The A Level microeconomics syllabus differ from the macroeconomics syllabus in the sense that each topic is discrete, and can mainly be studied on a standalone approach. This is unlike the macro syllabus where concepts are often interlinked e.g. an understanding of AD/AS analysis under the topic on National Income helps students appreciate the causes and policy solutions to macroeconomic problems.
As such, Economics tutor Mr Koh has distilled 3 tips that can help students make better sense of the A Level Economics syllabus.
Tip 1 – Market Failure: Market vs Activity approach
In explaining market failure, some students may see different approaches being used across different schools. They can be broadly summarised as follows:
|Market approach||Activity approach|
|How MPC and MPB are defined||MPC = cost of production|
MPB = satisfaction derived from consumption of the good.
|In the case of consumption activity, MPC=cost of buying good, on top of other private costs. MPB = utility from consuming good, on top of other private benefits. For production, MPC= production cost while MPB=revenue.|
|How externality diagram is drawn||For externalities from consumption (production), divergence is in benefit (cost) curves.||For positive externality, divergence in benefit curves. For negative externality, divergence in cost curves.|
|How imperfect information is explained||Divergence in MPBperceived and MPBactual, since imperfect info is on consumer’s end.||Divergence in MPBperceived and MPBactual or MPCperceived and MPCactual, depending on whether actual cost or benefit is misperceived.|
|Impact of government tax/subsidy||Shifts MPB if it is a direct tax or subsidy to consumers, otherwise indirect tax or subsidy affects MPC.|
|Always shifts MPC|
Tip 3 – Demand and Supply: Understanding Elasticities
While factors leading to a shift in demand or supply need to be inferred from a preamble (essay) or extract (case study), the elasticity of a good can often be inferred from a basic understanding of the nature of the good.
For example, most students can intuitively conclude that PEDcoffee < 1, given the addictive nature of the good. PEScoffee is also <1, given the gestation period needed for coffee crops to grow. Hence, there is no need for students to pore through an extract or essay preamble to deduce an elasticity value
As a general rule of thumb, primary goods have low PED and PES values, due to the nature of raw materials as necessities (PED<1), and the gestation period needed for agricultural output to grow (PES<1).
It is important not to confuse the primary form of a good with its secondary form. For example, while coffee beans have low PED and PES, the same does not extend to Starbucks coffee. PES>1 due to availability of stocks, while PED>1 due to availability of substitutes.
Tip 3: Overall – Positive Confirmation
When establishing an identity, students should always aim to provide a positive confirmation rather than a negative rejection.
For example, if one is asked what he or she had for breakfast, saying “I didn’t have oats for breakfast” is nowhere as revealing as saying “I had an omelette for breakfast”.
In the same vein, saying that PED>1 because the good is not a necessity is not convincing. Instead, students should aim to prove that PED>1, rather than reject the alternative (PED is not <1). For example, naming the presence of substitutes would provide good justification for the PED value of a good.
Similarly, students should not assume that if a good is not a necessity (YED<1 for necessity), YED has to be greater than 1. For example, makeup is not a necessity to a man (or most men). That definitely does not make them luxuries (YED>1)!
There are plenty of other practical tips for scoring in the JC Economics examinations which are shared in Mr Koh’s Economics tuition classes. Students who are interested to find out more can contact Economics tutor Mr Koh at www.thateconstutor.com or 9070-6248.