Economics - Year 13

Economics Overview

Term 1- Theme 3-Business behaviour and the labour market: Theme 3- 3.1 Business growth 3.2 Business objectives 3.3 Revenues, costs and profits

3.1.1 Sizes and types of firms 3.1.2 Business growth 3.1.3 Demergers 3.2.1 Business objectives 3.3.1 Revenue 3.3.2 Costs 3.3.3 Economies and diseconomies of scale 3.3.4 Normal profits, supernormal profits and losses

  1. End of unit assessments based on Topic 3.1, 3.2 and 3.3, these assessments are completed in timed conditions and are based on A-level exam questions, which helps prepare students for their A-Level examinations
Business growth

When a business increases the size of its operations This could be: Internally Opening new stores Franchising Externally Mergers Takeovers

Public sector organisations

That sector of the economy that is owned and controlled by the government rather than individuals or groups of individuals

Private sector organisations

The sector of the economy that is owned and controlled by individuals or groups of individuals rather than by the government

Principal-agent problem

A situation that occurs when there is a difficulty in getting one party, the manager or director, to work in the best interests of the principal party, the owners

Demergers

The process of splitting a business into separate components

Business objectives

Targets that a business wants to achieve within a set period of time

Revenue

The income received by a firm from selling goods and services

Costs

Expenditures incurred by a firm as part of the firm’s operations

Economies of scale

The advantages enjoyed by a firm, when unit costs fall, as it increases the scale of production

Diseconomies of scale

The problems experienced when unit costs, or average cost per unit, rise as a firm increases the scale of production

Normal profit

The minimum level of profit required by a firm to continue to operate and remain competitive in a market

Supernormal profit

Profit in excess of normal profit that occurs when average revenue > average total cost (AR > ATC)

Losses

The situation where total costs made by a business are greater than total revenue

  • Spiritual
  • Moral
  • Social
  • Cultural
Develop the individual:

Understanding the business side of the economy how firms operate within the UK.

Create a supportive community:

Group work and the development of research will help create an environment where students will support each other.

Term 2- Theme 3: Business behaviour and the labour market: Theme 3- 3.4 Market structures

3.4.1 Efficiency 3.4.2 Perfect competition 3.4.3 Monopolistic competition3.4.4 Oligopoly 3.4.5 Monopoly 3.4.6 Monopsony 3.4.7 Contestability

  1. End of unit assessments based on Topic 3.4, These assessments are completed in timed conditions and are based on A-level exam questions, which helps prepare students for their A-Level examinations.
Efficiency

When the maximum amount of products are produced at their minimum cost whilst maximising their benefit to society

Inefficiency

A situation where a firm does not maximise the amount of products it produces, operates above minimum cost and does not maximise benefits to society

Perfect competition

A hypothetical market structure where all firms sell homogenous products and are price takers

Monopolistic competition

A type of imperfect competition with many firms selling differentiated products.

Oligopoly

A type of market structure where a few firms dominate, the concentration ratio is high

Monopolies

A market structure where there is only one producer in an industry

Monopsony

A market structure where there is a sole (pure monopsony) or dominant buyer in the market

Contestability

The degree to which markets are contestable i.e. the degree of freedom to enter or exit the market, the degree of sunk costs and the degree of perfect knowledge

  • Spiritual
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  • Cultural
Develop the individual:

Develop and understanding of different market structures and how they influence an economy.

Create a supportive community:

Students work together to understand the concepts being introduced.

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Derived demand

Demand for a factor of production such as labour as a result of demand for the final product that that factor of production can produce.

Human capital

The amount of skill, knowledge, talent, experience and ability of workers. Human capital can be increased through education and training.

Geographical mobility of labour

The ability of labour to move around an area, region or country in order to work. Geographical mobility is affected by things such as family ties, transport networks, transferable qualifications and common language.

Labour supply

The labour supply is the number of hours that people are willing and able to supply at a given wage rate. The labour supply curve for any industry or occupation will be upward sloping. As wages rise, other workers enter this industry attracted by the incentive of higher pay.

Gender pay gap

The difference between male and female earnings, usually expressed as a percentage of male earnings. In the UK, the gender pay gap is around 20%.

Living wage

A wage that provides enough money for a working person to live decently and provide for their family.

Max. wage

A wage that is set below the equilibrium wage rate. In theory, the outcome would be an excess demand for labour, or a labour shortage.

NMW

A wage that is set above the equilibrium wage rate. In theory, the outcome would be an excess supply of labour, or unemployment – called the National Living Wage since 2016.

Zero hours contracts

Zero Hours Contracts do not guarantee a minimum number of working hours each week. In the UK labour market, People on “zero-hours contracts” are more likely to be young, part time, women, or in full-time education when compared with other people in employment.

