8823 H1 Economics (2022)

The syllabus content comprises three core themes:

● The Central Economic Problem
● Markets
● The National Economy

Theme 1: The Central Economic Problem

1.1 Scarcity as the Central Economic Problem

1.1.1 Scarcity, choice and resource allocation

  1. Concept of scarcity and the inevitability of choices by economic agents (consumers, producers and governments)
  2. Concept of opportunity cost and the nature of trade-offs in the allocation of resources

1.1.2 Rational decision-making process by economic agents

  1. Understanding objectives of economic agents
    • ●  Consumers – maximisation of utility
    • ●  Producers – maximisation of profits
    • ●  Governments – maximisation of social welfare
  2. Recognising constraints
  3. Gathering information and considering perspectives
  4. Weighing costs and benefits in decision-making
  5. Recognising trade-offs
  6. Recognising intended and unintended consequences

Concepts and Tools of Analysis

    • Positive and normative economics
    • Microeconomics and macroeconomics
    • Scarcity, choice and opportunity cost
    • Production possibility curve (PPC)
    • Marginal cost, marginal benefit and marginalist principle
    • Maximisation of utility
    • Maximisation of profit: Marginal Revenue = Marginal Cost
    • Maximisation of social welfare: Marginal Social Benefit = Marginal Social Cost

Theme 2: Markets

Theme 2.1 Price Mechanism and its Applications

2.1 Price Mechanism and its Applications

2.1.1 Price mechanism and its functions

a. Resource allocation in a free market

2.1.2 Interaction of demand and supply

  1. Determinants of demand and supply
  2. Equilibrium price and equilibrium quantity
  3. Changes in demand and supply leading to changes in market equilibrium

2.1.3 Applications of demand and supply analysis to real-world markets

  1. Responsiveness of consumers and/or producers
    • Price elasticity of demand – determinants and significance
    • Price elasticity of supply – determinants and significance
  2. Impact of market outcomes on consumers and producers
    • Consumer expenditure and producer revenue
  3. Rationale and impact of government intervention on consumers and producers
    • Taxes and subsidies
    • Price controls – maximum and minimum prices
    • Quantity controls – quotas

Concepts and Tools of Analysis

  • Price mechanism
  • Consumer sovereignty
  • Ceteris paribus
  • Effective demand
  • Law of diminishing marginal utility
  • Demand curve
  • Change in demand vs change in quantity demanded
  • Supply curve
  • Change in supply vs change in quantity supplied
  • Determinants of demand – non-price factors
  • Determinants of supply – non-price factors
  • Market equilibrium – equilibrium price and quantity
  • Market disequilibrium – shortage and surplus (See Market Adjustment Process Video)
  • Price elasticity of demand
  • Price elasticity of supply
  • Consumer expenditure and producer revenue
  • Consumer and producer surplus
  • Taxes and subsidies
  • Price controls – maximum and minimum prices
  • Quantity controls – quotas

Theme 2.2 Market Failure

2.2 Market Failure

  1. 2.2.1  Efficiency and equity in relation to markets
  2. 2.2.2  Market failure and its causes

a. Public goods

• Characteristics of non-excludability and non-rivalry

b. Positive and negative externalities in consumption and production

• Divergence between private cost/benefit and social cost/benefit

c. Merit and demerit goods
d. Information failure / Imperfect information

2.2.3 Government intervention in markets

  1. Policy measures including taxes and subsidies, quotas and tradeable permits, joint and direct provision, rules and regulations, and public education in addressing market failure
  2. Effectiveness of policy measures

Theme 2.2 Market Failure

Concepts and Tools of Analysis

  • Market failure
  • Allocative efficiency
  • Deadweight loss
  • Equity
  • Marginal private benefit and cost
  • Marginal external benefit and cost
  • Marginal social benefit and cost
  • Social versus private (market) optimum
  • Over-consumption and production
  • Under-consumption and production
  • Public goods– Non-excludability and non-rivalry
  • Positive and negative externalities
  • Merit and demerit goods
  • Information failure / Imperfect information

Theme 3: The National Economy

Theme 3.1 Introduction to Macroeconomics

3.1 Introduction to Macroeconomics

3.1.1  Aggregate demand (AD) and Aggregate supply (AS)

  1. Factors affecting AD and AS
  2. Equilibrium level of national output and general price level

An awareness of an increase in AD having a multiplied effect on national income will suffice.

Concepts and Tools of Analysis

  • Aggregate demand and factors affecting aggregate demand
  • Aggregate supply and factors affecting aggregate supply
  • National output
  • General price level

Theme 3.2 Standard of Living

3.2 Standard of living

3.2.1 Standard of Living and its indicators*

a.  Material and non-material aspects

3.2.2 Factors affecting standard of living#

  1. Economic growth
    1. Sustainable growth
    2. Inclusive growth (case of Singapore)
  2. Price Stability
    1. Inflation and Deflation
  3. Employment
    1. Full employment and unemployment

        3.2.3 Macroeconomic policies to improve standard of living

        1. Discretionary fiscal policy
          • Government expenditure and revenueˆ
        1. Monetary policy
          • Centred on interest rates˜
          • Centred on exchange rates (case of Singapore)
        1. Supply-side policies
          • Policies to improve quantity, quality and mobility of factors of production

        #An understanding of net exports as a component of AD affecting standard of living is required.

        ˆNational debt and methods of budget deficit financing are not required.

        ˜Determination of interest rates and exchange rates are not required. A broad understanding of the managed float in the Singapore context and flexible exchange rates will suffice.