JC A Level H2 Economics Syllabus (2023)

Not only do we provide you with the latest 2023 A Level H2 Economics Syllabus but also relevant links to some of our resources as you run through this syllabus.

(Click here if you are looking for H1 Economics Syllabus.)

The 2023 A Level H2 Economics Syllabus content comprises three core themes:

● The Central Economic Problem
● Markets
● The National and International Economy

Theme 1: The Central Economic Problem

1.1 Scarcity as the Central Economic Problem

1.1.1 Scarcity, choice and resource allocation

a. The Central Economic Problem is scarcity, arising from limited resources and unlimited wants

b. Scarcity implies that choices have to be made in the allocation of resources between different uses

c. When choices are made, trade-offs and opportunity costs are incurred

d. The concepts of scarcity, choice and opportunity costs can be explained from the perspectives of different economic agents (consumers, producers and governments)

e. Production Possibility Curve can be used to illustrate scarcity, choice, opportunity cost, productive efficiency, full employment, unemployment or under-utilisation of economic resources and changes in the productive capacity of an economy.

1.1.2 Decision-making process of economic agents

(Learn from a funny blog post here: Real World Economics Applied: To HK or Not)

  1. Understanding objectives of rational economic agents

●  Consumers – maximisation of utility

●  Producers – maximisation of profits

●  Governments – maximisation of social welfare

b. In the pursuit of their objectives, economic agents have to be:

  1. Recognising constraints
  2. Gathering information and considering perspectives
  3. Weighing costs and benefits in decision-making
  4. Recognising trade-offs
  5. Taking into account intended and unintended consequences and any changes occurring before reviewing the decisions

    Concepts and Tools of Analysis

      • Scarcity, choice and opportunity cost
      • Production possibility curve (PPC)
      • Marginal cost, marginal benefit and marginalist principle or approach
      • 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

    2.1.1 Price mechanism and its functions

    a. How the price mechanism allocates resources in the free market through signalling, incentive and rationing functions

    2.1.2 Demand and Supply Analysis and its Applications

    a. Market demand as a summation of individual demand

    b. Market Supply as a summation of individual supply

    c. Changes in price of the good/service itself cause a movement along the demand/supply curve

    (See video here)

    d. Changes in non-price determinants of demand and supply cause shifts in the demand/supply curve

    e. The market equilibrium price and  quantity are determined by the interaction of demand and supply

    f. Changes in demand and supply can affect equilibrium price and equilibrium quantity, consumer expenditure, producer revenue, consumer surplus and producer surplus

    g. These outcomes can be affected by price elasticities of demand and supply, income and cross elasticities of demand

    You can find our Economics Summary notes on PED and PES here.

    2.1.3 Government Intervention in Markets

    a. Governments may intervene in markets in the form of taxes, subsidies, price controls (maximum and minimum prices) and quantity controls (quotas)

    b. Government intervention in markets can affect the equilibrium price and quantity, consumer expenditure and producer revenue, consumer surplus and producer surplus

    c. Impact of government intervention on markets may be affected by price elasticities of demand and supply

    Concepts and Tools of Analysis

    • Price mechanism
    • Ceteris paribus
    • Change in demand vs change in quantity demanded
    • Change in supply vs change in quantity supplied
    • Demand and its determinants – non-price factors
    • Supply and its determinants – non-price factors
    • Market equilibrium – equilibrium price and quantity
    • Market disequilibrium – shortage and surplus (See Market Adjustment Process Video)
    • Price elasticity of demand
    • Income elasticity of demand– Normal and inferior goods
    • Cross elasticity of demand– Complements and substitutes
    • 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
    • Application to the real-world markets, including the labour market, is required

    Theme 2.2 Firms and Decisions

    2.2 Firms and Decisions

    2.2.1 Objectives of firms

    a. Firms aim to maximise profits

    • Profit as the difference between total revenue total cost

    • Profit-maximising output occurs at the point where marginal revenue (MR) equals marginal cost (MC) and where MC is rising

    • Firms may lack sufficient or accurate information to make price and output decisions to maximise profits

    b. Firms may choose to pursue alternative objectives such as revenue maximisation, profit satisficing, and market share dominance

    (See video on Firm Objectives)

    2.2.2 Costs and revenue

    a. Firms’ costs and revenue concepts in the short run and long run

    Learn the rules through our economics song on cost curves.

    b. Internal and external economies and diseconomies of scale and their link to the long-run average cost of production

    2.2.3 Firms’ decisions and strategies

    a. Firms make decisions and engage in pricing, cost and product differentiation strategies aimed at raising revenue and/or lowering unit costs. These include:

    1. growth, diversification and shut-down
    2. price competition
    3. third degree price discrimination
    4. innovation, research and development
    5. marketing
    6. collusion with other firms

    b. Firms consider the existing and potential levels of competition in the industry when making decisions and engaging in strategies

    c. Impact of firms’ decisions and strategies on:

    • efficiency (allocative, productive and dynamic)
    • consumer welfare (consumer choice, product quality and consumer surplus)
    • other firms (cost, revenue and profit)