Wage differentials

The difference in wages between workers. The term can refer to differences in wages between differently skilled workers in the same industry, or similar-skilled workers in different industries.

  • Spiritual
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Develop the individual:

Create a supportive community:

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CMA

Main competition policy body in the UK. Their main stated aim is to make markets work well for consumers, businesses and the economy

Deregulation

The opening up of markets to competition by reducing one or more barriers to entry. The aim is to increase market supply, stimulate competition and innovation and drive prices down for consumers.

Laissez-faire

A doctrine that government should not interfere with actions of business and markets.

Nationalisation

When a government takes over a private sector company.

Privatisation

The sale of state-owned companies to the private sector, normally through a stock market listing. The opposite of nationalisation.

Regulatory capture

When industries under the control of a regulatory body appear to operate in favour of the vested interest of monopoly producers rather than consumers.

Where parties have unequal access to information in a market.

Asymmetric information

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Develop the individual:

Create a supportive community:

Term 1-Theme 4 -A global perspective: Theme 4- 4.1 International economics

4.1 International economics4.1.1 Globalisation4.1.2 Specialisation and trade4.1.3 Pattern of trade4.1.4 Terms of trade4.1.5 Trading blocs and the World Trade Organisation (WTO)4.1.6 Restrictions on free trade4.1.7 Balance of payments4.1.8 Exchange rates4.1.9 International competitiveness

  1. End of unit assessment based on topic 4.1. These assessments are completed in timed conditions and are based on A-level exam questions, which helps prepare students for their A-Level examinations
Globalisation

The integration of international economies leading to a world market

Specialisation

When economic units, such as individuals, firms, regions or countries, concentrate on producing specific goods or services

The goods and services that a country trades and who it trades with

Pattern of trade

Terms of trade

The terms of trade is the ratio of export prices to import prices

Trading blocs

Economic units formed when the governments of a group of countries agree to trade together freely i.e. normally with no trade barriers

World Trade Organisation (WTO)

An organisation whose purpose is to promote free trade by persuading countries to abolish import tariffs and other barriers

Restrictions on free trade

The instruments of policy that are used by governments to limit the free movement of goods and services between countries

Balance of payments

A record of a country’s trade in goods and services, investment income and transfers with the rest of the world

Exchange rate systems

The way in which the value of a domestic currency e.g. £ is determined. Exchange rate systems include floating, fixed and managed exchange rates

International competitiveness

The ability of a business to compete in global markets to become a leader in a given industry across the world

  • Spiritual
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Develop the individual:

Student will get an appreciation of how international economies work together and the impact they have on developed and developing economies.

Create a supportive community:

Through group discussion and independent learning, students will develop analytical and evaluative skills.

Term 2-Theme 4- A global perspective : Theme 4- 4.2 Poverty and inequality and 4.3 Emerging and developing economies

4.2.1 Absolute and relative poverty 4.2.2 Inequality 4.3.1 Measures of development 4.3.2 Factors influencing growth and development 4.3.3 Strategies influencing growth and development

  1. End of unit assessments based on Topic 4.2 and 4.3. These assessments are completed in timed conditions and are based on A-level exam questions, which helps prepare students for their A-Level examinations
Measures of development

Indicators used to look at the extent to which countries have improved their economic wellbeing and quality of life

Growth

An increase in the value of real output in an economy over time

Development

The process of improving economic well-being and quality of life

Absolute poverty

When an individual cannot afford the basic needs of life in the country in which they live

Relative poverty

When individuals or households are poor in comparison to the rest of the population

Wealth inequality

This occurs when there is a disparity in the stock of financial assets e.g. houses owned by individuals or households

Income inequality

This occurs when there is a disparity in the flow of earnings of individuals or households

  • Spiritual
  • Moral
  • Social
  • Cultural
Develop the individual:

Understanding the difference between developed and developing economies and how poverty can occur between different types of economies.

Create a supportive community:

Help student recognise issues in the economy and to have differing view and accept that other will challenge their views.

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Bond market

The market for interest-bearing securities (with either a fixed or a floating rate) and with a maturity of at least one year) that companies and governments issue to raise capital.

Bank capital

Bank capital is the value of the bank's assets minus its liabilities (or debts).

Bank reserves

Money and liquid assets (such as securities that can be sold quickly) held by banks in order to meet cash withdrawals by customers.

Banking credit

An arrangement with a bank for a loan, or bank lending in general.

Capital market

Market for medium-longer term loan finance. Capital markets are the markets where securities such as shares, and bonds are issued to raise medium to long-term financing. Includes raising of finance by the government through the issue/sale of medium-term and long-term government bonds for example 10 year and 20 year bonds (loans).

