Spec coverage
Every spec point, and what actually teaches it
The real numbered content list from the official Pearson specification, each point matched to the lesson that covers it. Click through to a lesson from its spec point below, or rate how confident you feel — saved in this browser so it’s there next time you come back. Any point with no matching lesson is flagged, not hidden.
23 spec points · 23 covered
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1.3.1 — Introductory concepts
- 1.3.1.1
The nature of economics
- a) Economics as a social science: inability to conduct scientific experiments.
- b) The development of models in economics based on assumptions.
- c) The use of the ceteris paribus assumption in building models and drawing conclusions based on them.
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- 1.3.1.2
Positive and normative economics
- a) The distinction between positive statements and value judgements on economic issues.
- b) The role of value judgements in influencing economic decision making and policy.
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- 1.3.1.3
Scarcity
- a) The problem of unlimited wants and finite resources.
- b) The distinction between renewable and non-renewable resources.
- c) The link between scarcity and opportunity cost.
- d) The distinction between free goods and economic goods.
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- 1.3.1.4
Production possibility frontiers
- a) The use of production possibility frontiers to depict: the maximum productive potential of an economy; efficient or inefficient allocation of resources; possible and unobtainable production; opportunity cost (using marginal analysis); economic growth and decline.
- b) The distinction between movements along, and shifts in, production possibility frontiers, and their possible causes.
- c) The distinction between capital goods and consumer goods.
- d) The significance of capital goods for productivity and economic growth.
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- 1.3.1.5
Specialisation and the role of money and financial markets
- a) The advantages and disadvantages of specialisation and the division of labour in organising production; Adam Smith's views on the division of labour.
- b) The function of money as a medium of exchange, a measure and store of value, and a method of deferred payment; the significance of these functions for specialisation.
- c) The role of financial markets: to facilitate saving; to make funds available to businesses and individuals; to facilitate the exchange of goods and services; to provide forward markets in commodities and currencies; to provide a market for equities.
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- 1.3.1.6
Free market, mixed and command economies
- a) The distinction between free market, mixed and command economies.
- b) The advantages and disadvantages of free market and command economies.
- c) The role of the state in a mixed economy.
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1.3.2 — Consumer behaviour and demand
- 1.3.2.1
Rational decision making
- a) The assumption of rationality in decision making: consumers aim to maximise utility by making rational choices; firms aim to maximise profits.
- b) Reasons why consumers may not aim to maximise utility: the influence of other people's behaviour (herding); habitual behaviour; inertia; poor computational skills; the need to feel valued; framing and bias.
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- 1.3.2.2
The demand curve
- a) The concept of 'demand'.
- b) The distinction between movements along a demand curve and shifts of a demand curve.
- c) The concept of diminishing marginal utility and its significance for the shape of the individual demand curve.
- d) Factors that may cause a shift in the demand curve: changes in the price of substitutes or complementary goods; changes in real income; changes in tastes; changes in size and age distribution of the population; advertising.
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- 1.3.2.3
Price, income and cross-elasticities of demand
- a) The concepts of 'price', 'income' and 'cross-elasticities of demand'.
- b) How to use formulae to calculate price, income and cross-elasticities of demand.
- c) Interpretation of numerical values of price elasticity of demand: perfectly price elastic demand; price elastic demand; unitary price elastic demand; price inelastic demand; perfectly price inelastic demand.
- d) The factors influencing price elasticity of demand: availability of substitutes; branding; percentage of total expenditure; addictiveness of product; durability of product.
- e) How to calculate total revenue.
- f) How price elasticity of demand varies along a straight line demand curve.
- g) The relationship between price elasticity of demand and total revenue.
- h) Interpretation of numerical values of income elasticity of demand: perfectly income elastic demand; income elastic demand; income inelastic demand; perfectly income inelastic demand; the distinction between normal goods and inferior goods.
- i) Interpretation of numerical values of cross elasticity of demand. Significance for the degree to which goods are: substitutes; complements; unrelated.
- j) The significance of price, income and cross-elasticities of demand for firms, consumers and the government.
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1.3.3 — Supply
- 1.3.3.1
The supply curve
- a) The concept of 'supply'.
