Leaving Cert Economics

Leaving Cert Economics helpful information:

General Information

Subject Overview

Economics is a way of thinking about how people make decisions and interact with each other. As such it is one of the cognitive and social sciences, such as psychology, sociology and philosophy. Economics focuses on "the ordinary business of life" as the economist Alfred Marshall stated. It explains how we get our incomes, how we use them, the supply of resources and the production and exchange of goods and services. Decisions relating to these have social consequences, intended and unintended, which are also analysed in Economics.

Students who have studied Junior Certificate Business Studies will have received a basic introduction to economics but this is not essential for study of Leaving Certificate Economics.

Content

The syllabus for Leaving Certificate Economics offers students a broad introduction to economics. It introduces students to the nature of economics and to basic economic concepts. Following this introduction, the units of study undertaken are

  • Production and consumption
  • Economic systems and economic thought
  • Demand and supply
  • Price and output
  • Factor incomes
  • Determination of national income and its fluctuations
  • Money and banking
  • The Government in the economyInflation
  • International trade and payments
  • Terms of trade
  • Economics of population
  • Economic growth and development
  • Economic policies, problems and conflicts

Assessment

The syllabus is assessed by means of a terminal examination paper at two levels, Ordinary level and Higher level in ascending order of difficulty.

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Definitions
  • Economics is a social science. It studies how limited resources that have alternative uses are distributed to satisfy the infinite needs and wants of humankind.

  • When making a choice, the opportunity cost of the choice is the best alternative foregone.

  • An economic system refers to the system used by a society to allocate its resources.

  • Micro economics studies the behaviour of the smaller units e.g. individuals, while macroeconomics studies the bigger picture.

  • Utility refers to the pleasure/enjoyment/satisfaction/benefit a consumer gets from consuming a good or service. The units used to measure utility called utils.

  • Total utility refers to the total enjoyment a consumer gets from consuming several units of a good.

  • Marginal utility refers to the extra satisfaction a consumer gets from consuming an extra unit of the good.

  • An economic good is a good or service that gives utility, is transferable and is scarce relative to the demand for it.

  • The law of diminishing marginal utility states that as extra units of a good are consumed the extra satisfaction of the extra units of the good falls.

  • The law of qui marginal returns states that a consumer who wants to maximise utility will allocate their limited income so that the ratio of marginal utility to price is the same for all goods he or she consumes

  • A market is any place where goods and services are bought and sold.

  • Factor markets are markets where the factors of production are demanded and supplied.

  • Intermediate markets where raw materials are bought and sold

  • Final markets are for final goods and service.

  • Individual demand refers to the quantities that would be demanded by an individual consumer at different prices.

  • Market demand refers to the quantities that would be demanded by all the consumers in a market at different prices.

  • A demand schedule is a table showing the quantities that would be demanded different prices.

  • The law demand refers to the negative relationship between the price of a good and the quantity demand of a good.

  • A normal food is a good, demand for which rises when income rises and falls when income falls.

  • An inferior good is a good, demand for which falls when income rises and rises when income falls.

  • Money income refers to income in terms of euro.

  • The real income of a consumer refers to the purchasing power of income.

  • Consumer surplus is the difference between what a consumer actually pays for a good and what he/she would be willing to pay rather than do without the good.

  • Individual supply of a good or service is the quantity a supplier would supply at different prices.

  • Market supply comprises the total quantity that would be supplied by all the individual suppliers of a good or service at different prices.

  • A supply schedule is a table that shows quantities that would be supplied by a supplier at different prices.

  • The law of supply refers to the positive relationship between the price of a good and the quantity supplied of a good.

  • Producer surplus is the difference between the lowest price a producer / supplier would be willing to accept for a good / service and the price that he or she actually receives.

  • The equilibrium price is the price which ensures that exactly everything is produced is supplied.

  • Price elasticity of demand measures the responsiveness of the quantity demanded of a good to a change of price.

  • Income elasticity of demand measures the responsiveness of quantity demanded to change in income.

  • A normal good is a good, the demand for which rises when income rises, and the demand for which falls when income falls.

  • An inferior good is a good, the demand for which falls when income rises and the demand for which rises when income falls.

  • Cross elasticity of demand measures the responsiveness of the quantity demanded of one good to a change in price of another good.

  • Substitute goods are goods that act as alternatives for each other.

  • Complementary goods are goods that are sold together.

  • Price elasticity of supply measures the responsiveness of quantity supplied to a change in price.

  • Derived demand refers to demand for a good, not for its own sake but for it’s used in the production of other goods.

  • The marginal physical product of a factor refers to the extra output that is generated by employing an extra unit of a factor of production.

  • The marginal revenue product of a factor refers to the extra revenue that is generated by employing an extra factor of production

  • The supply provides of a factor of production is the lowest payment needed to bring a factor into use and keep it in that particular employment.

  • Economic rent is a payment to any factory of a production in excess of its supply price.

  • Transfer earnings – the earnings a factor could make if it were transferred to its next best alternative use.

