Download 5EFB_Syllabus - Association of Business Executives

QCF Syllabus
Economics for Business
Unit Title
Unit Reference Number
Guided Learning Hours
Level
Number of Credits
Economics for Business
A/502/4798
160
6
25
Unit purpose and aim(s):
This unit aims to give learners a sound understanding of:
 the finite nature of economic resources
 market equilibrium, supply and demand analysis, price determination
 elasticity of demand and supply
 short and long run costs, economies and diseconomies of scale
 how different market structures affect business
 how the banking and finance sector affects business
Learning Outcome 1
The learner will: Understand the nature of economic resources and that their finite supply creates the need for business
organisations to make choices.
Assessment Criteria
The learner can:
Indicative Content
1.1 Explain the difference between
microeconomics and
macroeconomics.
1.1.1 Explain what is meant by microeconomics and macroeconomics.
1.1.2 Provide examples to illustrate the differences between microeconomics and
macroeconomics.
1.2 Explain the problems of scarcity
and opportunity cost and how
these concepts are related, using
numerical examples and/or a
production possibility frontier.
1.2.1 Define and explain the nature of factors of production.
1.2.2 Explain the basic economic problem of scarcity.
1.2.3 Explain the concept of opportunity cost and use a production possibility frontier to
explain scarcity, resource choices and opportunity cost.
1.3 Compare, using real world
examples, the relative merits of
alternative economic
arrangements for overcoming
the problem of scarcity in
society.
1.3.1 Explain what is meant by free market, command and mixed economies.
1.3.2 Explain how different economic systems decide what to produce, how to produce it
and who to produce it for.
Learning Outcome 2
The learner will: Understand the concept of market equilibrium and be able to use supply and demand analysis to examine how
price is established within a market.
Assessment Criteria
The learner can:
Indicative Content
2.1 Explain, in words and with
diagrams, the concept of
equilibrium in a supply and
demand model, and illustrate the
effects of changes in market
conditions on equilibrium price
and quantity.
2.1.1 Explain with the use of diagrams, the difference between individual and market
demand.
2.1.2 Explain the reasons for movements along, or shifts in, supply and demand curves.
2.1.3 Draw supply and demand curves based on data and solve these for the equilibrium
price and quantity.
2.1.4 Analyse how equilibrium price and quantity are established and affected by changes
in supply and demand.
2.2 Examine, using appropriate
supply and demand diagrams,
the effects of taxes and subsidies
and the effects of price ceilings
and price floors on market price
and quantity traded.
2.2.1 Draw a supply and demand diagram and use this to illustrate and comment upon
the effect of a specific tax, a government subsidy and the imposition of
maximum/minimum prices.
2.2.2 Identify the burden/benefit of taxation/subsidies on consumers and producers.
2.3 Identify examples of positive and
negative externalities and, using
supply and demand analysis,
demonstrate the effects of these
externalities on the market
equilibrium.
2.3.1 Explain the meaning of positive and negative externalities and provide supporting
examples to show the distinction between private and social costs and benefits.
2.3.2 Using supply and demand analysis show how positive/negative externalities impact
upon resource allocation.
2.3.3 Illustrate, using supply and demand curves, how alternative policies, such as the use
of taxation, can be used to correct market failure caused by externalities.
Learning Outcome 3
The learner will: Understand the concepts of elasticity of demand and supply and their application within the business decisionmaking process.
Assessment Criteria
The learner can:
Indicative Content
3.1 Define, measure and interpret:
price elasticity of demand; price
elasticity of supply; income
elasticity of demand, and cross
price elasticity of demand.
3.1.1 State the formula for, and explain what is meant by: price elasticity of demand;
income elasticity of demand; cross price elasticity of supply, and price elasticity of
supply.
3.1.2 Explain the factors which affect the numerical values of each of these elasticities.
3.1.3 Solve simple numerical elasticity problems, using quantitative information.
3.2 Explain, using diagrams and
different concepts of demand
elasticities, what is meant by
each of the following: normal
goods; inferior goods; luxury
goods; complements, and
substitutes.
