This unit aims to help the learner become an effective and confident self-directed employee. This helps the learner become confident in managing own personal and professional skills to achieve personal and career goals.

Specification of Assessment
Unit abstract
This unit provides the learner with an understanding of what is meant by microeconomics and macroeconomics, the basic economic problem of scarcity, opportunity cost. It also explores what is meant by free market, command and mixed economies and how different economic systems decide what to produce, how to produce it and who to produce it for. It also looks at how equilibrium price and quantity are established and affected by changes in supply and demand. Identify the burden/benefit of taxation/subsidies on consumers and producers, the meaning of positive and negative externalities.

LO 1: Understand the nature of economic resources and that their finite supply creates the need for business organisations to make choices.
1.1 Explain the difference between microeconomics and macroeconomics. P1
1.2 Explain the problems of scarcity and opportunity cost and how these concepts are related, using numerical examples and/or a production possibility frontier. P2
1.3 Compare, using real world examples, the relative merits of alternative economic arrangements for overcoming the problem of scarcity in society. P3
LO 2: Understand the concept of market equilibrium and be able to use supply and demand analysis to examine how price is established within a market.
2.1 Explain, in words and with diagrams, the concept of equilibrium in a supply and demand model and illustrate the effects on equilibrium price and quantity of changes in market conditions. P4
2.2 Examine, using appropriate supply and demand diagrams, the effects of taxes and subsidies and the effects of price ceilings and price floors on market price and quantity traded. P5
2.3 Identify examples of positive and negative externalities and, using supply and demand analysis, demonstrate the effects of these externalities on the market equilibrium. P6
LO 3: Understand the concepts of elasticity of demand and supply and their application within the business decision making process.

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3.1 Define, measure and interpret: price elasticity of demand; price elasticity of supply; income elasticity of demand and cross price elasticity of demand. P7
3.2 Explain, using diagrams and different concepts of demand elasticities, what is meant by each of the following: normal goods; inferior goods; luxury goods; complements and substitutes. P8
3.3 Examine the use of the concepts of elasticity by firms to analyse and evaluate market changes. P9
LO 4: Understand the economic theory of costs, the distinction between short-run and long- run costs, economies and diseconomies of scale, and their application to business.
4.1 Use formulae, diagrams and examples to explain the differences between fixed cost, variable cost, marginal cost, average cost and total cost. P10
4.2 Explain, using examples, the determination of short-run and long-run cost curves and describe the relationship between short and long run average cost curves. P11
4.3 Distinguish between economies and diseconomies of scale and discuss their relevance to the business decision-making process, including the potential implications for businesses arising from changes in size. P12
LO 5:
Understand the nature and characteristics of different market structures and how these structures affect business conduct and performance.
5.1 Explain how different market structures determine the marginal conditions for the profit-maximising output decisions of a firm. P13
5.2 Identify the distinctive features of firms operating in Perfect Competition, Monopolistic Competition, Oligopoly and Monopoly and discuss the implications of these differences regarding pricing and output decisions of firms in the short run and long run. P14
5.3 Explain how different types of market structure will affect business decision making and create different policy alternatives within an organisation. P15
LO 6: Understand the role and importance of the banking and finance sector to the successful operation of a business
6.1 Outline the respective roles of the central bank and the commercial banking system and how they relate to the business environment. P16
6.2 Explain the concepts of inflation and deflation and their impact on business behaviour. P17
6.3 Explain the meaning and operation of monetary policy and how the use of different instruments such as changes in interest rates and changes in the money supply might influence business decision making. P18

 
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