AQA A LEVEL ECONOMICS

SPECIFICATION CHECKLIST

Individuals, firms, markets and □ Choice architecture and framing

market failure □ Nudges
□ Default choices, restricted choice and
mandated choice
Economic methodology and the
economic problem
Price determination in a
competitive market
□ The Economic Problem
□ Economics as a social science
□ Theory of demand
□ Positive and normative economic
statements □ Price elasticity of demand
□ Problem of scarcity □ Income elasticity of demand
□ Renewable and non-renewable □ Cross price elasticity of demand
resources □ Theory of supply
□ Environment as an economic resource □ Elasticity of supply
□ Production possibility frontiers □ Price determination
□ Opportunity cost and choice trade-offs □ Difference between equilibrium and
disequilibrium

Individual economic decision □ Why excess demand and excess supply

making lead to changes in price
□ Functions of the price mechanism

□ Rational economic decision making and □ Interrelationships between markets

economic incentives □ Joint demand, competitive demand,
composite demand, derived demand
□ Utility theory including utility
maximisation □ Joint supply
□ Importance of the margin when making
choices
Production, costs and revenue
□ Imperfect information
□ Significance of asymmetric information
□ Production and productivity
□ Bounded rationality and bounded
□ Specialisation, division of labour and
self-control
exchange
□ Biases in decision making: rules of
thumb, anchoring, availability and social □ Law of diminishing returns and returns to
norms scale
□ Returns to scale
□ Importance of altruism and perceptions
of fairness □ Fixed and variable costs

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□ Marginal, average and total costs
□ Difference between short-run and Perfect competition, imperfectly
long-run costs competitive markets and monopoly
□ Reasons for the shape of the marginal,
average and total cost curves
□ Market structures and business
□ How factor prices and productivity affect objectives
firms’ costs of production and their choice
of factor inputs □ Market structures
□ Difference between internal and external □ Spectrum of competition
economies of scale □ Profit-maximising rule (MC=MR)
□ Reasons for diseconomies of scale □ Reasons for and the consequences of a
□ Relationship between returns to scale divorce of ownership from control
and economies or diseconomies of scale □ The satisficing principle
□ Relationship between economies of □ Diagrammatic analysis of the perfectly
scale, diseconomies of scale and the shape competitive model in the short and long run
of the long-run average cost curve
□ Perfect competition and economic
□ L-shaped long-run average cost curve efficiency
□ Concept of the minimum efficient scale □ Diagrammatic analysis of the
of production monopolistically competitive model in the
□ Marginal, average and total revenue short and long run
□ Difference between marginal, average □ Main characteristics of monopolistically
and total revenue competitive markets
□ Relationship between average and □ Monopolistic competition and economic
marginal revenue efficiency
□ Relationship between marginal revenue □ Importance of non-price competition
and total revenue □ Main characteristics of oligopolistic
□ Profit markets
□ Difference between normal and □ Concentration ratios and how to
abnormal (supernormal) profit calculate a concentration ratio
□ Role of profit in a market economy □ Difference between collusive and
non-collusive oligopoly
□ Difference between cooperation and
□ Technological change collusion
□ Difference between invention and □ Kinked demand curve model
innovation
□ Significance of interdependence and
□ Impact of technological change on uncertainty in oligopoly
methods of production, productivity,
efficiency and firms’ costs of production □ Advantages and disadvantages of
oligopoly
□ Impact of technological change on
development of new products and markets □ Diagrammatic analysis of the monopoly
model
□ Impact of technological change on the
structure of markets □ Barriers to entry in markets

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□ Advantages and disadvantages of □ Determination of relative wage rates and
monopoly levels of employment in imperfectly
□ Conditions necessary for price competitive labour markets
discrimination □ Monopsony power in the labour market
□ Advantages and disadvantages of price □ Influence of trade unions in determining
discrimination wages and levels of employment
□ Dynamics of competition and □ Effects of a national minimum wage
competitive market processes upon labour markets
□ Difference between static efficiency and □ Advantages and disadvantages of a
dynamic efficiency national minimum wage
□ Conditions required for productive □ Discrimination in the labour market
efficiency (minimising average total costs)
and allocative efficiency (price = marginal
cost) Distribution of income and wealth:
□ Dynamic efficiency (research and poverty and inequality
development, investment in human and
non-human capital and technological
□ Difference between income and wealth
change)
□ Factors which influence the distribution
□ Short-run and long-run benefits which
are likely to result from competition of income and wealth

