Central Economics Wiki

Introduction to economics[]

The purpose of this section is to introduce the basic terminology and concepts of economics. Students are encouraged to consider what markets and governments can and cannot do. This section of the syllabus gives them an early opportunity to begin to explain economic phenomena through the use of diagrams,data analysis and the evaluation of economic material. This section is intended to make students aware of the role of economics in real-world situations. Even at this initial stage teachers and students shouldconsider the application of economic theories to developing countries, since development economics is integral to the course.

• Definitions of Social Science and Economics (Alejandro Peltoniemi)

• Definitions of Microeconomics and Macroeconomics (Ian Bjorklund)

• Definitions of Growth , Development Economics , and Sustainable Development (Daniel Clinton-McCausland)

Positive and Normative concepts (Daniel Clinton-McCausland)

Ceteris Paribus (Mat Goldstein)


factors of production: land, labour, capital and management/entrepreneurship (Oliver Alexander-Adams)
payments to factors of production: rent, wages, interest, profit (Nicholas Schiebel)


utility: basic definition (Nicole Schmidt)
opportunity cost (WIlliam Vicic)
free and economic goods (John Weber)
production possibility curves: definition (Daniel Clinton-McCausland)
diagrams showing opportunity cost, actual and potential output (Matthias Flath)
diagrams showing economic growth and economic development (Hui Hoang)

Rationing Systems

basic economic questions
what to produce? (Israel Thomas)
how to produce?
for whom to produce?
mixed economies
public (Sophie Maloney)
private (Sophie Maloney)
central planning versus free market (Sophie Maloney)
economies in transition (Sophie Maloney)


The purpose of this section is to identify and explain the importance of markets and the role played bydemand and supply. The roles played by consumers, producers and the government in different market structures are highlighted. The failures of a market system are identified and possible solutions areexamined. The concepts learned here have links with other areas of the economics syllabus; for example, elasticityhas many applications in different areas of international trade and development.


Definition of markets with relevant local, national and international examples (Emily Hare)

Importance of price as a signal and as an incentive in terms of resource allocation


• Definition of demand (Grace Gbolo)
Law of Demand As the price of a good or service increases, the consumer's demand for the good or service will decrease and vice versa. (Tsuehue Xiong)
• Determinants of demand (Bayley Taple)
• Fundamental distinction between a movement along a demand curve and a shiftof the demand curve (Audra Dunivan)


• Definition of supply (Emma Burgeson)
• Law of supply with diagrammatic analysis (Lao Thao)
• Determinants of supply (Hannah Frawley)
• Effect of taxes and subsidies on supply (Ka Thor)
• Fundamental distinction between a movement along a supply curve and a shiftof the supply curve (Claire Dunivan)

Interaction of demand and supply

• Equilibrium market clearing price and quantity (Emma Petersen)
• Diagrammatic analysis of changes in demand and supply to show the adjustment to a new equilibrium

Price Controls

• Maximum price: causes and consequences (Frank Berg)
• Minimum price: causes and consequences (Emma Abbott)
• Price support/buffer stock schemes (Steve Quam)
• Commodity agreements (Claire Dunivan)


Price elasticity of demand (PED)

• Formula (Chue Thao)
• Definition (Cherja Vang)
• Possible range of values
• Diagrams illustrating the range of values of elasticity (Nate Kado)
• Varying elasticity along a straight-line D curve
• Determinants of price elasticity of demand (Olumide Ige)

Cross-elasticity of demand

• Definition (Matt Spencer)
• Formula (William Ryan)
• Significance of sign with respect to complements and substitutes (Julia Amundson)

Income elasticity of demand

• Definition (Jerard Edwards)
• Formula (Seth Michael)
• Normal goods (Caroline Huynh)
• Inferior goods (Martin Worley-Meyers)

Price elasticity of supply

• Definition (Tyler Klatt)
• Formula (Devin Tomson-Moylan)
• Possible range of values
• Diagrams illustrating the range of values of elasticity
Determinants of Price Elasticity of Supply A numeric value that measures the elasticity of a good when the price changes. -availability of materials -length and complexity of product -time to respond -excess capacity -inventories (Tsuehue Xiong)

Applications of concepts of elasticity

• PED and business decisions: the effect of price changes on total revenue (Sam Ebertz)
• PED and taxation (Aung Oo)
• Cross-elasticity of demand: relevance for firms
• Significance of income elasticity for sectoral change (primary to secondary to tertiary) as economic growth occurs

