Important information

If you plan to sit your exam on or after 1 September 2019, you should study Economics and Markets: Seventh edition.

Sixth edition

This exam covers economics and quantitative methods. In economics, key microeconomics concepts of demand and supply, elasticity, productivity, market structures, and market failure are covered. It also covers macroeconomic concepts of income distribution and the structure of the financial economy including the calculation of key national economic measures. In quantitative methods, key tools of statistical analysis are covered, such as descriptive statistics, frequency distributions and probability, hypothesis testing, simple linear regression and correlation.


Part 1: Economics
1. Defining economics and the market 

1.1 Define ‘economics’ and describe the characteristics of an economic perspective 
1.2 Distinguish between wants and needs 
1.3 Explain how consumers allocate resources 
1.4 Define scarcity 
1.5 Explain the practical application of the law of marginal utility 
1.6 Explain the theory of markets 
1.7 Explain and apply the theory of comparative advantage between products and countries 
1.8 Analyse in practical terms the advantages and disadvantages of production on the basis of comparative advantage 
1.9 Identify and describe the factors of production 
1.10 Explain production and productivity 

1.10.1 Prepare and explain the production possibility frontier

2. Demand, supply, and the price mechanism 
Explain the concepts of demand and supply 
2.2 Relate consumer indifference to the substitution of goods 
2.3 Prepare demand curves for normal and inferior goods 
2.4 Explain the relationship between demand and supply 
2.5 Distinguish between movement along the demand curve and a shift in the demand curve 

2.5.1 Prepare a demand curve showing the impacts of shifts 

2.6 Distinguish between individual and market demand 
2.7 Distinguish between firm and industry demand and supply curves 

2.7.1 Prepare a short run and a long run supply curve

2.8 Distinguish between movement along the supply curve and a shift in the supply curve

2.8.1 Prepare a supply curve showing the impacts of shifts 

2.9 Define market equilibrium price and quantity 
2.10 Explain the use of price legislation, including price ceilings and price floors 

2.10.1 Illustrate the impact of price ceilings and price floors using the demand and supply curves 

2.11 Evaluate the process of price stabilisation and price control mechanisms 
2.12 Explain and illustrate how an equilibrium price is achieved

3. Elasticity of demand and supply 
3.1 Explain the concepts of elasticity of demand and elasticity of supply 
3.2 Calculate and interpret the elasticity of demand and elasticity of supply 
3.3 Prepare demand curves for necessities and luxury goods

4. Cost, revenues and productivity 
4.1 Explain the relationship between marginal cost, total cost, total revenue, marginal revenue, average revenue and price in both the long terms and short term

4.1.1 Demonstrate and apply the concept of MC = MR 

4.2 Apply the concepts of marginal revenue product, marginal product, total product, total cost and marginal cost in an analysis of productivity

4.2.1 Conduct a break-even analysis 

4.3 Explain the demand for factors of production 
4.4 Explain the concept of diminishing returns of factor of production

4.4.1 Calculate the diminishing returns 

4.5 Explain how a firm can attain an optimal combination of factors of production 
4.6 Explain the determinants of elasticity of a factor demand curve 
4.7 Explain the causes of a shift of a factor demand curve 
4.8 Distinguish between economies of scale and diseconomies of scale

5. Market structures 
Distinguish between perfect competition, monopolistic competition, monopoly, oligopoly, duopoly, and oligopsony 

5.1.1 Illustrate the relevant demand and supply curves 

5.2 Evaluate why monopolistic firms are able to allocate or misallocate scarce resources 
5.3 Explain the long term pricing approach for a monopolistic firm

6. Market failure, externalities and intervention 
6.1 Distinguish between social goods and private goods 
6.2 Evaluate the impact of tax, savings and subsidies on the pricing mechanism 
6.3 Analyse the implications of spill-overs or externalities using a demand and supply analysis

7. National income accounting
7.1 Distinguish between economic growth and economic development
7.2 Calculate Gross Domestic Product (GDP) and Gross National Product (GNP)
7.3 Perform national accounting calculations

8. Determining national income 
8.1 Calculate the National Income equation Y = C + G + I + (X – M) 

8.1.1 Present national income calculations using the IS-LM curve 
8.1.2 Calculate marginal efficiency of capital 
8.1.3 Apply the multiplier to determine national income 
8.1.4 Apply the accelerator principle in the determination of national income 

8.2 Evaluate the implications of the marginal propensity to save (MPS) and the marginal propensity to consume (MPC) on National Income (Y) 
8.3 Evaluate the impact of tax, savings and subsidies on National Income 
8.4 Explain the relationship between full employment and National Income

