Core topic: Thinking like an economist

Students develop an understanding that economic systems are viewed through different social and political lenses and that these perspectives determine the decisions of stakeholders.

Students develop economic thinking by using economic inquiry skills and economic concepts, principles, and models in different scenarios. Students apply economic thinking in the analysis of economic issues in a variety of contexts.

Economic inquiry skills

Students use an inquiring, critical, and thoughtful approach to their study of economics. They investigate scenarios and economic problems by:

• applying economic concepts, including scarcity, choice, opportunity cost, and cause and effect of economic decisions, in a variety of economic contexts
• applying principles, models, and terminology appropriately in a variety of economic contexts
• identifying specific economic objectives and asking relevant questions
• analysing the rationale for economic decisions and evaluating their intended and unintended consequences
• communicating reasoned arguments and evidence-based recommendations.

Data analysis

Students develop an understanding of a range of qualitative and quantitative economic data. They use data to understand economic activity, and the behaviour of people, businesses, markets, and governments.

Students analyse data, identify patterns and propose decisions, based on data contained in tables and graphs. They explore the difference between causality and correlation.

In this way students access economic theory, through the use of real-world data. Students use appropriate graphs, diagrams, and tables to display results and make recommendations based on their data analysis.

Students understand the use of (but are not required to calculate) the following statistical measures to analyse data:

• mean
• median
• quantiles
• variance.

Students develop a basic understanding of how to interpret linear regressions as an introduction to economic modelling. (Note: students are not required to calculate the coefficient of determination (R²), or linear equations.)

Microeconomics

Students develop an understanding of different market structures and how the market structure influences the behaviour of consumers and producers. They explore the features of:

• monopolies
• oligopolies
• monopolistic competition
• perfect competition.

Students analyse how market structures meet the needs of consumers and producers, using criteria such as price, choice, quality, efficiency, and the use of new technology.

Students develop an understanding of the effects of market failure on consumers, producers and efficiency, with direct reference to consumer surplus, producer surplus and deadweight loss (welfare loss). Market failures include:

• undersupply of public goods
• uncompetitive markets
• externalities — positive and negative, and production and consumption
• asymmetric information.

Students evaluate the measures taken to address market failure and undesirable market outcomes.

Students analyse the interaction between consumers and producers in a market, and the way in which this can be illustrated in demand and supply diagrams. They use supply and demand curves to identify changes that affect equilibrium prices and quantities.

Students develop an understanding of the concept of price elasticity of demand and the price elasticity of supply.

Students predict the pricing behaviour of producers, using the total revenue method in relation to price elasticity of demand.

Students analyse and evaluate the intended and unintended consequences of the following government interventions in markets, including consumer and producer surplus and deadweight loss using supply and demand diagrams:

• price ceilings
• price floors
• subsidies
• taxes.

Students develop an understanding of the duopoly market structure through a basic study of game theory. Game theory is a way of understanding how people interact based on their actions, motives, and beliefs about what others will do and the actions available to them. They solve simple 2 × 2 games and explore and understand the concepts of payoff, preferences and Nash equilibrium.

Macroeconomics

Students develop an understanding of macroeconomic objectives and their measurement, and learn to identify and interpret recent trends in data. The macroeconomic objectives are:

• full employment — unemployment rate and labour force participation rate
• price stability — the percentage change in the consumer price index
• economic growth — the percentage change in real gross domestic product (GDP).

Students apply their understanding of a range of leading, lagging and coincident indicators to determine the phase of the business cycle for an economy.

Students use the five-sector, circular-flow model to understand the relationship between different sectors of the economy. Students analyse the effect of leakages and injections on the equilibrium level of income and expenditure in an economy. They evaluate the significance and impact of the expenditure multiplier.

Students analyse the potential cause and effect of changes in aggregate demand (AD) and long run and short run aggregate supply (LRAS, SRAS) in the AD–AS model. They evaluate the impact of these changes against the macroeconomic objectives.

Students analyse the Monetarist AD–AS model (including both short-run and long-run aggregate supply curves) to identify equilibrium in the model and determine output and price level.

Students explore the demand and supply management policies that governments and central banks use to meet macroeconomic objectives in different phases of the business cycle. They evaluate the intended and unintended consequences of these policies against macroeconomic objectives and the business cycle. Students evaluate which demand and supply management policies are most effective in managing the economy.

Students analyse the causes of and impact of changes in the exchange rate on the macroeconomic objectives and on demand and supply management policies.