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Most Important 40 Questions for Last Minute Revision in O Level Economics

1. What is meant by capital and identify two types of capital? Give examples. 2. Describe specialization and list its levels? 3. What are the features of a developing country? 4. Compare substitutes and complements? Give examples. 5. What are the advantages of forming a multinational? 6. What is meant by Price Elasticity of Demand? 7. What are the main roles of a trade union? 8. What are the reasons for wage differentials? 9. Distinguish between economies of scale and diseconomies of scale? List their types. 10. Compare Fixed cost and Variable cost? Give examples. 11. What is diversification? Give examples. 12. Why diversification is important for developing countries? 13. Describe the types of taxes? 14. Distinguish between Regressive and Progressive tax? Give examples. 15. Compare Perfect competition and Monopoly? 16. What are the advantages of Perfect competition? 17. Name the important economic policies? 18. What a

Most Frequent 40 Questions in O Level Economics

1. What is opportunity cost? 2. What are the four factors of production and their rewards? 3. What factors affect the demand for a normal product? 4. What are the advantages and disadvantages of specialization? 5. What are the functions of a central bank? 6. What is a multinational company? 7. Name the three types of integration and describe them? 8. What are the functions of a trade union? 9. Distinguish between Private and Public limited companies? 10. Compare Private sector and Public sector? 11. What factors affect supply of goods? 12. What are the reasons for wage differentials within the same occupation? 13. What are the reasons for wage differentials between occupations? 14. What factors affect consumer spending? 15. What factors affect consumer saving? 16. List the three sectors of economy and describe them with examples? 17. Distinguish between fixed cost and variable cost? 18. What are the advantages of econom

Scarcity

Learning Outcomes On completion of the lesson, students are expected to; understand the problem of unlimited wants and finite resources.  distinguish between renewable and non-renewable resources.  Students should understand that the economic problem is faced by consumers, producers and the government. Students should also understand the meaning of sustainable resources. Meaning of Economics Economics is the study of efficient management of scarce resources so as to get the maximum satisfaction of human wants. The word economics is derived from the Greek word “oikonomia”. It means household management. Economics has a Microeconomic and a Macroeconomic dimension. Microeconomics is concerned with the efficient supply of a particular good or service. But Macroeconomics is concerned with the overall efficiency of resource use in an economy. In particular, it is concerned with the achievement of economic objectives such as; a high and stable level of employment a

4.8 What other measures can be used to promote growth and development?

What students need to learn: Content Students should be able to: Additional Guidance Notes Ways of promoting growth and development Consider factors such as: aid debt relief development of human capital inward looking/outward looking strategies free market/government intervention approaches industrialisation; development of tourism; agriculture microfinance fair trade schemes role of international financial institutions and non-government organisations in promoting growth and development. Students should investigate the benefits and disadvantages associated with each of the listed strategies. In addition, the strategy should be considered in relation to some theoretical framework, for example market orientated approaches; structural change theories; international dependence theories. With reference to a particular economy, students might consider which theory might be most appropriate. Student

4.7 What is the role of the state in promoting growth and development?

What students need to learn: Content Students should be able to: Additional Guidance Notes Macro economic policies Evaluate the use of policies to achieve economic objectives including macroeconomic stability. For example, how fiscal policy is used to achieve budgetary objectives; the role of independent central banks to achieve inflation targets; the use of supply-side policies to achieve economic growth. Students should have an understanding of global factors influencing a country’s inflation rate; for example the impact of low wages in developing countries or the impact of a rise in commodity prices. The AD/AS model introduced in Unit 2 should be applied in analysing and evaluating these policies. The distinction between short and long run aggregate supply curves should be considered, as well as the factors influencing each. Students should be aware of the problems facing policy makers when applying policies, for exa

4.6 What are the limits to growth and development in developed and developing countries?

What students need to learn: Content Students should be able to: Additional Guidance Notes Limits to growth and development Consider factors such as: poor infrastructure human capital inadequacies primary product dependency savings gap; inadequate capital accumulation foreign currency gap capital flight corruption population issues debt poor governance; civil wars. Students will not be expected to know specific numerical information for countries. Students should be aware of the problems associated with declining terms of trade. Students would benefit from using case studies as a means of illustrating the constraints facing different economies and reasons for their different growth rates. For example, they could study one country from each of the following continents: Africa, Asia, South America, North America and Europe. Specific knowledge of individual countries will not be required.

4.5 What is poverty and inequality in developed and developing countries?

What students need to learn: Content Students should be able to: Additional Guidance Notes Absolute and relative poverty Consider absolute and relative poverty. An ability to understand/sketch a Lorenz curve diagram and Gini coefficients is required. Measurements of inequality Identify measurements of inequality: the Lorenz curve; Gini coefficient. Students should consider the causes and consequences of inequality and poverty in developed and developing countries and related issues, for example the extent to which inequality is an essential ingredient of capitalism.