Market Failure[]

Reasons for market failure

• Positive and negative externalities, with appropriate diagrams (Keenan Lilyquist)
• Short-term and long-term environmental concerns, with reference to sustainable development
• Lack of public goods (Jackson Kidder)
• Underprovision of merit goods (Henry Mackaman)
• Overprovision of demerit goods (Henry Mackaman)
• Abuse of monopoly power (Huy Le)

Possible government responses

• Legislation
• Direct provision of merit and public goods
• Taxation (Amie Thao)
• Subsidies (Maggie Scimeca)
• Tradable permits (Henry Mackaman)
• Extension of property rights
• Advertising to encourage or discourage consumption (Audra Dunivan)
• International cooperation among governments (Annie Moua)


The purpose of this section is to provide students with the opportunity for a detailed examination of the major macroeconomic issues facing countries' economic growth, economic development, unemployment, inflation and income distribution.

Section 4 deals with external equilibrium. Income distribution is introduced here in section 3 but is addressed in greater detail in section 5.

The economic strategies available to governments—demand-side policies, supply-side policies, direct intervention—are introduced and evaluated. These policies are applicable to almost all areas of macroeconomics, international economics and development economics.

National Income[]

Circular flow of income (Nicole Tempas)

Methods of measurement —income, expenditure and output

Distinction Between :

• gross and net (Shelby Bauer)
• national and domestic (Tseng Yang)
• nominal and real (Matt Starry)
• total and per capita (Malcolm Galligan)

Introduction to Development[]

Definitions of economic growth and economic development (Stephanie Scott)

Differences in the definitions of the two concept s (Angela Nguyen)

Gross Domestic Product (GDP) versus Gross National Product (GNP) as measures of growth (Joe Nelson)

Limitations of using GDP as a measure to compare welfare between countries (Becca Engdahl)

Allowance for differences in purchasing power when comparing welfare between countries

Alternative methods of measurement

Problems of measuring development

Macroeconomic Models[]

Aggregate demand —components (Kelsey Wotzka)

Aggregate supply

• short-run (Heather Hopkins)
• long-run (Keynesian versus neo-classical approach) (Lao Yang)

Full employment level of national income

Equilibrium level of national income

Inflationary gap

Deflationary Gap (Enzo DeLuca)

Diagram illustrating trade/business cycle (Anny Vang)

Demand-side policies and Supply-side policies[]

Shifts in the aggregate demand curve/demand-side policies
• fiscal policy (Jari Vang)
• interest rates as a tool of monetary policy
Shifts in the aggregate supply curve/supply-side policies
• Strengths and weaknesses of demand-side and supply-side policies

Unemployment and Inflation[]

• Unemployment

Full employment and underemployment (Koumman Lee)
Unemployment rate (Barbara Vang)
Costs of unemployment (Uri-Biia Si-Asar)
Types of unemployment
• structural (Isaac Kaplan)
• frictional (Katie Schonebaum)
• seasonal (Carlisa Hardy)
• cyclical/demand-deficient (Ayla Morris)
• real wage (Brooks Hier)
Measures to deal with unemployment (Peter Nelson)

• Inflation

Definitions of inflation and deflation (Alex Davis)
Costs of inflation and deflation (Tong Thao)
Causes of inflation
• cost push (Henry Mackaman)
• demand pull (John Seng)
• excess monetary growth (Alex Arnott)

Distribution of income[]

Direct Taxation (Joshua Anosike)

Indirect Taxation (Hue Vang)

Progressive taxation (Alec Nicol)

Proportional taxation (Ben Hageman)

Regressive taxation (Charlie Diamond)

Transfer payments (Cher Moua)

International Economics[]

The purpose of this section is to encourage candidates to understand why countries trade, the problemsinvolved and how these problems are addressed. Students need to understand how exchange rates affect international trade. The international trade theory introduced in this section should be related to real-world examples.

