Cambridge Pre-U Economics (Principal Subject) Syllabus

Economics (Principal Subject) syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for Economics (Principal Subject) in Cambridge Pre-U, not a summary of it.

1. 1

   Microeconomics

   4 topics

   • The Economic Problem
     • Scarcity, choice and opportunity cost
     • Production possibility frontiers
     • Specialisation and exchange
   • Demand, Supply and Price
     • Determinants of demand and supply
     • Price elasticity and its applications
     • Consumer and producer surplus
   • Market Structures
     • Perfect competition and monopoly
     • Monopolistic competition and oligopoly
     • Efficiency and contestable markets
   • Market Failure
     • Externalities and public goods
     • Information failure and merit goods
     • Government intervention and its limits
2. 2

   Macroeconomics

   4 topics

   • Measuring the Economy
     • National income and GDP
     • Inflation, unemployment and balance of payments
     • Economic growth and living standards
   • Aggregate Demand and Supply
     • Components of aggregate demand
     • Short- and long-run aggregate supply
     • The multiplier and accelerator
   • Macroeconomic Policy
     • Fiscal policy
     • Monetary policy and interest rates
     • Supply-side policies
   • Policy Objectives and Conflicts
     • Trade-offs between objectives
     • The Phillips curve
3. 3

   The Global Economy

   4 topics

   • International Trade
     • Comparative advantage
     • Protectionism and trade barriers
     • Trading blocs and the WTO
   • Exchange Rates and Balance of Payments
     • Exchange rate systems
     • Current account imbalances
   • Economic Development
     • Measuring development
     • Barriers to and strategies for development
   • Globalisation
     • Multinational corporations
     • Costs and benefits of globalisation
4. 4

   Quantitative and Evaluative Skills

   3 topics

   • Data Handling
     • Interpreting economic data and indices
     • Calculations: elasticity, multipliers and percentages
   • Economic Reasoning
     • Constructing chains of analysis
     • Evaluating policy with judgement
   • Application to Case Studies
     • Analysing real-world economic events
     • Synoptic essay writing

Economics (Principal Subject) flashcards for Cambridge Pre-U

19 of 60 cards from the Economics (Principal Subject) deck — real questions with worked answers.

1. What is the central economic problem?

   Scarcity: human wants are unlimited but the resources (factors of production) available to satisfy them are finite, forcing choices about how to allocate them.

2. What is opportunity cost?

   The value of the next best alternative forgone when a choice is made.

3. Name the four factors of production and their rewards.

   Land (rent), Labour (wages), Capital (interest), Enterprise/Entrepreneurship (profit).

4. What does a Production Possibility Frontier (PPF) show, and what does a point inside it represent?

   It shows the maximum combinations of two goods an economy can produce with full, efficient use of resources. A point inside represents unemployment/inefficiency (unused resources).

5. Why is a PPF typically drawn concave to the origin (bowed outwards)?

   Because of increasing opportunity costs: resources are not equally suited to producing both goods, so reallocating them yields progressively smaller gains.

6. Distinguish positive and normative statements in economics.

   A positive statement is objective and testable against evidence (what is); a normative statement is a value judgement about what ought to be.

7. State the law of demand.

   Ceteris paribus, as the price of a good rises its quantity demanded falls, and as price falls quantity demanded rises — giving a downward-sloping demand curve.

8. Distinguish a movement along a demand curve from a shift of the demand curve.

   A movement (change in quantity demanded) is caused only by a change in the good's own price; a shift (change in demand) is caused by non-price determinants such as income, tastes, prices of related goods, or population.

9. Give the formula for price elasticity of demand (PED).

   $$PED = \frac{\%\ \Delta\ \text{quantity demanded}}{\%\ \Delta\ \text{price}}$$

10. How is PED interpreted as elastic, inelastic or unit elastic?

    $|PED| > 1$ is elastic, $|PED| < 1$ is inelastic, and $|PED| = 1$ is unit elastic. PED is normally negative due to the inverse price–quantity relationship.

11. What is the relationship between PED and total revenue when price falls?

    If demand is elastic ($|PED|>1$) a price fall raises total revenue; if inelastic ($|PED|<1$) a price fall lowers total revenue; if unit elastic, revenue is unchanged.

12. Give the formula for income elasticity of demand (YED) and the sign for a normal good.

    $$YED = \frac{\%\ \Delta\ \text{quantity demanded}}{\%\ \Delta\ \text{income}}$$ A normal good has $YED > 0$; an inferior good has $YED < 0$.

13. Give the formula for cross elasticity of demand (XED) and what its sign indicates.

    $$XED = \frac{\%\ \Delta\ Q_{d}\ \text{of good A}}{\%\ \Delta\ \text{price of good B}}$$ Positive $XED$ indicates substitutes; negative $XED$ indicates complements.

14. Give the formula for price elasticity of supply (PES).

    $$PES = \frac{\%\ \Delta\ \text{quantity supplied}}{\%\ \Delta\ \text{price}}$$ It is normally positive.

15. How is market equilibrium defined?

    The price and quantity at which quantity demanded equals quantity supplied, so there is no tendency for price to change; the market clears.

16. In a market, what happens when price is set below the equilibrium price?

    Quantity demanded exceeds quantity supplied, creating excess demand (a shortage), which puts upward pressure on price back towards equilibrium.

17. List the three functions of price in a market economy.

    The signalling function (conveying information), the incentive function (rewarding action), and the rationing/allocative function (allocating scarce goods).

18. What are consumer surplus and producer surplus?

    Consumer surplus is the difference between what consumers are willing to pay and what they actually pay; producer surplus is the difference between the price producers receive and the minimum they would accept.

19. State the four assumptions of perfect competition.

    Many buyers and sellers (price takers), a homogeneous product, perfect knowledge/information, and freedom of entry and exit (no barriers).

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