    Concepts and Tools of Analysis

    • Profit maximisation: Marginal Revenue = Marginal Cost, where MC is rising
    • Revenue maximisation, profit satisficing, market share dominance
    • Short run vs long run
    • Fixed cost vs variable cost
    • Total cost, average cost, marginal cost
    • Total revenue, average revenue, marginal revenue
    • Internal and external economies and diseconomies of scale
    • Barriers to entry
    • Market concentration ratio
    • Market structures– Perfect competition, monopolistic competition, oligopoly, monopoly (an awareness that economists generally classify these 4 market structures based on characteristics such as number and size of firms, barriers to entry and nature of product).
    • Price discrimination
    • Shut-down condition
    • Product differentiation
    • Competition versus collusion– Cartels, contestable markets
    • Efficiency– Allocative, productive and dynamic efficiency.
    • Consumer welfare
    • Awareness that firms may apply knowledge of consumers’ cognitive biases (sunk cost fallacy, loss aversion or salience bias) in their strategies
    • Awareness that firms may be affected by technological disruptions in the industry
    • Awareness that firms may consider social and environmental concerns in their decisions

    Learn about cognitive biases through our video here.

    There are many concepts in the above topic. Samples of our mindmaps and infographics will help you.

    Theme 2.3 Microeconomic Objectives and Policies

    2.3.1  Governments’ Microeconomic Objectives

    a. Governments’ microeconomic objectives are efficiency and equity

    b. Efficiency in markets occurs when the social optimum is achieved, where Marginal Social Benefit (MSB) = marginal Social Cost (MSC), maximising society’s welfare

    c. Deadweight loss results when the social optimum is not achieved = can be explained as the reduction in net benefit to society when output level is not at the social optimum

    d. Efficient resource allocation may not result in equitable outcomes

    e. Equity occurs when there is fairness in the distribution of essential goods and services

    2.3.2  Market Failure and its Causes

    a. Market failure occurs when the free market is unable to allocate resources efficiently

    b. Markets may fail in terms of

    • non-provision of public good due to characteristics of non-excludability, non-rivalry and non-rejectability

    • non-socially optimal levels of goods and services due to the presence of externalities, information failure (including asymmetric information), immobility of factors of production and market dominance.

    Watch our video on Asymmetric Information here.

    2.3.3 Microeconomic Policies

    a. Microeconomic policy decisions undertaken by governments to achieve microeconomic objectives in relation to efficiency and equity

    b. Policy measures including taxes and subsidies, quotas and tradeable permits, joint and direct provision, rules and regulations, and public education in achieving efficiency and equity

    c. Effectiveness of policy measures and government 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, non-rivalry and non-rejectability
    • Positive and negative externalities
    • Merit and demerit goods
    • Market dominance
    • Information failure including Asymmetric information – moral hazard, adverse selection
    • Factor immobility
    • A 2-diagram approach for externalities showing MSC is higher than MPC for negative externalities and MSB is higher than MPB for positive externalities will suffice
    • Awareness that governments may apply knowledge of consumers’ cognitive biases (sunk cost fallacy, loss aversion or salience bias) to nudge the decisions of economic agents
    Learn about market failure diagrams through our video here.

    Check out our resource providing many microeconomics and macroeconomics definitions

    Theme 3: The National and International Economy

    Theme 3.1 Introduction to Macroeconomics

    3.1.1  Circular flow of income

    a. The circular flow of income as an interactive model involving households, firms, government and the foreign sector

    b. National income equals expenditure equals output

    Learn about Circular Flow of Income through our Video here

    3.1.2  Aggregate Demand (AD) and Aggregate Supply (AS)

    a. Aggregate Demand (AD) and its components: consumption (C), investment (I), government spending (G) and net exports (X – M)

    b. How AD is affected by changes in the determinants of C, I, G and (X – M)

    c. How Aggregate Supply (AS) is affected by its determinants

    d. How interaction of AD and AS determines equilibrium level of national output and general price level

    e. How changes in the components of AD can have a multiplied effect on national income

    Learn about the multiplier effect through our Multiplier Song and Multiplier Video

    Concepts and Tools of Analysis

    • Circular flow of income
    • Aggregate demand and determinants of C, I, G and (X – M)
    • Aggregate supply
    • Determinants of aggregate supply
    • National output
    • General price level
    • Multiplier effect
    • Distinction between and autonomous and induced expenditure is required
    • Knowledge of marginal propensities (consumption, savings, taxes and imports) and the multiplier formula is required

    Theme 3.2 Macroeconomic Objectives and Policies

    3.2.1 Standard of Living and Macroeconomics Indicators

    a. Economies are primarily concerned with improving the standard of living

    • Standard of living involves material and non-material aspects, as measured by real national income per capita taking into account other indicators such as income distribution, leisure time, quality of environment

    b. Standard of living is affected by an economy’s ability to achieve macroeconomic objectives in terms of sustainable and inclusive economic growth, low unemployment, price stability and a favourable balance of trade position

    c. Macroeconomic indicators

    • Indicators of economic performance include real Gross Domestic Product (GDP) or Gross National Income (GNI), real GDP or GNI per capita, unemployment rate, Consumer Price Index (CPI) and balance of trade