Reasons for Trade[]

Differences in factor endowments (Daniel Clinton-McCausland)

Differences in factor endowments

Differences in factor endowments (Teng Lee)


Free Trade and Protectionism[]

Definition of Free Trade (Alex O'Brien)

Types of protectionism

• Tariffs (Alison Shanahan)
• Quotas (Brett Schneider)
• Subsidies
• Voluntary Export Restraints (VERs)
• Administrative obstacles
• Health and safety standards (Thay Thao)
• Environmental standards (Dana Rider)

Arguments for protectionism

• Infant industry argument
• Efforts of a developing country to diversify
• Protection of employment (Daniel Clinton-McCausland)
• Source of government revenue
• Strategic arguments
• Means to overcome a balance of payments disequilibrium
• Anti-dumping

Arguments against protectionism

• Inefficiency of resource allocation
• Costs of long-run reliance on protectionist methods
• Increased prices of goods and services to consumers
• The cost effect of protected imports on export competitiveness

Economic Integration[]


Trading blocs

• Free trade areas (FTAs)
• Customs unions
• Common markets

World Trade Organization (WTO)[]

Aims (Ryan Readinger)

Success and failure viewed from different perspectives

Balance of Payments[]

Current account

• balance of trade (Daniel Clinton-McCausland)
• invisible balance (Daniel Clinton-McCausland)

Capital account

Exchange Rates[]

Fixed exchange rates (Nick Connolly)

Floating exchange rates

Exchange Rates#Floating exchange rates

Distinction between

• depreciation and devaluation
• appreciation and revaluation

Effects on exchange rates of

• trade flow
• capital flows/interest rate changes
• inflation (Bobby Richardson)
• speculation
• use of foreign currency reserves

Balance of payment problems[]

Consequences of a current account deficit or surplus

Methods of correction

• managed changes in exchange rates
• reduction in aggregate demand/expenditure-reducing policies
• change in supply-side policies to increase competitiveness
• protectionism/expenditure-switching policies

Consequences of a capital account deficit or surplus

Terms of Trade[]

Definition of terms of trade (Ayah Mohammed)

Consequences of a change in the terms of trade for a country's balance of payments and domestic economy

The significance of deteriorating terms of trade for developing countries

Development Economics[]

Throughout the course, students are introduced to several important concepts in development economicsand, in particular, to the fundamental distinction between economic growth and economic development established in section 3. This important distinction needs to be re-emphasized at the beginning of this section.

Given the dynamic nature of the international economy, it is problematic to group countries into clearlyestablished categories such as developed, developing, newly industrialized countries (NICs) and transition economies. However, students should understand current terminology and be aware that similarities anddifferences exist within different categories. It is important for teachers to help students find relevantexamples of the different categories of countries.

The main purpose of this section is to provide students with the opportunity to understand the problemsfaced by developing countries, and to develop an awareness of possible solutions to these problems.

Sources of economic growth and/or development[]

Natural factors: the quantity and/or quality of land or raw materials

Natural factors: the quantity and/or quality of human resources

Physical capital and technological factors: the quantity and/or quality of physical capital

Institutional factors that contribute to development

• banking system
• education system (Faiza Usman)
• health care
• infrastructure
• political stability (Mohamed Osman)

Consequences of Growth[]

Externalities (Dee Yang)

Income distribution


Barriers to economic growth and/or development[]

Poverty cycle: low incomes lead to low savings lead to low investment leads to low incomes (Eliot Hart-Nelson)

Institutional and political factors

• ineffective taxation structure (Mohamed Osman)
• lack of property rights
• political instability
• corruption (Rebeca Ayala B)
• unequal distribution of income
• formal and informal markets
• lack of infrastructure (Colin Franken)

International trade barriers

• overdependence on primary products (Tou Moua)
• consequences of adverse terms of trade
• consequences of a narrow range of exports (Tou Xiong)
• protectionism in international trade (Henry Mackaman)

International financial barriers

• indebtedness
• non-convertible currencies
• capital flight (Nancy Xiong)

Social and cultural factors acting as barriers

• religion (Sam Andrastek)
• culture
• tradition (Francois Veronneau)
• gender issues

Growth and Development Strategies[]

Harrod-Domar growth model

Structural change/dual sector model

Types of aid

• bilateral, multilateral
• grant aid, soft loans
• official aid
• tied aid

Export-led growth/outward-oriented strategies

Import substitution/inward-oriented strategies/protectionism

Commercial loans

Fair trade organizations

Micro-credit schemes

Foreign direct investment

Sustainable development

Evaluation of growth and development strategies[]

Evaluation of the following in terms of achieving growth and/or development

• aid and trade
• market-led and interventionist strategies

The role of international financial institutions

• the International Monetary Fund (IMF)
• the World Bank
• private sector banks
• non-governmental organizations (NGOs)
• multinational corporations/transnational corporations (MNCs/TNCs)
• commodity agreements