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Syllabus Requirements
2.1 Markets
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Definition of markets with relevant local, local and international examples.
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Brief descriptions of perfect competition, monopoly and oligopoly as different types of market structures, and monopolistic competition, using the characteristics of the number of buyers and sellers, type of product and barriers of entry.
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Importance of price as a signal and as an incentive in terms of resource allocation.
Demand
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Definition of demand
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Law of demand with diagrammatic analysis
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Determinants of demand
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Fundamental distinction between a movement along a demand curve and a shift along of the demand curve
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Exceptions of the law of demand (the upward-sloping demand curve) [HL only]
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ostentatious (Veblen) goods
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role of expectations
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Giffen goods
Supply
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Definition of supply
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Law of supply with diagrammatic analysis
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Determinants of supply
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Effect of taxes and subsidies on supply
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Fundamental distinction between a movement along a supply curve and a shift along of the supply curve
Interaction of supply and demand
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Equilibrium market clearing and quantity
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Diagrammatic analysis of change in demand and supply to show the adjustment to a new equilibrium
Price controls
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Maximum price: causes and consequences
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Minimum price: causes and consequences
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Price support/buffer stock schemes
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Commodity agreements
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