    • Human Development Index (HDI) as an indicator to reflect standard of living

    • Gini coefficient as an indicator to reflect income distribution

    d. Comparison of living standards over time and over space (between economies)

    Check out our video on whether RGNI per capita can measure Standard of Living

    3.2.2 Macroeconomic issues

    a. Macroeconomic issues and their causes:

    1. Undesirable Economic growth – persistently low or negative, unsustainable, non-inclusive due to factors such as changes in AD or AS, environmental degradation, inequitable income distribution
    2. Unemployment – demand-deficient, structural, frictional due to factors such as lack of AD, technological changes, mismatch of skills, transition between jobs
    3. Price instability – demand-pull inflation, cost-push inflation, deflation due to factors such as changes in AD, costs of production, productive capacity
    4. Persistently large balance of trade deficit or surplus due to factors such as changes in global conditions, international competitiveness, exchange rates

    Various videos on Inflation, Unemployment and balance of trade can be found here

    b. Consequences of undesirable economic growth, unemployment, price instability, persistently large balance of trade deficit or surplus for economic agents on the standard of living

    3.2.3 Macroeconomic policies to achieve macroeconomic aims

    a. Macroeconomic policy decisions undertaken by governments to achieve macroeconomic objectives in relation to living standards

    b. Policy measures and their effectiveness in achieving macroeconomic objectives:

    • Fiscal policy – How discretionary fiscal policy can influence the level of economic activities and living standards through government spending and taxation

    • Monetary policy – How monetary policy can influence the level of economic activities and living standards through the management of exchange rates (case of Singapore) and interest rates

    • Supply-side policies – How supply-side policies can improve quantity, quality and mobility of factors of production to increase the productive capacity of an economy and hence affect living standards

    c. Possibilities of conflicts between macroeconomic objectives and how this may affect governments’ decision on macroeconomic policy

    Concepts and Tools of Analysis

    • Standard of living
      – Material and non-material well-being
      – Gross Domestic Product (GDP) and Gross National Income (GNI) – Human Development Index (HDI)
    • Income distribution – Income inequality
    • An understanding of the meaning of the Gini coefficient (using the Lorenz curve) and the variation of the coefficient between 0 and 1 is required.
    • Economic growth
      • Actual and Potential growth
      • Sustainable growth
      • Inclusive growth
    • Full employment and unemployment
      • Demand-deficient unemployment
      • Structural unemployment
      • Frictional unemployment
    • Price stability
      • Demand-pull inflation
      • Cost-push inflation
      • Deflation
      • Consumer price index (CPI)
    • Nominal and real concepts
    • An understanding of nominal and real concepts is required. An understanding of how index numbers are interpreted, including the base year and use of weights, is required.
    • Balance of trade surplus and deficit
    • Current Account of the Balance of payments
    • Short-term capital flows
    • Long-term capital flows– Foreign direct investment
    • An awareness of the key components of the balance of payments accounts (current, capital and financial accounts) is required.
    • Discretionary fiscal policy
    • Government budget surplus and deficit
    • Monetary policy
      • Interest rates
      • Exchange rate appreciation and depreciation
    • Supply-side policies
    • An understanding that governments around the world focus on different macroeconomic objectives, depending on the state of the economy and the level of development of the country is required.
    • An awareness of the desirability for a government to maintain fiscal sustainability over the long term is required.
    • An understanding of how transfer payments can improve income distribution and help achieve inclusive growth is required.
    • Knowledge of the Marshall-Lerner condition is required.

    Theme 3.3 Globalisation and the International Economy

    3.3.1 Globalisation, International Trade and Economic Co-operation

    a. Globalisation as the increased trade of goods and services, and flows of capital and labour between countries

    • Factors affecting globalisation

    b. Basis of free trade and specialisation

    c. Benefits and costs of free trade and flows of capital and labour on:

    • Consumers – Prices, choice and variety of goods and services

    • Producers – Size of markets, degree of competition, cost of production and innovation

    • Government – Macroeconomic objectives (and policy choice)

    d. Benefits and costs of protectionism

    e. Governments may decide to engage in economic co-operation and trade agreements between countries or impose protectionist measures to achieve macroeconomic aims

    Concepts and Tools of Analysis

    • Globalisation
    • An understanding of the Theory of Comparative Advantage, in terms of opportunity cost, is required.
    • Free trade
    • Protectionism– Tariffs and non-tariff measures
    • Diagrammatic analysis of the effects of tariffs is required
    • International and regional economic co-operation
    Do Not Fear: Check out our Complete Guide to JC A Level Economics and Sign up for the Best H2 Economics Tuition in Singapore today! :-)
    If you are still deciding between H1 or H2 Economics, do check out that blog post.