- b) The distinction between movements along a supply curve and shifts of a supply curve.
- c) Factors that may cause a shift in the supply curve: changes in the costs of production; the introduction of new technology; indirect taxes (specific and ad valorem); government subsidies; natural disasters.
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- 1.3.3.2
Price elasticity of supply
- a) The concept of 'price elasticity of supply'.
- b) Calculation and interpretation of numerical values of price elasticity of supply: perfectly elastic supply; elastic supply; unitary elastic supply; inelastic supply; perfectly inelastic supply.
- c) Factors that influence price elasticity of supply: the time period; availability of stock/perishability; mobility of factors of production; legal constraints; capacity.
- d) The distinction between the short run and long run in economics and its significance for price elasticity of supply.
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1.3.4 — Price determination
- 1.3.4.1
Determination of market equilibrium
- a) Equilibrium price and quantity, and how they are determined.
- b) Causes of changes in the equilibrium price and quantity as a result of shifts in demand and supply curves.
- c) The operation of market forces to eliminate excess demand and excess supply.
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- 1.3.4.2
Consumer and producer surplus
- a) The distinction between consumer and producer surplus.
- b) How changes in demand or supply might affect consumer and producer surplus.
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- 1.3.4.3
Functions of the price mechanism
- a) The rationing, incentive and signalling functions of the price mechanism for allocating scarce resources.
- b) The price mechanism in the context of different types of markets, including local, national and global markets.
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- 1.3.4.4
Indirect taxes and subsidies
- a) The impact of indirect taxes on consumers, producers and the government.
- b) The incidence of indirect taxes on consumers and producers.
- c) The impact of subsidies on consumers, producers and the government.
- d) The incidence of subsidies on consumers and producers.
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1.3.5 — Market failure
- 1.3.5.1
Sources of market failure
- a) Why market failure occurs: too much or too little of a good is produced and/or consumed compared to the socially optimal level of output.
- b) Sources of market failure: externalities; the free-rider problem; non-provision of public goods; imperfect market information; moral hazard; speculation and market bubbles.
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- 1.3.5.2
Positive and negative externalities
- a) The distinction between private benefits, external benefits and social benefits.
- b) The distinction between private costs, external costs and social costs.
- c) The distinction between: external benefits of production; external benefits of consumption; external costs of production; external costs of consumption.
- d) The use of diagrams, using marginal analysis, to illustrate: the external benefits from consumption; the external costs from production; the distinction between the market and social optimum positions; identification of the welfare loss or gain areas.
- e) The impact of externalities in various contexts: transport; health; education; environment; financial.
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- 1.3.5.3
Non-provision of public goods
- a) The distinction between public and private goods: private goods: rival and excludable; public goods: non-rival and non-excludable.
- b) Why public goods may not be provided by the private sector making reference to the free-rider problem.
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- 1.3.5.4
Imperfect market information
- a) The distinction between symmetric and asymmetric information.
- b) The significance of information gaps.
- c) How imperfect market information may lead to a misallocation of resources in various contexts: healthcare; education; pensions; insurance.
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- 1.3.5.5
Moral hazard
- a) How moral hazard can occur.
- b) The impact of moral hazard on consumers, producers, workers and governments in: insurance; banking.
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- 1.3.5.6
Speculation and market bubbles
- a) How market bubbles may arise.
- b) The impact of market bubbles on consumers, producers, workers and governments in various contexts: housing; stocks and shares.
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1.3.6 — Government intervention in markets
- 1.3.6.1
Purpose and methods of government intervention
- a) The purpose of government intervention, including reference to market failure.
- b) Methods of intervention: indirect taxation (ad valorem and specific); subsidies; maximum and minimum (guaranteed) prices; tradeable pollution permits; extension of property rights; state provision; regulation; provision of information.
- c) Contexts in which governments may intervene: health; housing; education; transport; environment; energy; agriculture; commodities.
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- 1.3.6.2
Government failure
- a) 'Government failure' as intervention that results in a net welfare loss.
- b) Causes of government failure: information gaps; lack of incentives; unintended consequences; excessive administrative costs; moral hazard.
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