Commercial banks

Commercial banks have a licence to take the deposits of savers and make loans. They provide services to corporate and individual customers. Commercial banks make their profits by taking small, short-term, relatively liquid deposits from retail savers and transforming these into larger, longer maturity loans e.g. in the form of business loans and mortgages. Other services of commercial banks include providing debit and credit cards, private banking, money custody and guarantees, cash management and settlement e.g. through cheque accounts, as well as trade finance.

Crowdfunding

Crowdfunding is a form of equity finance that has grown rapidly in the USA and the UK. Crowdfunding involves the collective effort of a large number of individuals who network and pool small amounts of their capital to finance a new or existing business venture. Social causes remain the most active source of crowdfunding activity.

Investment banks

An investment bank provides a wide range of specialized services for companies and large investors. These include: Underwriting and advising on securities issues and other forms of capital raising; Advice on mergers and acquisitions and also corporate restructuring; Trading on capital markets; Research and private equity investments.

Money supply

The money supply is the total amount of money in circulation in a country or group of countries in a monetary union. A distinction is made between narrow & broad money.

Asset bubble

A sustained rise in the prices of assets such as housing and equities which takes their values well above long run sustainable levels.

FPC

The FPC’s main role in the UK is to identify, monitor, and take action to remove or reduce risks that threaten the resilience of the UK financial system as a whole. The FPC publishes a Financial Stability Report identifying key threats to the stability of the UK financial system. The FPC has the power to instruct commercial banks to change their capital reserves (buffers).

FCA

The Financial Conduct Authority (FCA) is funded entirely by the firms it regulates. The FCA has three main objectives: (i) Secure an appropriate degree of protection for consumers; (ii) Protect and enhance the integrity of the UK financial system; (iii) Promote effective competition in the interests of consumers.

Liquidity trap

A liquidity trap occurs when low interest rates and a high amount of cash balances in the economy fail to stimulate aggregate demand partly through a lack of confidence.

Market rigging

Illegally and unfairly controlling the price or the interest rate in order to increase their joint profits or exploit consumers.

Moral hazard

Moral hazard exists in a market where an individual or organisation takes many more risks than they should do because they know that they are either covered by insurance, or that the government will protect them from any damage incurred as a result of those risks.

Central bank

The monetary authority and major regulatory bank in a country. Its functions include issuing and managing the country's currency and a lender of last resort to the banks.

Central bank intervention

When a central bank enters the foreign exchange market to buy or sell currency in order to influence exchange rates.

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Create a supportive community:

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Crowding in

When an increase in government spending/investment leads to an expansion of economic activity (real GDP) which in turn incentivises private sector firms to raise their own levels of capital investment and employment.

Crowding out

The crowding out view is that a rapid growth of government spending leads to a transfer of scarce productive resources from the private sector to the public sector where productivity might be lower. Can also lead to higher taxes and interest rates which squeezes profits, investment employment in the private sector.

Incidence of a tax

How the final burden of a tax is shared out. If demand for a good is price elastic and a tax is imposed, then the tax may fall mainly on the producer as they will be unable to put prices up without losing a lot of demand.

Laffer curve

A (supposed) relationship between economic activity and the rate of taxation which suggests there is an optimum tax rate which maximises total tax revenue.

Progressive tax

With a progressive tax, the marginal rate of tax rises as income rises. I.e. as people earn more income, the rate of tax on each extra pound goes up. This causes a rise in the average rate of tax.

Regressive tax

With a regressive tax, the rate of tax paid falls as incomes rise – I.e. the average rate of tax is lower for people on higher incomes. Examples: Duties on tobacco and alcohol.

Proportional tax

When the marginal rate of tax is constant leading to a constant average rate of tax.

Automatic stabiliser

A feature of the tax and transfer system that reduce economic activity during booms and stimulates activity during slumps, but without direct intervention by the government.

External shock

An unexpected event beyond the control of the country’s officials that has a large negative impact on its economy.

Financial shocks

These occur in the global financial system, such as increased stress in the international banking system or financial markets.

  • Spiritual
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Develop the individual:

Create a supportive community:

Term 5: Revision of all four themes

Revision for theme 1,2,3 and 4.

  1. Paper 1- Markets and how they work. (theme 1 and 4) Paper 2- Competing in the global economy (theme 2 and 3) Paper 3- The economic environment and business (theme 1,2,3 and 4)
  • Spiritual
  • Moral
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Develop the individual:

Test all assessment objectives in all four themes.

Create a supportive community:

Mentoring and helping each other to achieve the best possible grade in the final examination.