4.4 How does a country compete?

What students need to learn: Content Students should be able to: Additional Guidance Notes Measures of competitiveness Consider measures of competitiveness. For example: relative unit labour costs and relative export prices. Factors influencing competitiveness Consider factors influencing a country’s competitiveness. For example: exchange rate; productivity; wage and non-wage costs; regulation. Government policy Examine government policy to increase international competitiveness. For example: measures to improve education and training; incentives for investment; deregulation. Students might examine case studies of particular industries to see how they compete for example: cars; textiles.

4.3 How is international trade recorded and financed?

What students need to learn: Content Students should be able to: Additional Guidance Notes Balance of Payments Understand the different components of the Balance of Payments. For example: the trade in goods and services current account as well as the accounts showing short- and long-term capital flows. Current account deficits and surpluses Understand the factors influencing the size of deficits and surpluses on different components of the Balance of Payments; significance of deficits and surpluses on the current account. Students should consider whether such current account surpluses and deficits matter and examine measures to reduce such imbalances. The significance of global imbalances should be examined. Influences on exchange rates Understand factors influencing exchange rates. Students should consider the significance of relative interest rates; relativ

4.2 Why trade?

What students need to learn: Content Students should be able to: Additional Guidance Notes Patterns of trade Identify patterns of trade between developed and developing countries. Students should be aware of changes in trade flows between countries and the reasons for them, for example the potential impact of China and India on world trade patterns and the possible reaction of developed economies. Specialisation and comparative advantage Understand the benefits and costs of specialisation and trade; the law of comparative advantage. Students should understand the distinction between absolute and comparative advantage. The significance of opportunity cost should be emphasised. Comparative advantage may be illustrated numerically and diagrammatically. WTO Understand the role of the World Trade Organization (WTO) in trade liberalisation; trading blocs. The d

4.1 What are the causes and effects of globalization?

What students need to learn: Content Students should be able to: Additional Guidance Notes Causes of globalisation Identify factors contributing to globalisation. For example: trade liberalisation; reduced cost of communications; increased significance of transnational companies. Effects of globalisation Identify the benefits and costs of globalisation. Students should consider the issue of sustainability and environmental degradation as part of the costs of trading.

3.11 Why does the government intervene in markets to maintain competition?

What students need to learn: Content Students should be able to: Additional Guidance Notes Government intervention to maintain competition in markets Explain and evaluate measures aimed at enhancing competition between firms and their impact on prices, output and market structure. Compare and evaluate the strengths and weaknesses of methods of regulation for example price capping, monitoring of prices and performance targets. Students should be able to explain why governments may intervene to encourage competition, or prevent monopolies and mergers. A detailed knowledge of the legislation that relates to competition policy is not required. Students will need to be aware of various types of private sector involvement in public sector organisations, including contracting out, competitive tendering and public private partnerships (PPP/PFI).

3.10 How does the threat of competition affect a firm’s behavior?

What students need to learn: Content Students should be able to: Additional Guidance Notes Contestability Define contestability and understand how the threat of new entry may influence behaviour and market performance of existing firms. Students should be able to understand the relationship between sunk costs and the degree of contestability — examples may include banking, airline industry and petrol retailing.

3.9 What determines the behaviour of firms?

What students need to learn: Content Students should be able to: Additional Guidance Notes Perfect competition Understand the assumptions of perfect competition and be able to explain the behaviour of firms in this market structure. Diagrammatic analysis of the market structure is required in both the short and long run. Students will be expected to understand the significance of firms as price-takers in perfectly competitive markets. An understanding of the meaning of shut-down point is required. The impact of entry into and exit from the industry should be considered. Monopoly Understand the characteristics of this model and be able to use them to explain the behaviour of firms in this market structure. Explain and evaluate the differences in efficiency between perfect competition and monopoly. Explain and evaluate the potential costs and benefits of monopoly to both firms and consumers, including the

3.8 What do we mean by market concentration?

What students need to learn: Content Students should be able to: Additional Guidance Notes Market concentration Understand market concentration ratios and be able to interpret the meaning and significance for business behaviour.

3.7 What barriers exist to firms entering and leaving markets?

What students need to learn: Content Students should be able to: Additional Guidance Notes Barriers to market entry and exit Understand the meaning and types of barriers to entry and exit and how they affect the behaviour of firms. Examples of barriers to include economies of scale; limit pricing; legal barriers, for example patents; sunk costs, for example advertising. Students will be expected to discuss the significance of barriers to entry and exit to firms operating in different market structures.

3.6 What is meant by profit?

What students need to learn: Content Students should be able to: Additional Guidance Notes Normal and supernormal profit Understand the distinction between normal and supernormal profit. This can be related to the understanding of the objectives of the firm and the ability of different firms to make normal and supernormal profit. Profit maximisation Explain and illustrate the concept of profit maximisation using marginal cost and marginal revenue.

3.5 What is meant by efficiency?

What students need to learn: Content Students should be able to: Additional Guidance Notes Productive and allocative efficiency Understand and distinguish between productive and allocative efficiency. Students will be required to know that the minimum point on the average total cost is the most productively efficient point and that allocative efficiency occurs where price is equal to marginal cost. Students should also understand the meaning of inefficiency eg, x-inefficiency.