ECON 1 – The Market System

The Market System considers issues like needs, wants, scarce resources, the capitalist system, supply, demand, prices and

incomes, later addressing issues of market failure like monopoly, inequalities in the distribution of income and wealth, under

consumption of merit goods (things that are deemed good for us and society as a whole), over-consumption of de-merit goods

(goods that are considered bad for us and society as a whole), the under provision of public goods, wasteful competition and

externalities. The study of externalities has always been important, but is particularly significant in today’s world as we now

know much more about the extent to which the way we live and the nature of our economic activities (pollution, burning fossil

fuels, global warming) are impacting on the biosphere, and thus compromising the security of future generations.

The role that the government might play in all of this is also a central feature of this unit, and here we look at taxes, subsidies,

regulation and legislation. Policies like the Common Agricultural Policy (CAP) in the context of the European Union and

Foreign Aid in the context of the global economy are also significant themes.

ECON2 – The National Economy

The National Economy focuses much more on those issues that we tend to hear much more about on the national news. Issues

relating to unemployment, inflation, economic growth, the balance of payments, imports, exports, austerity, wages,

employment and the government’s attempt to steer our economy along a path to prosperity using the fiscal (taxes) and

monetary (interest rates) instruments at its disposal. The role of the Bank of England in all of this is a key area of learning, and

the reasons why the then Chancellor of the Exchequer, Gordon Brown, made the Bank of England independent of the

government with regard to interest rate policy.

The unit also looks at the European and global contexts in which our national economy operates, and helps students to

understand better the role that the UK plays in the world in terms of manufacturing and consumption.

Building on the learning from ECON1, this unit helps to assess how and why we make the economic decisions about working

and spending that we do, focusing on interesting and yet conflicting theories established by economists about why ‘economic

actors’ behave in the ways that they do, and manage to create the havoc that the recent banking and financial crisis has inflicted

on our lives.

A2 Units

Students who are successful in this subject at the end of Year 12 can then, if they so wish, continue onto the A2 section of the

course, which involves the study of two further units (ECON3 and ECON4). ECON 3 is entitled ‘Business Economics and the

Distribution of Income,’ and ECON 4 is entitled ‘The National and International Economy.’