3. Microeconomic decision-makers
- Syllabus
- 0455–2027–2028
- Section
- 3
- Level
- —
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In this section
Topic 3.1
3.1. Money and banking
Objectives in this topic
3.1.1—Money
- forms, functions and characteristics of money
3.1.2—Banking
- role and importance of central banks
- role and importance of commercial banks
Topic 3.2
3.2. Households
Objectives in this topic
3.2.1—Influences on households’ spending, saving and borrowing
- income
- rate of interest
- confidence
- age
- culture
Topic 3.3
3.3. Workers
Objectives in this topic
3.3.1—Factors affecting an individual’s choice of occupation
- wage and non-wage factors
3.3.2—Wage determination
- influences of the demand for labour and the supply of labour
- trade unions and their relative bargaining power
- government policy, including national minimum wage (NMW)
- drawing and interpretation of diagrams that illustrate the effects of:
- changes in demand and supply in the labour market
- national minimum wages
3.3.3—Reasons for differences in wages
- reasons for differences:
- demand for and supply of labour
- relative bargaining strengths
- discrimination, e.g. male/female
- government policy
- how these reasons influence the wages of workers, depending on:
- level of skills of workers
- economic sector workers operate in: primary/secondary/tertiary
- discrimination between workers, e.g. male/female
- whether the worker is working in the private sector or public sector
3.3.4—Mobility of labour
- causes of changes in the occupational and geographical mobility of labour
- consequences of changes in the occupational and geographical mobility of labour
3.3.5—Division of labour
- definition of division of labour (worker specialisation)
- advantages and disadvantages of division of labour
Topic 3.4
3.4. Firms
Objectives in this topic
3.4.1—Different types of firms
- primary/secondary/tertiary sector firms
- private sector/public sector firms
- advantages and disadvantages of small and large firms
3.4.2—Mergers
- definitions, examples, advantages and disadvantages of different types of mergers: horizontal, vertical and conglomerate
3.4.3—Economies and diseconomies of scale
- how internal and external economies and diseconomies of scale can affect a firm/industry as the scale of production changes
- drawing and interpretation of average total cost (ATC) diagrams to illustrate economies and diseconomies of scale
Topic 3.5
3.5. Firms and production
Objectives in this topic
3.5.1—Demand for factors of production
- influences to include demand for the product, the price of different factors of production, their availability and their productivity
3.5.2—Labour-intensive and capital-intensive production
- reasons for adopting the different forms of production
- advantages and disadvantages of the different forms of production
3.5.3—Production and productivity
- the difference between production and productivity
- influences on production and productivity
- effects of changes in investment on productivity
Topic 3.6
3.6. Firms’ costs, revenue and objectives
Objectives in this topic
3.6.1—Definitions of costs of production
- total cost (TC), average total cost (ATC), fixed cost (FC), average fixed cost (AFC), variable cost (VC), average variable cost (AVC)
3.6.2—Calculation of costs of production
- calculation of TC, ATC, FC, AFC, VC and AVC
- drawing and interpretation of diagrams that show how changes in output affect costs of production
3.6.3—Definition of revenue
- definitions of total revenue (TR) and average revenue (AR)
3.6.4—Calculation of revenue
- calculation of TR and AR
- the influence of sales on revenue
3.6.5—Objectives of firms
- survival, social welfare, profit maximisation and growth
Topic 3.7
3.7. Types of markets
Objectives in this topic
3.7.1—Competitive markets
- characteristics, advantages and disadvantages of competitive markets
- effect of having a high number of firms on price, quality, choice, profit Note: diagrams / perfect or imperfect competition theory are not required.
3.7.2—Monopoly markets
- characteristics, advantages and disadvantages of monopoly markets
- effect of having only one firm on price, quality, choice, profit Note: diagrams are not required.