Specification Economics

2 Economics content
Course structure
1: Microeconomics and Business Economics 11
• The Pearson Edexcel International GCSE in Economics comprises two examinations.
2: Macroeconomics and the Global Economy 23 • The Pearson Edexcel International GCSE in Economics is a linear qualification. All
examinations must be taken in the terminal series at the end of the course of study.
Pearson Edexcel International GCSE in Economics – Specification 9 10 Pearson Edexcel International GCSE in Economics – Specification
Issue 2 – March 2019 © Pearson Education Limited 2019 Issue 2 – March 2019 © Pearson Education Limited 2019
Paper 1: Microeconomics and Business Economics Assessment information
Examination of 1 hour and 30 minutes, set and marked by

Pearson.
Externally assessed
Single tier of entry.
The total number of marks available is 80.
Description
The examination paper consists of four compulsory questions,
each worth 20 marks. The questions are a mixture of multiple-
You will start by learning about basic economic problems. All choice, short-answer, data response and open-ended questions.
resources are scarce and therefore limited in supply. Consumers,
Each question will be based on a particular topic from the subject
firms and governments all have to make choices between different
content related to microeconomics and business economics. Due
products and these choices will introduce you to the concept of
to the nature of economics, there is some interrelation between
opportunity cost.
topics.
Microeconomics is the study of individual markets. You will learn
about the supply and demand model, which will give you a toolkit
to explore how changes in the economy will affect supply,
demand, price and quantity. The model will help to explain why
prices rise and fall, for example enabling you to explain the
changes in oil, house, gold and cocoa prices. You will look at how
much the quantity supplied and demanded will respond to changes
in price or income, which will help you to understand why some
price changes see large or small changes in quantity.
Having looked at how markets work, you will look at how they
sometimes fail. In some cases we overconsume as we ignore
negative impacts on others, for example pollution. In other cases
we underconsume as we might undervalue the benefits our
education could bring to others.
You will then move on to studying business economics. You will
look at what is needed to produce goods and services, including
land, labour, capital and enterprise. You will look at how
businesses can organise production to improve the output per
worker, which we call productivity. You will study business costs,
revenues and profits. You will then explore different types of
businesses, from those that are competitive to single firms that we
call monopolies, and also those industries with several large firms,
which we call oligopolies. In each case you will consider the
advantages of the types of business that exist.
Sometimes markets and businesses do not give the best outcome
for people and so governments have to enter the market. You will
look at the alternative ways in which they can affect markets,
considering the benefits and drawbacks of each.
1.1 – The market system Subject content What students need to learn:
1.1.3 Demand, supply and Demand
market equilibrium
a) Definition of demand.
Subject content What students need to learn:
b) The use of demand curve diagram to show:
1.1.1 The economic a) The problem of scarcity – where there are unlimited
problem wants and finite resources, leading to the need to • changes in price causing movements along a
make choices. demand curve
• shifts indicating increased and decreased demand.
b) Opportunity cost and its effect on economic agents
(consumers, producers and government). c) Factors that may cause a shift in the demand curve,
including:
c) The use of diagrams to show production possibility
curve. • advertising
d) Production possibility curve diagram should be used • income
to show: • fashion and tastes
• the maximum productive potential of an economy • price of substitute goods
• fully employed or unemployed resources • price of complementary goods
• opportunity cost • demographic changes.
• positive or negative economic growth that shifts the Supply
production possibility frontier (PPF) outwards and
inwards d) Definition of supply.
• possible and unobtainable production. e) The use of supply curve diagram to show:
e) Possible causes of positive or negative economic • changes in price causing movements along a supply
growth. curve
1.1.2 Economic a) The underlying assumptions that: • shifts indicating increased and decreased supply.
assumptions f) Factors that may cause a shift in the supply curve,
• consumers aim to maximise their benefit
including:
• businesses aim to maximise their profit.
• costs of production
b) Reasons why consumers may not maximise their
benefit: • changes in technology
• consumers are not always good at calculating their • indirect taxes

