Unit 55: Business Economics Unit code: Y/506/2409 QCF level: 5 Credit value: 15 credits Aim The aim of this unit is to enable learners to understand the behaviour of domestic firms, transnational organisations and governments through substantive micro and macro-economic theory and policies and apply these to current and past events that have had a significant economic impact on the world. Unit abstract Economics is the study of how society responds to the basic problem of scarcity of resources, from both an individual and societal approach. It also helps to explain and address a wide range of economic phenomena such as a financial crisis. This unit will explore market equilibrium as well as compare the behaviour of individual firms which operate within the four main market structures; perfect competition, monopolistic competition, oligopoly as well as perfect and statutory monopolies. It will also examine domestic and transnational macroeconomic policies which governments pursue, including the effects of fiscal and monetary policy, and the theory behind comparative advantage and international trade. Learning outcomes On successful completion of this unit a learner will: 1 Understand microeconomic theory relating to markets 2 Understand the impact of market power on an economy 3 Understand the role of government in the macroeconomic environment 4 Be able to apply economic theories to the globalisation of trade. 297
Unit content 1 Understand microeconomic theory relating to markets The basic economic problem of scarcity and resource allocation: limited resources versus infinite human wants, production possibility frontiers, propensity to consume and save The role of opportunity cost: concept of foregone benefit, costs in the short and long run, revenue, profit maximisation Equilibrium in a market: Concept of supply and demand, supply and demand curves, normal goods, inferior goods, the effect of price movements, market equilibrium Differing market system: planned versus market-based economies, mixed economies, e.g. different levels of state intervention around the world Importance of elasticity: concepts of price, cross price and income elasticity of demand and elasticity of supply, contributing factors to elasticity pricing strategies Government Intervention in the Market: minimum and maximum pricing, black markets, indirect taxation, elasticity and the incidence of taxation 2 Understand the impact of market power on an economy Recognise how firms set prices: pricing behaviour of firms in markets, structure-conduct-performance Market power, operations and economic environment: market structures including perfect competition, monopolistic competition, oligopoly, monopoly, natural monopoly, contestable markets, monopsony, the impact of regulation on these market structures 3 Understand the role of government in the macroeconomic environment Changes in structure of the economy: Privatisation, move from an industrial to service sector to technology-based economy Four possible economic objectives for government macro-economic policy, full employment, price stability, economic growth, balance of payments equilibrium Economic policy: fiscal policy, monetary policy, Keynesian economics versus different schools of economic thought, multiplier, supply side policy Performance of economies in the global market: Key economic indicators such as GDP growth unemployment, inflation, investment, global trade in the last 20 years 298 Pearson BTEC Levels 4 and 5 Higher Nationals specification in Business Units Issue 7 May 2014 Pearson Education Limited 2014
4 Be able to apply economic theories to the globalisation of trade Economics of trade for development: Theory of comparative advantage, growth of global trade 1900 to present time, impact of emerging economies, e.g. Brazil, Russia, China, India ( BRIC s), Mexico. Indonesia, South Korea, Turkey (MIST) Advantages and disadvantages of free trade for development: trade agreements, protectionism, impact of the economic union and trading blocks, e.g. EU, ASEAN, etc. Global economic environment and internationalisation: Impact of transnational organisations, financial and money markets, emerging economies e.g. BRIC, MIST countries and emerging Africa Impact of domestic and global economic shocks: global financial crises, boom and bust economies, impact of recessions on individual firms 299
Learning outcomes and assessment criteria Learning outcomes On successful completion of this unit a learner will: LO1 Understand microeconomic theory relating to markets LO2 Understand the impact of market power on an economy LO3 Understand the role of government in the macroeconomic environment LO4 Be able to apply economic theories to the globalisation of trade Assessment criteria for pass The learner can: 1.1 explain the economic problem of scarcity and resource allocation 1.2 explain how equilibrium in a market is achieved 1.3 evaluate the importance of differing market systems 1.4 evaluate the role of opportunity costs in determining how economies make decisions 1.5 assess the importance of elasticity in market interactions 2.1 explain the implications of pricing and objectives on a business firm s operations 2.2 compare how prices are set in different market structures 2.3 analyse how a firm s behaviour is affected by: their market structure operations 2.4 evaluate the impact of regulation on market power in given situations 3.1 analyse how the structure of an economy has changed in the 21st Century giving the arguments for this change 3.2 evaluate the tools available to meet macroeconomic policy challenges 3.3 evaluate the success of a government s policies in achieving macroeconomic objectives 3.4 evaluate the economic performance of an economy in the global market 4.1 demonstrate the theory of comparative advantage using relevant illustrations from emerging economies 4.2 justify the advantages and disadvantages of free trade for development using appropriate case studies 4.3 analyse the impact of emerging economies on the developed economies 4.4 evaluate the impact of recent domestic and global economic shocks to the economy 300 Pearson BTEC Levels 4 and 5 Higher Nationals specification in Business Units Issue 7 May 2014 Pearson Education Limited 2014
Guidance Links This unit links with the external environment pathway units, especially: Unit 1: Business Environment; Unit 35: European Business. Essential requirements Real life case studies and real time news articles will be needed to support learners through this unit. The use of case studies at this level will need careful preparation and management. There are a large number of examples of case studies focusing on individual firms, transnational organisations, governments and economies, often in appropriate journals. Learners must read a quality newspaper, journal or associated website on a regular basis. Employer engagement and vocational contexts Centres should try to develop links with local Employers. Many businesses and chambers of commerce are keen to promote local business and are often willing to provide visit opportunities, guest speakers, and information about business and the local business context. Db230614G:\WORDPROC\LT\PD\HIGHER NATIONALS\9781446913284_BTEC_HNS_L45_BUS_ISSUE_7\BTEC_HNS_L45_BUS_UNITS_ISSUE_7.DOC.1 303/1 301