3.2.1 Explain the relationship between concepts of demand elasticities and the following
goods: normal goods; inferior goods; luxury goods; complementary goods, and
substitute goods.
3.2.2 Identify real world examples of normal goods; inferior goods; luxury goods;
complementary goods and substitute goods.
3.3 Examine the use of the concepts
of elasticity by firms to analyse
and evaluate market changes.
3.3.1 Identify the implications of price elasticity of demand, price elasticity of supply,
income elasticity of demand and cross price elasticity of demand, for the behaviour
of firms.
3.3.2 Evaluate the usefulness of the concepts of elasticity as appropriate decision-making
tools for a business.
Learning Outcome 4
The learner will: Understand the economic theory of costs, the distinction between short-run and long-run costs, economies and
diseconomies of scale, and their application to business.
Assessment Criteria
The learner can:
Indicative Content
4.1 Use formulae, diagrams and
examples to explain the
differences between fixed cost,
variable cost, marginal cost,
average cost and total cost.
4.1.1 Explain, using numerical examples and diagrams, the difference between fixed cost,
variable cost, marginal cost, average cost and total cost.
4.1.2 Explain, using an appropriate diagram, the relationship between average and
marginal cost.
4.1.3 Draw cost curve diagrams based on numerical cost data.
4.1.4 Solve numerical and/or diagrammatic problems using cost data.
4.2 Explain, using examples, the
determination of short-run and
long-run cost curves and describe
the relationship between short
and long run average cost curves.
4.2.1 Explain the relationship between diminishing marginal returns and the shape of the
short-run average cost curve.
4.2.2 Explain the relationship between increasing returns to scale, decreasing returns to
scale and the shape of the long-run average cost curve.
4.3 Distinguish between economies
and diseconomies of scale and
discuss their relevance to the
business decision-making
process, including the potential
implications for businesses
arising from changes in size.
4.3.1 Explain what is meant by economies and diseconomies of scale and relate these
concepts to the long-run average cost curve.
4.3.2 Identify the potential benefits to the firm associated with economies of scale.
4.3.3 Examine why firms might wish to increase in size.
4.3.4 Explain why small firms might still play an important role in an economy.
Learning Outcome 5
The learner will: Understand the nature and characteristics of different market structures and how these structures affect
business conduct and performance.
Assessment Criteria
The learner can:
Indicative Content
5.1 Explain how different market
structures determine the
marginal conditions for the
profit-maximising output
decisions of a firm.
5.1.1 Illustrate, using diagrams, and numerical examples, the relationship between total
revenue, average revenue, and marginal revenue, and between marginal revenue
and the elasticity of demand for a profit maximising firm.
5.1.2 Explain the marginal conditions for the profit-maximising output decision of the
firm.
5.1.3 Explain, using words, diagrams and numerical examples, how a firm reaches its
profit maximising output with reference to marginal cost and marginal revenue.
5.1.4 Solve diagrammatic and numerical problems of profit maximisation.
5.1.5 Explain, using diagrams, how a firm chooses whether or not to stay in operation or
leave the industry in the short run and long run.
5.2 Identify the distinctive features
of firms operating in perfect
competition, monopolistic
competition, oligopoly and
monopoly and discuss the
implications of these differences
regarding pricing and output
decisions of firms in the short run
and long run.
5.2.1 Illustrate the distinctive features associated with a firm operating in a perfectly
competitive market and, using numerical and/or diagrammatic examples, show how
the firm establishes its profit maximising equilibrium price and output.
5.2.2 Identify the distinctive features of a monopoly and explain, using diagrams and/or
numerical examples, the firm’s profit maximising equilibrium output and price.
5.2.3 Describe the key characteristics of a firm operating in a monopolistically competitive
market and illustrate the profit maximising price and output position in the short
run and the long run.
5.2.4 Outline the general characteristics of an oligopoly industry and explain, using
diagrams, the profit-maximising price and output position.
