Papers 1 & 2

Below are notes for material examined in Paper 1 and Paper 2 for CIE Economics.

Basic Economic Ideas and Resource Allocation

a) Scarcity, choice and opportunity cost
b) Positive and normative statements
c) Factors of production
d) Resource allocation in different economic systems and issues of transition
e) Production possibility curves
f) Money
g) Classification of goods and services

Price System and the Microeconomy

a) Demand and supply curves
b) Price elasticity, income elasticity and cross-elasticities of demand
c) Price elasticity of supply
d) and e) Interaction of demand and supply and market equilibrium
f) Consumer and producer surplus

Government Microeconomic Intervention

a) Maximum and minimum prices
b) Taxes (direct and indirect)
c) Subsidies
d) Transfer payments
e) Direct provision of goods and services
f) Nationalisation and privatisation

The Macroeconomy

a) Aggregate demand (AD) and aggregate supply (AS) analysis
b) Inflation
c) Balance of payments
d) Exchange rates
e) The terms of trade
f) Principles of absolute and comparative advantage
g) Protectionism

Government Macroeconomic Intervention

a) Types of policy fiscal policy, monetary policy and supply-side policy
b) Policies to correct balance of payments disequilibrium
c) Policies to correct inflation and deflation