benefits • subsidies
• consumers have habits that are hard to give up • natural factors (natural disasters and weather).
• consumers sometimes copy others’ behaviour.
Market equilibrium
c) Reasons why producers may not maximise their profit:
g) Equilibrium price and quantity and how they are
• producers may have managers that revenue
determined.
maximise or sales maximise
• producers may prioritise caring for customers h) The use of diagrams to show:
• producers may complete charitable work. • how shifts in supply and demand affect equilibrium
price and quantity in real-world situations
• excess demand
• excess supply.
i) Define, calculate and draw excess demand and excess
supply.
j) The use of market forces to remove excess supply or
excess demand.
Subject content What students need to learn: Subject content What students need to learn:
1.1.4 Elasticity Price elasticity of demand (PED) m) The factors influencing PES, including:
a) Definition of PED. • factors of production
b) Formula of PED. • availability of stocks
c) Calculate the PED using given percentage changes in • spare capacity

quantity demanded and percentage changes in price. • time.
d) The use of diagrams to show price elastic and price n) Use examples to show the likely PES for manufactured
inelastic demand. and primary products.
e) Interpret numerical values of PED that show: Income elasticity of demand
• perfect price inelasticity o) Definition of income elasticity of demand.
• price inelasticity p) Formula of income elasticity of demand.
• unitary price elasticity
q) Calculate the income elasticity of demand using given
• price elasticity percentage changes in quantity demanded and
percentage changes in income.
• perfect price elasticity.
r) Interpret numerical values of income elasticity of
f) The factors influencing PED, including:
demand that show:
• substitutes
• luxury goods
• degree of necessity
• normal goods
• percentage of income spent on goods or service
• inferior goods.
• time.
s) The significance of price and income elasticities of
g) Use of total revenue calculations to show the demand to businesses and the government, in terms
relationship between a change in price and the change of:
in total revenue, to determine whether demand is price
• the imposition of indirect taxes and subsidies
elastic or price inelastic.
• changes in income.
Price elasticity of supply (PES)
1.1.5 The mixed economy a) Definition of mixed economy.
h) Definition of PES.
b) Definition of public and private sector.
i) Formula of PES.
c) Difference between public and private sectors in terms
j) Calculate the PES using given percentage changes in
of ownership, control and aims.
quantity supplied and percentage changes in price.
d) How the problems of what to produce, how to produce
k) The use of diagrams to show price elastic and price
and for whom to produce are solved in the mixed
inelastic supply.
economy.
l) Interpret numerical values of PES that show:
e) Concept of market failure – linked to inefficient
• perfect price inelasticity allocation of resources.
• price inelasticity f) Why governments might need to intervene because of
• unitary price elasticity market failure.
• price elasticity g) Definition of public goods – non-excludability, non-