5.3 Explain how different types of
market structure will affect
business decision-making and
create different policy
alternatives within an
organisation.
5.3.1 Compare the welfare implications of perfect competition and monopoly with
reference to equilibrium price and output, deadweight welfare loss, allocative
efficiency, productive efficiency and X-inefficiency.
5.3.2 Outline policy alternatives aimed at reducing the social cost of monopoly.
5.3.3 Explain the meaning of collusion and the factors that aid or hamper the ability of
firms to collude in the context of oligopoly.
5.3.4 Compare the price, output and welfare implications of oligopoly models relative to
the models of monopoly, monopolistic competition and perfect competition, and
examine the implications of these findings for policy makers and business decisionmaking.
Learning Outcome 6
The learner will: Understand the role and importance of the banking and finance sector to the successful operation of a business.
Assessment Criteria
The learner can:
Indicative Content
6.1 Outline the respective roles of
the central bank and the
commercial banking system and
how they relate to the business
environment.
6.1.1 Explain the role and functions of money in a modern economy.
6.1.2 Explain the role and functions of a central bank and its importance in relation to
business operations.
6.1.3 Examine the key characteristics of the commercial banks and their importance to
business.
6.1.4 Explain the relationship between the banking system, the credit creation process
and the control of the money supply.
6.2 Explain the concepts of inflation
and deflation and their impact on
business behaviour.
6.2.1 Define the concepts of inflation and deflation.
6.2.2 Explain the causes of inflation and deflation.
6.2.3 Illustrate and explain inflationary and deflationary gaps, using Keynesian cross
diagrams and/or aggregate demand (AD) and aggregate supply (AS) diagrams.
6.2.4 Explain why both inflation and deflation can cause problems for a business.
6.3 Explain the meaning and
operation of monetary policy and
how the use of different
instruments such as changes in
interest rates and changes in the
money supply might influence
business decision-making.
6.3.1 Explain the meaning and operation of monetary policy and how the different
instruments of monetary control, such as the use of interest rate changes, operate.
6.3.2 Identify the factors that determine the effectiveness of monetary policy.
6.3.3 Explain the likely impact of different monetary policies on businesses and the
implications of these policies for business decision-making.
Learning Outcome 7
The learner will: Understand the impact of international free trade and the use of alternative exchange rate regimes upon
business performance.
Assessment Criteria
The learner can:
Indicative Content
7.1 Explain how the various
measures of the external
accounts are constructed and
examine the different factors
that determine them.
7.1.1 Explain the separate elements of each part of the balance of payments account and
distinguish between visible/invisible items; between balance of trade and invisible
balance and between current and capital account.
7.1.2 Examine the different factors which determine the state (surplus/deficit) of these
accounts.
7.2 Identify the advantages and
disadvantages of free trade and
explain why governments may
decide to impose restrictions on
free trade.
7.2.1 Explain the difference between absolute and comparative advantage, the gains from
specialisation and the benefits of free trade.
7.2.2 Illustrate, using numerical examples, how gains from specialisation arise and identify
the gains from trade, using data on opportunity cost for two countries.
7.2.3 Identify the measures that can be employed by governments to restrict or promote
trade and their impact on business performance in developed and developing
countries.
7.2.4 Examine the costs and benefits associated with the use of measures to restrict free
trade.
7.3 Describe the concepts of
exchange rates and terms of
trade and compare the effects of
alternative exchange rate
regimes on business.
7.3.1 Explain the difference between key terms used in the analysis of exchange rates:
devaluation; depreciation; revaluation; appreciation.
7.3.2 Describe the ways in which government manipulation of exchange rates may affect
business performance.
Assessment:
 Assessment method: written examination (unless otherwise stated).
 Written examinations are of three hours’ duration.
 All learning outcomes will be assessed.
Recommended Reading:
 Economic Principles and their Application to Business – ABE Study Manual.
 Please refer to the Tuition Resources section of the Members Area of the ABE website ( www.abeuk.com) for further
recommended reading.