1.2 Business economics
- Syllabus
- 2026
- Section
- 1.2
- Level
- —
Exam analysis
No tagged past-paper evidence yet
Published Concept pages under this syllabus area do not have tagged past-paper appearances in the selected level yet.
Recent 5 years
In this section
Topic 1.2.1
1.2.1 Production
Objectives in this topic
1.2.1.a Factors of production
The factors of production:
- land
- labour
- capital
- enterprise.
1.2.1.b Sectors of the economy
Sectors of the economy:
- primary
- secondary
- tertiary.
1.2.1.c Changing sector importance in developed and developing economies
Explain changes over time in the employment and output shares of the primary, secondary and tertiary sectors in developing and developed economies.
Topic 1.2.2
1.2.2 Productivity and division of labour
Objectives in this topic
1.2.2.a Productivity
Definition of productivity.
1.2.2.b Factors affecting productivity
Factors affecting productivity:
- land – use of fertiliser, drainage, irrigation, reclamation
- labour – quality of labour, including improved human capital through education and training and impact of migration
- capital – increased quantity and technological advances.
1.2.2.c Division of labour
Definition of division of labour.
1.2.2.d Division of labour: effects on workers and businesses
Advantages and disadvantages of the division of labour to workers and businesses.
Topic 1.2.3
1.2.3 Business costs, revenues and profit
Objectives in this topic
1.2.3.a Revenue, cost and profit formulae
Define and use formulae to calculate total revenue, total costs, total fixed costs, total variable costs, average total costs and profit.
1.2.3.b Internal and external economies of scale
Define economies of scale and internal economies of scale; explain purchasing, marketing, technical, financial, managerial and risk-bearing internal economies. Define external economies of scale and explain skilled labour, infrastructure, access to suppliers and clusters of similar businesses.
1.2.3.c Diseconomies of scale and the LRAC curve
Define diseconomies of scale and explain bureaucracy, communication problems, lack of control and distance between senior management and workers. Use an LRAC diagram to show internal economies, diseconomies and the output at which the business is most efficient.
Topic 1.2.4
1.2.4 Business competition
Objectives in this topic
1.2.4.a Effects of competition on firms, consumers and the economy
Advantages and disadvantages of competition to firms, consumers and the economy, including:
- efficiency
- choice
- quality
- innovation
- price.
1.2.4.b Advantages and disadvantages of large firms and small
Advantages and disadvantages of large firms and small firms.
1.2.4.c Factors influencing the growth of firms
Factors influencing the growth of firms:
- government regulation
- access to finance
- economies of scale
- the desire to spread risk
- the desire to take over competitors.
1.2.4.d Reasons firms stay small
Explain why firms may stay small because of market size, niche-market characteristics, lack of finance or the entrepreneur’s aims.
1.2.4.e Monopoly
Definition of monopoly.
1.2.4.f Main features of monopoly
Main features of monopoly:
- one business dominates the market
- unique product
- price-maker
- barriers to entry:
- legal barriers
- patents
- marketing budgets
- technology
- high start-up costs.
1.2.4.g Advantages and disadvantages of monopoly
Evaluate monopoly in terms of efficiency, choice, quality, innovation, price and economies of scale.
1.2.4.h Oligopoly
Definition of oligopoly.
1.2.4.i Main features of oligopoly
Main features of oligopoly:
- few firms
- large firms dominate
- different products
- barriers to entry
- collusion
- non-price competition
- price competition.
1.2.4.j Advantages and disadvantages of oligopoly
Advantages and disadvantages of oligopoly:
- choice
- quality
- innovation
- collusion and cartels fixing high prices
- price wars between oligopolies.
Topic 1.2.5
1.2.5 The labour market
Objectives in this topic
1.2.5.a Factors affecting the demand for labour
Explain how demand for the final product (derived demand), availability of substitutes including machines, and workforce productivity affect demand for labour.
1.2.5.b Factors affecting the supply of labour
Factors affecting the supply of labour:
- population size
- migration
- age distribution of population
- retirement age
- school-leaving age
- female participation
- skills and qualifications
- ability to move geographic locations/move to different types of employment.
1.2.5.c Importance of labour quantity and quality to businesses
Importance of the quantity and quality of labour to business.
1.2.5.d Education, training and human capital
Impact of education and training on human capital and quality of labour.
1.2.5.e Labour-market diagrams
Use labour-market diagrams showing labour supply, labour demand, equilibrium wage and employment, and the effects of shifts in labour demand or supply.
1.2.5.f Trade union involvement in the labour market
Trade union involvement in the labour market:
- impact of trade union activity to improve working conditions and increase wages.
Topic 1.2.6
1.2.6 Government intervention
Objectives in this topic
1.2.6.a Government policy to deal with externalities
Government policy to deal with externalities:
- taxation
- subsidies
- fines
- regulation
- pollution permits.
1.2.6.b Evaluating government policies for externalities
Advantages and disadvantages of each government policy.
1.2.6.c Government regulation of competition
Government regulation of competition to:
- promote competition
- limit monopoly power
- protect consumer interests
- control mergers and takeovers.
1.2.6.d Minimum-wage intervention and diagrams
Explain reasons for a minimum wage and its advantages and disadvantages. Use diagrams to show the effects of introducing or increasing a minimum wage.