rivalry and how this causes the free rider problem.
• perfect price elasticity.
h) The role of the public sector and private sectors in the
production of goods and services.
i) The relative importance of public sector and private
sector in different economies.
j) Definition of privatisation.
Subject content What students need to learn: 1.2 – Business economics
k) Effects of privatisation on:
• consumers
• workers
1.2.1 Production a) The factors of production:
• businesses
• land
• government.
• labour
1.1.6 Externalities External costs of production
• capital
a) Definition of external costs.
• enterprise.
b) Examples of external costs, including pollution,
congestion and environmental damage. b) Sectors of the economy:
• primary
External benefits of consumption
• secondary
c) Definition of external benefits.
• tertiary.
d) Examples of external benefits, including education,
healthcare and vaccinations. c) Changes in the importance of these sectors in terms of
employment and output over time in developing and
e) Definition and formula for:
developed economies.
• social costs = private costs + external costs
1.2.2 Productivity and a) Definition of productivity.
• social benefits = private benefits + external division of labour
benefits. b) Factors affecting productivity:
• land – use of fertiliser, drainage, irrigation,
reclamation
• labour – quality of labour, including improved
human capital through education and training and
impact of migration
• capital – increased quantity and technological
advances.
c) Definition of division of labour.
d) Advantages and disadvantages of the division of labour
to workers and businesses.
1.2.3 Business costs, a) Definition and use of formulae to calculate: 1.2.4 Business competition Competition
revenues and profit
• total revenue a) Advantages and disadvantages of competition to firms,
• total costs consumers and the economy, including:
• total fixed costs • efficiency
• total variable costs • choice
• average (total) costs • quality
• profit. • innovation
• price.
b) Economies of scale:
• definition of economies of scale b) Advantages and disadvantages of large firms and small
firms.
• definition of internal economies of scale
c) Factors influencing the growth of firms:
• types of internal economies of scale:
• government regulation
o purchasing (bulk buying)
• access to finance
o marketing
• economies of scale
o technical
• the desire to spread risk
o financial
• the desire to take over competitors.
o managerial
d) Reasons firms stay small:
o risk bearing.
• size of market
• definition of external economies of scale
• nature of market – niche
• types of external economies of scale:
• lack of finance
o skilled labour
• aims of the entrepreneur.
o infrastructure
Monopoly
o access to suppliers
e) Definition of monopoly.
o similar businesses in area.
f) Main features of monopoly:
c) Diseconomies of scale:
• one business dominates the market
• definition of diseconomies of scale
• unique product
• types of diseconomies of scale:
• price-maker
o bureaucracy
• barriers to entry:
o communication problems
o legal barriers
o lack of control
o patents
o distance between top management and workers
at bottom of the organisation o marketing budgets
• the use of long run average cost (LRAC) curve o technology
diagram, annotated to show internal economies of
o high start-up costs.
scale and diseconomies of scale and where the
business will be most efficient.
g) Advantages and disadvantages of monopoly: c) Importance of the quantity and quality of labour to
business.
• efficiency
• choice d) Impact of education and training on human capital and
quality of labour.
• quality
e) The use of labour market diagrams showing:
• innovation
• supply of labour, demand for labour, market
• price equilibrium wage and quantity of labour
• economies of scale. (employment)
Oligopoly • effect of shifts in demand for labour and supply of

labour.
h) Definition of oligopoly.
f) Trade union involvement in the labour market:
i) Main features of oligopoly:
• impact of trade union activity to improve working
• few firms conditions and increase wages.
• large firms dominate
1.2.6 Government a) Government policy to deal with externalities:
• different products intervention
• taxation
• barriers to entry
• subsidies
• collusion
• fines
• non-price competition
• regulation
• price competition.
• pollution permits.
j) Advantages and disadvantages of oligopoly:
b) Advantages and disadvantages of each government
• choice policy.
• quality c) Government regulation of competition to:
• innovation • promote competition
• collusion and cartels fixing high prices • limit monopoly power
• price wars between oligopolies. • protect consumer interests
1.2.5 The labour market a) Factors affecting the demand for labour: • control mergers and takeovers.
• demand for the final product (derived demand) d) Government intervention in the labour market:
• availability of substitutes, including machines • reasons for minimum wage
• productivity of workforce. • advantages and disadvantages of minimum wage
b) Factors affecting the supply of labour: • the use of diagrams to show impact of the
introduction of a minimum wage and the increase of
• population size
a minimum wage.
• migration
• age distribution of population
• retirement age
• school-leaving age
• female participation
• skills and qualifications
• ability to move geographic locations/move to
different types of employment.
Paper 2: Macroeconomics and the Global Economy Assessment information
Examination of 1 hour and 30 minutes, set and marked by