□ Process of creative destruction □ Difference between equality and equity

in relation to the distribution of income and
□ Consumer and producer surplus wealth
□ Significance of market contestability for □ Lorenz curve and Gini coefficient
the performance of an industry
□ Likely benefits and costs of more equal
□ Concepts such as sunk costs and and more unequal distributions
hit-and-run competition
□ Difference between relative and absolute
poverty
The Labour Market □ Causes and effects of poverty
□ Policies to influence the distribution of
income and wealth and to alleviate poverty
□ Marginal productivity theory of the
demand for labour □ Economic consequences of such
policies
□ Causes of shifts in the demand curve for
labour
□ Determinants of the elasticity of demand Market mechanism, market failure
for labour and government intervention in
□ Influences upon the supply of labour to markets
different markets
□ Causes of shifts in the market supply
□ Rationing, incentive and signalling
curve for labour
functions of prices
□ Determination of relative wage rates and
□ Advantages and disadvantages of the
levels of employment in perfectly
price mechanism
competitive labour markets
□ Meaning of market failure
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□ Difference between complete market □ Arguments for and against the
failure and partial market failure privatisation of state-owned enterprises
□ Public goods, private goods and □ Arguments for and against the regulation
quasi-public goods of markets
□ Difference between a public good and a □ Arguments for and against the
private good deregulation of markets
□ Quasi-public goods □ Problem of regulatory capture
□ Significance of technological change on □ Interventions to address market failure(s)
the nature of public goods
□ Indirect taxation
□ Free-rider problem
□ Subsidies
□ Tragedy of the commons □ Price controls
□ Positive and negative externalities in
□ State provision and regulation
consumption and production
□ Extension of property rights and
□ Externalities and divergence between
pollution permits to correct market failure
private and social costs & benefits
□ Causes of government failure
□ Positive externalities from consumption
□ Positive externalities from production
□ Negative externalities from consumption The national and international
economy
□ Negative externalities from production
□ Externalities and net welfare loss
□ Merit and demerit goods Measurement of macroeconomic
performance & macroeconomic
□ Importance of value judgements
objectives
□ Merit goods and positive externalities
from consumption
□ objectives of government
□ Imperfect information and merit goods
macroeconomic policy
□ De-merit goods and negative
□ Possibility of conflict arising, at least in
externalities from consumption
the short run, when attempting to achieve
□ Imperfect information and de-merit these objectives
goods
□ How index numbers are calculated and
□ Why imperfect and asymmetric interpreted, including the base year and the
information can lead to market failure use of weights
□ Why the existence of monopoly and □ How index numbers are used to measure
monopoly power can lead to market failure changes in the price level and changes in
□ Why the immobility of factors of other economic variables
production can lead to market failure □ Use and limitations of national income
□ Principles of UK competition policy and data to assess changes in living standards
EU competition policy over time
□ Costs and benefits of such policies □ Use and limitations of national income
data to compare differences in living
□ Arguments for and against public standards between countries
ownership of firms and industries

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□ Importance of using purchasing power □ How demand-side and supply-side
parity (PPP) exchange rates when making shocks affect the macroeconomy
international comparisons of living
standards
Economic performance