  • Land refers to anything provided by nature that is used to provide goods or services.

  • Labour is the physical effort used to provide goods or services.

  • The marginal physical product of labour is the extra output generated by hiring an extra unit of labour.

  • The marginal revenue product of labour is the extra revenue generated by hiring extra workers.

  • The geographical mobility of labour refers to the willingness of workers to move from one place to another to take up employment.

  • The occupational mobility of labour refers to the willingness of works to move from one occupation / career to another.

  • Full employment refers to a situation where everybody who wants a job can find one at existing wage levels.

  • The labour force comprises those who are unemployed seeing work and those in employment.

  • The participation rate refers to the proportion of the population of a country that is in its labour force.

  • Underemployment refers to works whose skills / talents / time are not required / used to their full potential.

  • The unemployment rate is calculated by dividing the number of people unemployment by the labour force.

  • Frictional unemployment refers to unemployment that results from people who are between jobs, and therefore, temporarily unemployed and to jobseekers that are not located where suitable jobs are available.

  • Seasonal unemployment refers to unemployment those results from a change in the time of year.

  • The live register is a record of all those in receipt of social welfare payment

  • The quarterly national household survey of 39,000 households is carried out every quarter and the employment status of those surveyed is used as an indication of the national unemployment rate.

  • Capital is anything manmade that is used to provide goods or services.

  • Investment refers to the production / formation of capital goods.

  • Gross investment refers to all capital spending, both on new capital and on replacing worn out or damaged capital.

  • Net investment refers to investment that does not include spending on capital that is being replaced or gross investment minus depreciation.

  • Capital widening refers to increasing the amount of capital and labour so that the ration of capital to labour remains unchanged.

  • Capital deepening refers to increasing the amount of capital by a higher percentage than the increase in the amount of labour so that the ratio of the capital to labour increases.

  • Fixed capital is the term used to refer to fixed assets.

  • Social capital refers to the capital owned by society.

  • The marginal efficiency of capital refers to the extra profit generated by employing an extra unit of capital.

  • Liquidity preference refers to the desire of individuals to hold their wealth in liquid form.

  • An entrepreneur us a person who takes a risk to make a profit by bringing the other three factors of production together to provide goods and services.

  • The short run is a period of time so short that at least one factor of production is fixed.

  • The long run is a period of time long enough for all factors of production to be varied.

  • Fixed costs are costs that do not vary with output.

  • Variable costs are costs that do vary with output.

  • Total costs = fixed costs and variable costs.

  • Average fixed costs are the fixed costs per unit of output.

  • Average variable costs are the variable costs per unit of VC / Q

  • Average total cost is made of average fixed costs plus average variable costs. It is the total cost per unit of TC/Q.

  • Marginal Cost is the extra cost of producing an extra unit of output.

  • The law of diminishing marginal returns states that as extra quantities of a variable factor are applied to fixed quantities of a fixed factor, the extra output eventually begins to diminish

  • A firm provides goods / services and sells these in the market place for a price.

  • An industry is made up of a number of firms that together provide all the output of a particular good / service.

  • Internal economies of scale refer to the decrease in the AC of a firm as the firm increases in size.

  • External economies of scale refer to the decrease in the AC of a firm as the industry increases in size.

  • Internal diseconomies of scale refer to the increase in the AC of a firm as the firm increases in size.

  • External diseconomies of scale refer to the increase in the AC of a firm as the industry increases in size.

  • A perfectly competitive market is one where identical goods are provided by a large number of sellers who are price takers to a large number of buyers.

  • Generic advertising refers to advertisements that promote the qualities / features of a product without naming a specific supplier of a product.

  • Competitive advertising is advertising that promotes the features of an individual firm’s product over those of competing firms.

  • Barriers to entry are factors that prevent or deter new suppliers from entering the market.

  • A patent allows the inventor the sole right to provide the good / service.

  • Price discrimination involves charging different customers different prices for the same good or service where the reason for the price difference is not due to differences in the costs of production.

  • Product differentiation means that the products sold by competing firms are similar but have differences. There are close but not identical substitutes available.

  • An oligopolistic market is a market with a large number of buyers purchasing from a small number of sellers, and these sellers make decisions to increase sales while taking into account the possible reactions of competitors.

  • Non – price competition occurs when firms try to increase their market share with lowering prices.

  • Price rigidity refers to the tendency for prices not to change, even if the firm’s costs change, in order to avoid reactions from competitors.

  • Price leadership occurs when the largest supplier decides the price it will charge the smaller rivals follow its lead.

  • Collusion occurs when competing firms who wish to increase their profits attempt to do so by forming a cartel and agreeing either formally or informally to restrict competition between them.

  • Limit pricing occurs when existing firms in an oligopolistic market charge a lower than the price they could charge in order to discourage the entry of new firms into the market of to force unwanted entrants out of the market.

  • An economy achieves full employment when everybody who seeks work can find work at existing wage levels. A 4 per cent unemployment rate indicated full employment.

