaluate the causes and consequences of unemployment for individuals, regions and the government

3.3 Fair distribution of income

• explain what is meant by the distribution of income, including different types of income and the difference between income and wealth
• calculate income and wealth
• evaluate the causes of differences in the distribution of income and wealth and the consequences for an economy

3.4 Price stability

• explain what is meant by price stability and inflation, including the difference between real and nominal values
• explain how inflation is measured using the Consumer Price Index (CPI)
• calculate the effect of inflation on prices
• analyse recent and historical inflation figures
• evaluate the causes of inflation and the consequences for consumers, producers, savers and the government

3.5 Fiscal policy

• explain purposes of government spending and sources of government revenue, including direct taxes and indirect taxes
• explain what is meant by a balanced government budget, budget surplus and budget deficit
• explain what is meant by fiscal policy and how it can be used to achieve economic objectives
• calculate and analyse how taxes and government spending can affect markets as well as the overall economy
• evaluate the costs, including opportunity cost, and the benefits of fiscal policy on the economy to achieve economic objectives
• evaluate economic consequences of measures to redistribute income and wealth, including progressive taxes

3.6 Monetary policy 

• explain what is meant by monetary policy and how it can be used to achieve economic objectives
• analyse how monetary policy can affect growth, employment and price stability
• evaluate the effects of monetary policy on consumer spending, borrowing, saving and investment

3.7 Supply side policies

• explain what is meant by supply side policy and how it can be used to achieve economic objectives
• evaluate the costs, including opportunity cost, and the benefits of supply side policies for the economy

3.8 Limitations of markets

• explain what is meant by positive and negative externalities
• explain government policies to correct positive and negative externalities, including taxation and subsidies, state provision, legislation and regulation and information provision
• evaluate the use and impact of government policies to correct positive and negative externalities
• evaluate the costs, including opportunity cost, and the benefits of government policies to correct positive and negative externalities

4. International trade and the global economy

4.1 Importance of international trade

• explain why countries import and export goods and services and the benefits of this for consumers and producers
• explain free trade agreements including the European Union 

4.2 Balance of payments

• explain the balance of payments on current account
• explain the meaning of a balanced current account, a current account surplus and current account deficit
• calculate deficits and surpluses
• analyse recent and historical data on exports and imports
• evaluate the importance of the balance of payments on current account to the UK economy
• evaluate the causes of surpluses and deficits of the balance of payments on current account

4.3 Exchange rates 

• draw and analyse how exchange rates are determined through the interaction of supply and demand
• calculate currency conversion
• analyse recent and historical exchange rate data
• evaluate the effect of changes in the exchange rate on consumers and producers

4.4 Globalisation

• explain globalisation, including its driving factors
• explain how development is measured, including GDP per capita, life expectancy, access to health care, technology and education
• evaluate the costs and benefits of globalisation to producers, workers and consumers in developed countries, including the impact on economic, social and environmental sustainability
• evaluate the costs and benefits of globalisation to producers, workers and consumers in less developed countries, including the impact on economic, social and environmental sustainability