9. Macroeconomic concepts - inflation and unemployment 
9.1 Describe different types of unemployment 
9.2 Describe the causes of inflation and its impact on an economy 
9.3 Explain the relationship between rates of employment and the performance of an economy 

9.3.1 Prepare a Phillips curve 

9.4 Define money 
9.5 Explain the structure of interest rates 
9.6 Analyse the factors affecting the movement of interest rates 
9.7 Explain the Keynesian and Classical theories of money

10. Macroeconomic policy 
10.1 Explain government policy to address the redistribution of income 
10.2 Analyse the impact of interest rates on base employment 
10.3 Explain the purpose of monetary policy and the implications of holding cash balances 

10.3.1 Calculate the credit multiplier 

10.4 Explain how fiscal policy relates to the stimulation of national income and rates of employment 

10.4.1 Demonstrate how fiscal policy affects aggregate demand 

10.5 Explain the relationship between interest rates, monetary policy, employment and national income 

10.5.1 Prepare an expectations augmented Phillips curve 

10.6 Analyse the role of the monetary authorities (Reserve Banks/Central Banks) in the control of money

11. Government intervention and income distribution 
Explain how the government may intervene to reduce misallocation of resources 
11.2 Analyse ways to redress income inequalities 
11.3 Explain the concept of income distribution and describe the Lorenz curve 
11.4 Measure income inequality

Part 2: Statistics
12. Statistical analysis, data, and methods of describing data
Explain the role of statistical analysis in decision making
12.2 Distinguish between quantitative and qualitative data
12.3 Explain and apply the different sampling methods

12.3.1 Random sampling
12.3.2 Cluster sampling
12.3.3 Stratified sampling

12.4 Describe the different methods of collecting data and statistical information

12.4.1 Survey
12.4.2 Published source

12.5 Explain the different levels of data measurement

12.5.1 nominal-level data
12.5.2 ordinal-level data
12.5.3 interval-level data
12.5.4 ratio-level data

12.6 Describe different ways of presenting data

12.6.1 Construct a bar graph, a pie chart, a histogram, and a scatter diagram from a given set of data
12.6.2 Interpret data presented in bar graph, a pie chart, a histogram, and a scatter diagram

13. Descriptive statistics
13.1 Distinguish between measures of central tendency and measures of variability
13.2 Distinguish between the shapes of a normal distribution, exponential distribution and binomial distribution
13.3 Explain the difference between grouped and ungrouped data
13.4 Calculate and interpret the mean, median, and mode from a given set of data
13.5 Calculate and interpret the range, standard deviation, and variance from a given set of data
13.6 Distinguish between the sample and population standard deviation and the sample and population variance
13.7 Distinguish between kurtosis and skewness

14. Frequency distributions and probability
Develop a frequency distribution from a given set of data
14.2 Distinguish between class range, class midpoint, relative frequency, and cumulative frequency
14.3 Define the concept of probability
14.4 Explain the different ways of assigning probability
14.5 Explain and apply marginal, union, joint, and conditional probabilities
14.6 Explain the use of probability matrices to solve probability problems

15. Hypothesis testing
15.1 Explain the concept of hypothesis testing
15.2 Construct null and alternative hypotheses
15.3 Distinguish between type I and type II errors
15.4 Test population mean using one-tail and two-tail tests
15.5 Test population proportion
15.6 Calculate and interpret the probability value (p-value) in hypothesis testing

16. Simple linear regression and correlation
16.1 Calculate the equation of a simple regression line from a sample of data
16.2 Explain and interpret the slope and intercept of the equation
16.3 Calculate and interpret estimated values of y using the regression line
16.4 Calculate and interpret the coefficient of correlation
16.5 Calculate and interpret the coefficient of determination

Exam topic weightings

Part 1: Economics
Defining economics and the market 5%
Demand, supply and the price mechanism 8%
Elasticity of demand and supply 5% 
Cost, revenues and productivity 8%
Market structures  4%
Market failures, externalities and intervention  5%
Macroeconomic concepts - inflation and unemployment  5%
Macroeconomic policy 7%
Government intervention and income distribution 5%
National Income accounting 4%
Determining national income 4%
Part 2: Statistics
Statistical analysis, data, and methods of describing data 8%
Descriptive statistics 8%
Frequency distributions and probability 8%
Hypothesis testing  8%
Simple linear regression and correlation 8%
Total 100%