1. AS Economics
Specification Map
Edexcel AS Economics
ECON1
Key specification requirements mapped to tagged resources
on the tutor2u Economics Blog

2. Unit 1 Competitive Markets — How They Work and Why They Fail
1.3 Unit content
1.3.1 What is the nature of economics?
What students need to learn:
Content Students should be able to: Additional guidance notes
Scarcity Understand the problem of Students should understand that
unlimited wants and finite the economic problem is faced
resources. by consumers, producers and the
government.
Distinguish between renewable Students should understand the
and non-renewable resources. meaning of sustainable resources.
Production Use production possibility Marginal analysis is required to
possibility frontiers to depict opportunity depict opportunity cost. A basic
frontiers cost, economic growth and the definition of economic growth is
efficient allocation of resources. required along with knowledge of
the factors which might cause the
Distinguish between movements production possibility frontier to
along and shifts in production shift outwards or inwards.
possibility frontiers.
Specialisation and Understand the advantages and AS students are not expected
the division of disadvantages of specialisation to have an understanding of
labour and the division of labour. international specialisation and
comparative advantage.
Free market and Understand the advantages and Students are not expected
mixed economies disadvantages of a free market to have an understanding of
economy and why there are centrally planned economies.
mixed economies.
Positive and Distinguish between objective Students should know that value
normative statements and value judgements influence economic
economics judgements on economic issues. decision making and policy.
1 Section C © Edexcel Limited 2010 Edexcel GCE in Economics

3. Competitive Markets — How They Work and Why They Fail Unit 1
1.3.2 What determines the demand for a good or service in a market?
What students need to learn:
Content Students should be able to: Additional guidance notes
Movement along Understand how a change in Students are not expected to
the demand curve price causes a movement along have an understanding of utility
a demand curve. theory or indifference curve
analysis.
Shifts in the Understand factors which may
demand curve cause a shift in the demand
curve, for example, changes
in the price of substitutes or
complementary goods; changes
in real income and tastes.
Price, income and Explain price, income and Students may have to calculate
cross elasticities of cross elasticities of demand. and interpret numerical values
demand Understand factors that of price, income and cross
influence elasticities of demand elasticity of demand.
and their significance to firms
and government.
Understand the relationship Students should understand
between price elasticity of the significance of elasticity to
demand and total revenue. firms and government in terms
of the imposition of indirect
taxes and subsidies; changes
in real income and changes
in the price of substitute and
complementary goods.
Edexcel GCE in Economics © Edexcel Limited 2010 Section C 1

4. Unit 1 Competitive Markets — How They Work and Why They Fail
1.3.3 What determines the supply of a good or service in a market?
What students need to learn:
Content Students should be able to: Additional guidance notes
Movement along Understand how a change in AS students are not expected
the supply curve price causes a movement along to understand the relationship
the supply curve. between marginal costs and
supply.
Shifts in the supply Understand the factors which Producer cartels may be a
curve may cause a shift in the supply significant determinant of supply
curve, for example, changes in some markets, for example,
in the costs of production, the oil.
introduction of new technology,
indirect taxes and government Students should be able to apply
subsidies. both specific and ad valorem
taxes to a market.
Price elasticity of Explain price elasticity of Students may have to calculate
supply supply; understand factors and interpret numerical values
that influence price elasticity of of price elasticity of supply.
supply.
Distinguish between the short
run and long run in economics
and understand its significance
to price elasticity of supply.
1 Section C © Edexcel Limited 2010 Edexcel GCE in Economics

5. Competitive Markets — How They Work and Why They Fail Unit 1
1.3.4 What determines the price of a good or service in a market?
What students need to learn:
Content Students should be able to: Additional guidance notes
Determination of Explain equilibrium price and Students should understand
market equilibrium quantity and how they are that shifts in demand and
determined. supply curves will change the
equilibrium price and quantity.
Understand how the operation of
market forces eliminates excess
demand and excess supply.
Consumer and Distinguish between consumer Students should understand
producer surplus and producer surplus. how changes in demand or
supply might affect consumer
Illustrate consumer and and producer surplus.
producer surplus on a demand
and supply diagram.
Functions of the Understand the rationing, The price mechanism may be
price mechanism incentive and signalling considered in the context of
functions of the price product, commodity and labour
mechanism for allocating scarce markets.
resources.
Edexcel GCE in Economics © Edexcel Limited 2010 Section C 1

