51ºÚÁÏ

Candidates will examine how markets and the price mechanism determine the allocation of resources,with particular emphasis on these key concepts: scarcity and choice; equilibrium and disequilibrium. The importance of elasticity within the market will be analysed drawing on the key concept of time. Candidates should use the model of demand and supply to analyse markets for a range of commodities, for example primary products, foodstuffs, transport and foreign currency. Candidates will also consider the significance of consumer surplus and producer surplus, which are of relevance to the key concept of efficiency and inefficiency.

2.1 Demand and supply curves
2.1.1 effective demand
2.1.2 individual and market demand and supply
2.1.3 determinants of demand
2.1.4 determinants of supply
2.1.5 causes of a shift in the demand curve (D)
2.1.6 causes of a shift in the supply curve (S)
2.1.7 distinction between the shift in the demand or supply curve and the movement along these curves
2.2 Price elasticity, income elasticity and cross elasticity of demand
2.2.1 definition of price elasticity, income elasticity and cross elasticity of demand (PED, YED, XED)
2.2.2 formulae for and calculation of price elasticity, income elasticity and cross elasticity of demand
2.2.3 significance of relative percentage changes, the size and sign of the coefficient of:• price elasticity of demand• income elasticity of demand• cross elasticity of demand
2.2.4 descriptions of elasticity values: perfectly elastic, (highly) elastic, unitary elasticity, (highly) inelastic,perfectly inelastic
2.2.5 variation in price elasticity of demand along the length of a straight-line demand curve
2.2.6 factors affecting:• price elasticity of demand• income elasticity of demand• cross elasticity of demand
2.2.7 relationship between price elasticity of demand and total expenditure on a product
2.2.8 implications for decision-making of price elasticity, income elasticity and cross elasticity of demand