How the macroeconomy works: the

circular flow of income, aggregate □ The difference between short-run and
long-run growth
demand / aggregate supply
analysis and related concepts □ Demand-side and supply-side
determinants of short- run growth of real
national income
□ What national income measures □ Determinants of long-run trend rate of
□ Difference between nominal and real economic growth
income □ Costs and benefits of economic growth
□ Real national income as an indicator of □ Impact of growth on individuals, the
economic performance economy and the environment
□ Circular flow of income concept, the □ Concept of the economic cycle and
equation income = output = expenditure cyclical indicators
□ Injections and withdrawals into the □ Positive and negative output gaps
circular flow of income
□ Causes of changes in the phases of the
□ Effect of changes in injections and economic cycle, including internal and
withdrawals on national income external shocks
□ What is meant by AD □ Main UK measures of unemployment, ie
□ Determinants of AD (consumption, the claimant count and Labour Force Survey
investment, government spending, exports measure
and imports) □ Voluntary and involuntary unemployment
□ Basic accelerator process □ Seasonal, frictional, structural and
□ Determinants of savings cyclical unemployment
□ Difference between saving and □ Demand and supply-side causes of
investment unemployment
□ Role of AD in influencing the level of □ Factors which determine, real wage
economic activity unemployment
□ Multiplier process □ Factors which determine, the natural rate
of unemployment
□ Concept of the marginal propensity to
consume and use to calculate the size of the □ Consequences of unemployment for
multiplier individuals and for the performance of the
economy
□ Determinants of short-run aggregate
supply □ Concepts of inflation, deflation and
disinflation
□ Determinants of long-run aggregate
supply □ Demand-pull and cost-push influences
on the price level
□ Keynesian AS curve
□ Using AD/AS diagrams to illustrate
macroeconomic equilibrium
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□ Fisher’s equation of exchange MV = PQ □ Inverse relationship between market
and Quantity Theory of Money in relation to interest rates and bond prices
the monetarist model
□ Commercial banks and investment
□ Effects of expectations on changes in banks
the price level
□ Difference between a commercial bank
□ Consequences of inflation for both and an investment bank
individuals and the performance of the
□ Main functions of a commercial bank
economy
□ Structure of a commercial bank’s
□ Consequences of deflation for both
balance sheet
individuals and the performance of the
economy □ Objectives of a commercial bank, ie
liquidity, profitability, security
□ How changes in world commodity prices
affect domestic inflation □ Potential conflicts between objectives of
commercial banks
□ How changes in other economies can
affect inflation in the UK □ How banks create credit
□ Possible conflicts between □ Main functions of a central bank
macroeconomic policy objectives □ Objectives of monetary policy set by the
□ How negative and positive output gaps government
relate to unemployment and inflationary □ Role of the Monetary Policy Committee
pressures of the Bank of England (MPC)
□ Short-run Phillips curve and the long-run, □ Factors considered by the MPC when
L-shaped Phillips curve setting the bank (interest) rate
□ Implications of the short-run Phillips □ How changes in the exchange rate affect
curve and the long-run, L-shaped Phillips AD and macroeconomic policy objectives
curve for economic policy
□ Monetary policy transmission
□ Policies to reconcile possible policy mechanism
conflicts both in the short run and the long
run □ How the Bank of England can influence
the growth of the money supply
□ Roles of Prudential Regulation Authority
Financial markets and monetary (PRA), Financial Policy Committee (FPC) and
policy Financial Conduct Authority (FCA)
□ Why banks fail
□ Structure of financial markets and □ Liquidity ratios and capital ratios
financial assets □ Moral hazard
□ Characteristics and functions of money □ Systemic risk and the impact of financial
□ Definitions of the money supply instability on the real economy
□ Difference between money market,
capital market and foreign exchange market
Fiscal policy and supply-side
□ Roles of financial markets in the wider policies
economy
□ Difference between debt and equity
□ How fiscal policy can be used to
influence aggregate demand

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□ How fiscal policy can be used to
influence aggregate supply
The international economy
□ How government spending and taxation
can affect the pattern of economic activity
□ Causes of globalisation
□ Types of and reasons for public
expenditure □ Characteristics of globalisation
□ Why governments levy taxes □ Consequences of globalisation for
less-developed and for more-developed
□ Difference between direct and indirect
countries
taxes
□ Role of multinational corporations in
□ Difference between progressive,
globalisation
proportional and regressive taxes
□ Model of comparative advantage
□ Principles of taxation
□ Distinction between comparative and
□ Role and relative merits of different UK
absolute advantage
taxes
□ Wider benefits from international trade
□ Relationship between the budget
balance and the national debt □ Costs of international trade
□ Cyclical and structural budget deficits □ Reasons for changes in the pattern of
and surpluses trade between UK and rest of the world
□ Consequences of budget deficits and □ Protectionist policies, such as: tariffs,
surpluses for macroeconomic performance quotas and export subsidies
□ Significance of the size of the national □ Causes and consequences of countries
debt adopting protectionist policies
□ Role of the Office for Budget □ Features of a customs union
Responsibility
□ Characteristics of the Single European
□ Difference between supply-side policies Market (SEM)
and supply-side improvements in the
□ Consequences for the UK of
economy membership of European Union (EU)
□ How supply-side policies can help to
□ Role of the World Trade Organisation
achieve supply-side improvements in the
(WTO)
economy
□ Difference between the current, capital
□ Role of supply-side policies in
and financial accounts on the balance of
addressing conflicts between macro payments
objectives
□ Meaning of a deficit and a surplus on the
□ Role of supply-side policies in improving
current account
the current account of the balance of
payments □ Factors that influence a country’s current
account balance
□ Role of supply-side policies in reducing
the natural rate of unemployment □ Consequences of investment flows
between countries
□ Free market supply-side policies
□ Policies to correct a balance of
□ Interventionist supply-side policies
payments deficit or surplus
□ Microeconomic effects of supply-side
□ Expenditure-switching and
economic policies
expenditure-reducing policies

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□ Effect policies to correct a deficit or □ Difference between growth and
surplus may have on other policy objectives development
□ Significance of deficits and surpluses for □ Characteristics of less-developed
an individual economy economies
□ Implications of trade imbalances in the □ Indicators of development, including
world economy Human Development Index (HDI)
□ How exchange rates are determined in □ Factors that affect growth and
freely floating exchange rate systems development
□ How governments can intervene to □ Barriers to growth and development
influence the exchange rate
□ Policies to promote economic growth
□ Advantages and disadvantages of fixed and development
and floating exchange rate systems
□ Role of aid and trade in promoting
□ Advantages and disadvantages for a growth and development
country of joining a currency union, eg the
euro zone

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