  • Economic growth refers to increase in the wealth of a country without changes in the structures of society.

  • Fiscal policy refers to the ability of the government to alter taxes and government spending to achieve its objectives.

  • Decentralisation is a government plan to relocate some state agencies and governments from the capital to other locations throughout the country.

  • A prices and incomes policy refers to a policy whereby the government controls price and increases and at the same time restrains wage increases.

  • Direct taxes refer to taxes on income and wealth.

  • Income take is a tax on wages

  • Deposit interest rate tax is a tax on interest

  • Capital gains tax is a tax chargeable on the gains made from the disposal of an asset.

  • Capital acquisitions tax is a tax on items acquired by an individual

  • Corporation tax is a tax on company profits.

  • Indirect taxes are taxes on goods and services. Indirect taxes are paid indirectly to the government by final customers.

  • Value added tax is a tax on goods / services. Examples include VAT on clothing and on the services of a tradesperson.

  • Excise duty is put on products that can have negative effects such as alcohol tobacco and oil based products.

  • A tariff / customs duty is a tax on imports

  • Stamp duty is a tax on transactions, documents and certain instruments.

  • A regressive tax is a tax that does not take into account the ability to pay of a taxpayer.

  • A progressive tax is a tax that takes into account the ability to pay of tax payers

  • Tax avoidance involves organising your affairs to avoid paying tax or to reduce liability.

  • Tax evasion involves organising your affairs to illegally avoid paying tax or to reduce your tax liability.

  • The tax wedge is the difference between the cost to an employer of its employee and the take home wage of the employee as a result of taxation.

  • Tax harmonisation refers to a policy of the EU that aims to make tax regimes similar in all EU states.

  • The black economy refers to unrecorded economic activity.

  • Current income refers to money earned by the government on a continuous basis.

  • Current spending refers to money spent by the government on a continuous basis.

  • A current budget deficit occurs when current income is less than current spending.

  • A current budget surplus occurs when current income is greater than current spending

  • A balanced budget occurs when current income equals current spending.

  • Revenue buoyancy refers to a situation where the revenue collected by the government is greater than the amount the government predicted it would collect during the year.

  • Central government capital income refers to money received by the government on a once off basis.

  • Central government capital spending refers to money spent by the government on a once off basis.

  • The national debt is the total amount of money owed by the government to Irish and foreign financial institutions and individuals.

  • The debt GDP ration measures the size of the national debt in relation to the GDP of a country.

  • Deadweight debt refers to money borrowed and spent on projects that yield no revenue that could be used to pay back the debt.

  • Self liquidating projects are projects that can generate future income that can be used to pay off money borrowed to pay for a project.

  • Privatisation is the sale of government owned firms to private individuals and organisations.

  • The private cost of a good / service is the cost to the individual / firm that uses the good / service.

  • The social cost of a good / service is the cost to society of the existence of a good / service.

  • The social benefit of a good / service if the benefit to society of the existence of a good / service.

  • Demand – pull inflation occurs when demand for goods and services in greater that the supply of goods and services available, forcing prices to rise.

  • Cost push inflation occurs when the cost of providing goods and services rises and producers / sellers then pass these higher costs on to consumers by raising prices.

  • The consumer price index is used to measure the general increase in the price of goods and services in Ireland.

  • Deflation occurs when the demand for goods and service is lower than the supply. Prices fall as a result.

  • Money is the modern medium by which exchange can take place.

  • Taken money refers to money that has a face value that is greater than it’s intrinsic.

  • The term legal tender means that the currency is the official currency that must be accepted as payment by suppliers of goods / services by creditors.

  • The reserve ratio or primary liquidity ratio or cash ratio is the percentage of deposits that it must keep in cash form to meet customers demands for notes and coins.

  • Liquid assets are assets that are easily transferable into cash.

  • Monetary policy refers to the use of interest rates, money supply and credit to achieve economic objectives.

  • Economic and monetary union is the term that refers to the unification of the economies of EU members through unification of monetary policy and the introduction of the euro and harmonisation of fiscal policies of members.

Free Sample Answers
Statistics

Did you know?

In 2011 a total of 3846 students took Economics at Leaving Cert. 1444 girls took Economics at Leaving Certificate at higher level while 2402 boys did Economics  at Higher Level in 2010.

  • 11.4% of students got an A
  • 30.3% of students got a B
  • 31.6% of students got a C
  • 23.8% of students got a D
  • 5% of students failed
Paper Layout

Economics

Marks: 400
Answer 6 / 9 Questions
Time Allocated: 150 minutes

Exam Breakdown:

Duration of Exam: 2 hours 30 minutes (150 minutes).
Total marks for exam 400 marks.

Answer six of nine questions from Section A and four questions from Section B.  

Credit will be given for clear, precise answering and for orderly presentation of material

Section 1

Answer six of the nine questions asked

16 Marks
5 minutes per question
Section 2

Answer four of the eight questions asked

75 Marks
25 minutes per question

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