6. Unit 1 Competitive Markets — How They Work and Why They Fail
1.3.5 How might the change in price of a good or service be explained?
What students need to learn:
Content Students should be able to: Additional guidance notes
Price mechanism Apply the price mechanism Students should be able to apply
in markets, such as goods, the determinants of demand and
services, commodities or labour. supply to various markets, for
example, price of stock market
shares, oil, precious metals and
agricultural commodities.
Indirect taxes and Use supply and demand analysis Students should be aware of
subsidies to demonstrate the impact and the importance of elasticities
incidence of taxes and subsidies of demand and supply,
on consumers, producers and for example, in relation to
the government. government indirect taxes and
subsidies.
1 Section C © Edexcel Limited 2010 Edexcel GCE in Economics

7. Competitive Markets — How They Work and Why They Fail Unit 1
1.3.6 What determines the wage rate for labour in a market?
What students need to learn:
Content Students should be able to: Additional guidance notes
Demand and supply Understand the factors which Students are not expected
of labour influence the demand and to use marginal revenue
supply of labour. productivity theory in explaining
the demand for labour.
Recognise that demand for AS students are not required
labour is derived from the to use the backward sloping
demand for the final product it supply curve for labour and are
makes (derived demand). not required to use monopsony
analysis.
Understand that factors
influencing the supply of labour
include population migration,
income tax and benefits,
government regulations (for
example, national minimum
wage) and trade unions.
Edexcel GCE in Economics © Edexcel Limited 2010 Section C 1

8. Unit 1 Competitive Markets — How They Work and Why They Fail
1.3.7 Why do some markets fail?
What students need to learn:
Content Students should be able to: Additional guidance notes
Market failure Define and understand different Students should understand that
types of market failure. market failure is when the price
mechanism causes an inefficient
allocation of resources.
The types of market failure
considered at AS level are
externalities, public goods,
imperfect market information,
labour immobility and unstable
commodity markets.
Externalities Illustrate external costs and Students are required only to
external benefits using marginal illustrate the external costs from
analysis, distinguishing between production and external benefits
the market and social optimum from consumption.
positions. The welfare loss or
gain areas are required.
Understand the impact of Students should assess the
externalities and government costs and benefits from major
intervention in various markets, investment projects such as
for example, transport, health sporting events and transport
care, education, environment, infrastructure improvements.
waste disposal and recycling.
Public goods Explain why public goods may Students should understand
not be provided by the market. the free rider and valuation
problems.
Distinguish between public and
private goods.
20 Section C © Edexcel Limited 2010 Edexcel GCE in Economics

9. Competitive Markets — How They Work and Why They Fail Unit 1
Content Students should be able to: Additional guidance notes
Imperfect market Distinguish between symmetric
information and asymmetric information.
Understand how imperfect
market information may lead to
a misallocation of resources, for
example, health care, education,
pensions, tobacco and alcohol.
Labour immobility Understand geographical and Students should understand
occupational immobility of the significance of house prices
labour may result in structural for restricting the geographical
unemployment. mobility of labour and the skills
shortage for restricting the
occupational mobility of labour.
Assess government measures
to reduce factor immobility such
as training programmes and
relocation subsidies.
Unstable Understand the causes and Students should understand
commodity markets effects of fluctuating commodity how uncertainty in production
prices on consumers and (for example, climatic) and time
producers. lags may affect supply and the
significance of price and income
Assess the impact of elasticity of demand.
government intervention in the
form of minimum prices and Students are not expected to
buffer stocks. Use diagrammatic use diagrammatic analysis of
analysis for minimum prices and the cobweb model.
buffer stocks.
Edexcel GCE in Economics © Edexcel Limited 2010 Section C 21

10. Unit 1 Competitive Markets — How They Work and Why They Fail
1.3.8 How do governments attempt to correct market failure?
What students need to learn:
Content Students should be able to: Additional guidance notes
Methods of Understand the different Students should be able to apply
government measures of government government economic measures
intervention intervention to correct market in various contexts, for example,
failure, for example, indirect road pricing, landfill tax, carbon
taxation, subsidies, buffer offsetting and carbon emissions
stocks, tradable pollution trading, renewable energy
permits, extension of property certificates.
rights, state provision and
regulation.
Apply, analyse and assess the
effectiveness of each method
of government intervention for
correcting market failure.
1.3.9 What is government failure?
What students need to learn:
Content Students should be able to: Additional guidance notes
Government failure Define and explain different Students should understand that
types of government failure, for government intervention may
example, undesirable outcomes result in a net welfare loss.
from agricultural stabilisation
policies; environmental policies; Students should understand
transport, housing and the the economic arguments for
national minimum wage. and against an increase in the
national minimum wage.
22 Section C © Edexcel Limited 2010 Edexcel GCE in Economics