Pearson.
Externally assessed
The total number of marks available is 80.
Description
The examination paper consists of four compulsory questions,
each worth 20 marks. The questions are a mixture of multiple-
In macroeconomics you will look at all the markets combined in a choice, short-answer, data response and open-ended questions.
country. So you will now look at your own countries’ and other
Each question will be based on a particular topic from the subject
countries’ economies. You will look at the different objectives that
content related to macroeconomics and the global economy. Due
governments will be concerned about. These include trying to
to the nature of economics, there is some interrelation between
achieve:
topics.
• low inflation
• low unemployment
• increases in economic growth
• surpluses or equilibrium on the current account of the balance
of payments
• redistribution of income
• environmental protection.
For each objective, you will look at the issues and problems
involved and how the government acts to improve the outcomes.
You will then look at the global economy. This will involve looking
at the benefits and problems of increased integration between
economies of the globe. You will look at international trade and
how countries come together as trading partners to boost growth.
Exchange rates will also be looked at to consider how changes can
affect an economy. You will study both developing and developed
economies.
2.1 – Government and the economy Subject content What students need to learn:
c) Low unemployment:
• definition of unemployment
• measurement of unemployment using International
2.1.1 Macroeconomic a) Economic growth: Labour Organization (ILO) measure
objectives
• definition of economic growth • types of unemployment:
• measurement using increases in gross domestic o cyclical
product (GDP)
o structural
• limitations of GDP as a measure of growth
o seasonal
• the use of diagrams to show the economic cycle:
annotating boom, downturn, recession and recovery o voluntary
o frictional.
• the effect of each stage of the economic cycle on
economic growth, inflation and unemployment • impact of unemployment on:
• the impact of economic growth on: o output
o employment o use of scarce resources
o standards of living o poverty
o poverty o government spending on benefits
o productive potential o tax revenue
o inflation o consumer confidence
o the environment. o business confidence
b) Low and stable inflation: o society.
• definition of inflation d) Surplus or balance on the current account of the
• definition of deflation balance of payments:
• measurement using consumer price index (CPI) • definition of current account on the balance of
payments
• types of inflation:
• current account deficits and surpluses
o demand pull
• trade in goods (visibles) and services (invisibles)
o cost push.
• relationship between current account and exchange
• relationship between inflation and interest rates rates
• impact of inflation on: • examples of real-world exchange rates
o prices • reasons for deficits and surpluses:
o wages o quality of domestic goods
o exports o quality of foreign goods
o unemployment o price of domestic goods
o menu costs o price of foreign goods
o shoe leather costs o exchange rates between countries.
o uncertainty
o business and consumer confidence
o investment.
• impact of current account deficit: 2.1.2 Government policies a) Fiscal policy – government revenue and government
o leakage from the economy expenditure:
o can be inflationary if prices rise abroad • definition of fiscal policy
o low demand for our exports • government revenue – direct and indirect taxes
o problems finding foreign reserves to fund the • government expenditure – main areas of focus
deficit. • fiscal deficits and fiscal surpluses
e) Protection of the environment: • impact of a fiscal deficit and fiscal surplus
• business activity that damages the environment • the impact of fiscal policy on macroeconomic
objectives.
• ways businesses damage the environment:
o visual pollution, including litter b) Monetary policy – focused on interest rate changes:
o noise pollution • definition of monetary policy
o air pollution • definition of interest rates
o water pollution. • central banks role in setting interest rates
• government intervention to protect the • impact of changes in interest rates on

environment: macroeconomic objectives:
o taxation o the mechanism by which a change in interest

rates affects consumers and businesses
o subsidy
o awareness of asset purchasing used by central
o regulation banks.
o fines c) Supply-side policy:
o pollution permits • definition of supply-side policy
o government provision of parks. • supply-side policy and its impact on productivity and
f) Redistribution of income: total output
• definition of income inequality • the impact of supply-side policies on

macroeconomic objectives:
• definition of absolute poverty
o privatisation
• definition of relative poverty
o deregulation
• reasons to reduce poverty and inequality:
o education and training
o meet basic needs
o policies to boost regions with high
o raise standards of living unemployment
o ethical reasons. o infrastructure spending
• government intervention to reduce inequality and o lower business taxes to stimulate investment
poverty:
o lower income tax rates to encourage working.
o progressive taxation
d) Government controls:
o redistribution through benefit payments
• advantages and disadvantages of:
o investment in education and healthcare.
o regulation
o legislation
o fines
o pollution permits.
2.2 – The global economy
2.1.3 Relationships a) The impact of policies and the trade-off between
between objectives macroeconomic objectives:
and policies
• unemployment and inflation Subject content What students need to learn:
• economic growth and inflation 2.2.1 Globalisation a) Definition of globalisation: increased integration and
• economic growth and environmental protection interdependence of economies.
• inflation and the current account on balance of b) Reasons for globalisation:

payments. • fewer tariffs and quotas
• reduced cost of transport
• reduced cost of communication
• increased significance of multinational
corporations (MNCs).
c) Impacts of globalisation and global companies on
individual countries, governments, producers and
consumers, workers and the environment:
• rising living standards
• greater choice
• lower prices
• reduced costs of communication
• closing of traditional industries
• environmental impact.
d) Definition of multinational corporations (MNCs):
• definition of foreign direct investment (FDI)
• reasons for emergence of MNCs/FDI:
o to benefit from economies of scale
o to access natural resources/cheap materials
o lower transport and communication costs
o to access customers in different regions.
• advantages and disadvantages of MNCs/ FDI:
o creating jobs
o investing in infrastructure
o developing skills
o developing capital
o contributing to taxes
o avoiding paying taxes
o environmental damage
o moving profits abroad.
2.2.2 International trade a) Advantages and disadvantages of free trade, including: 2.2.3 Exchange rates a) Definition of exchange rates.
• lower prices and increased choice for consumers b) Factors affecting supply and demand of currencies:
• lower input costs • interest rates
• wider markets for businesses • currency speculators
• foreign competition harming domestic businesses • imports and exports of goods and services
• increasing unemployment. • supply and demand diagrams to show determination
of exchange rates.
b) Reasons for protection:
c) Definition of appreciation:
• prevent dumping
• definition of revaluation
• protect employment
• impact of appreciation of exchange rate on:
• protecting infant industries
o import and export prices
• to gain tariff revenue
o demand for imports and exports
• protect consumers from unsafe products
o current account on balance of payments.
• reducing current account deficits
• retaliation. d) Definition of depreciation:
• definition of devaluation
c) Methods of protection:
• impact of depreciation of exchange rate on:
• tariffs
o import and export prices
• quotas
o demand for imports and exports
• subsidies
o current account on balance of payments.
• advantages and disadvantages of each method of
protection
• supply and demand diagrams to show tariffs, quotas
and subsidies.
d) Modern trading blocs:
• impact of trading blocs on member and non-
member countries
• examples of trading blocs.
e) Role of the World Trade Organization (WTO):
• actions by the WTO.
f) Trade patterns of developed and developing countries.
3 Assessment information
Assessment requirements
Paper number and Level Assessment information Number of raw
unit title marks allocated
in the paper
Paper 1: 1/2 Examination of 1 hour 30 minutes 80
Microeconomics and set and marked by Pearson.
Business Economics
The paper is weighted at 50% of
the qualification.
Students may use a calculator.
Paper 2: 1/2 Examination of 1 hour 30 minutes 80
Macroeconomics and set and marked by Pearson.
the Global Economy
The paper is weighted at 50% of
the qualification.
Students may use a calculator.
Pearson Edexcel International GCSE in Economics – Specification 33

Issue 2 – March 2019 © Pearson Education Limited 2019

Specification Economics

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2 Economics content

Examination of 1 hour and 30 minutes, set and marked by

• consumers are not always good at calculating their • indirect taxes

b) Formula of PED. • availability of stocks

c) Calculate the PED using given percentage changes in • spare capacity

• price elasticity g) Definition of public goods – non-excludability, non-

• total fixed costs • efficiency

• total variable costs • choice

• average (total) costs • quality

Oligopoly • effect of shifts in demand for labour and supply of

Examination of 1 hour and 30 minutes, set and marked by

o can be inflationary if prices rise abroad • definition of fiscal policy

o noise pollution • definition of monetary policy

o air pollution • definition of interest rates

o water pollution. • central banks role in setting interest rates

• government intervention to protect the • impact of changes in interest rates on

o taxation o the mechanism by which a change in interest

• definition of income inequality • the impact of supply-side policies on

• inflation and the current account on balance of b) Reasons for globalisation:

Pearson Edexcel International GCSE in Economics – Specification 33

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