What Will You Learn in A-Level Economics?

Many people assume economics is mainly about money, banking and the stock market. These subjects do feature, but A-Level Economics is much broader.

Economics helps us understand many of the biggest issues affecting everyday life. Why do prices rise? Why does unemployment increase? Why do governments change taxes? Why do interest rates move? Why are some jobs paid much more than others? Why do some countries become richer than others?

At A-Level, you will learn how economists investigate questions like these. You will study economic theories and models, but you will also learn how to apply them to real businesses, government policies and events taking place around the world.

Microeconomics and Macroeconomics

A-Level Economics is divided into two broad areas: microeconomics and macroeconomics.

Microeconomics looks at the decisions made by individual consumers, workers and businesses. It examines how markets operate, why prices change and why governments sometimes intervene in the way goods and services are produced or consumed.

Macroeconomics looks at the economy as a whole. It examines subjects such as inflation, unemployment, economic growth, government borrowing, taxation, interest rates and international trade.

Some of the main topics you are likely to study are shown below.

Microeconomics	Macroeconomics
Supply, demand and elasticity	Inflation and unemployment
Costs, revenue and profit	Economic growth
Competition and monopoly	Government taxation and spending
Labour markets and wages	Interest rates and monetary policy
Market failure	International trade and exchange rates
Government intervention	Poverty, inequality and development
Environmental economics	The wider global economy

The exact content and organisation of the course will depend on your examination board. However, AQA and Edexcel cover many of the same central ideas.

Understanding How Decisions Are Made

Economics is not simply a list of separate topics. Much of the subject is about understanding how consumers, businesses and governments make decisions, and how those decisions affect one another.

Consumers decide what to buy, how much to save and whether to borrow. Businesses decide what to produce, what prices to charge, how many workers to employ and whether to invest. Governments decide how much to tax, spend and borrow.

A decision made in one part of the economy can have effects elsewhere. A rise in interest rates may affect household spending, business investment and house prices. A new tax may change consumer behaviour. A fall in overseas demand may reduce the sales of British businesses and affect employment.

One of the aims of A-Level Economics is to help you understand these connections rather than simply memorising individual facts.

For a broader introduction to the subject, read Economics Isn’t Really About Money — It’s About Choices.

Economics Helps Explain the Real World

Ideas such as inflation, unemployment and economic growth can initially sound rather abstract. In reality, they can have a profound effect on people’s lives.

Inflation affects what households can afford. Unemployment affects people’s incomes, confidence and future prospects. Economic growth may create jobs and raise living standards, but it can also increase pollution, place pressure on natural resources or distribute its benefits unevenly.

Economics therefore examines both the causes and consequences of economic change. It also considers what governments and central banks might do in response.

For example, you may study whether higher interest rates can reduce inflation, whether tax cuts can encourage economic growth or whether increased government spending can reduce unemployment. You will also consider the possible disadvantages and unintended consequences of each policy.

Economic problems rarely have perfectly simple solutions.

Economics as a Social Science

Economics is described as a social science because it studies the behaviour of people, businesses, governments and other organisations.

Economists use evidence, data and models, but they are studying a world shaped by human choices. This makes Economics different from a natural science in which researchers may be able to carry out controlled laboratory experiments.

Economists cannot normally raise interest rates in one version of Britain, leave them unchanged in an otherwise identical version, and then compare what happens. The real economy continues to change in many different ways at the same time.

Suppose interest rates rise and inflation subsequently falls. Did the higher interest rates cause the fall? Perhaps they did. But energy prices might also have fallen, global supply problems may have eased or households may have reduced their spending for other reasons.

It can therefore be difficult to isolate cause and effect with complete certainty.

Human behaviour is not perfectly predictable either. Two households may react differently to the same increase in interest rates. One might cut its spending sharply, while another may make almost no change.

Economists use models to simplify this complicated reality and identify important relationships. However, those models must be tested against evidence and used with care.

Positive and Normative Economics

Economists make an important distinction between positive and normative statements.

A positive statement is a claim that can, at least in principle, be tested against evidence. For example:

An increase in cigarette taxes will reduce the quantity of cigarettes purchased.

Evidence could be collected to investigate whether that statement is correct. Economists might compare cigarette sales before and after the tax increase, while also considering other factors that could have affected demand.

A normative statement contains a value judgement about what ought to happen. For example:

The government should increase taxes on cigarettes.

Evidence can help inform that debate. It might show that higher taxes reduce smoking or increase government revenue. However, the word should introduces a judgement. People may disagree about how much freedom consumers should have, whether the tax is fair or how strongly the government should discourage unhealthy behaviour.

Economic arguments often contain both types of statement. Someone may make a positive claim about what a policy is likely to do and then a normative judgement about whether the outcome is desirable.

Recognising the difference between evidence and value judgements is an important part of thinking like an economist.

Why Economists Do Not Always Agree

One of the fascinating features of Economics is that economists frequently disagree.

Sometimes they disagree about the evidence. Economic data may be incomplete, revised later or open to different interpretations. Economists may also disagree about which factors caused a particular outcome.

They may use different models or make different assumptions. One economist may believe consumers will respond strongly to a tax change, while another expects the effect to be small.

Economists can also agree about what a policy is likely to do but disagree about whether it should be introduced. A policy might reduce inflation but increase unemployment. Another might promote growth while increasing government borrowing or inequality.

The disagreement may therefore reflect different priorities rather than a dispute over the underlying facts.

A-Level Economics teaches you to examine these competing arguments, assess the evidence and reach a supported judgement.

Economics Is Not Just About Memorising Facts

You will need to learn definitions, diagrams and economic concepts. However, success in Economics does not come from memorisation alone.

The greater challenge is understanding why things happen and how different parts of an argument connect.

For example, you may need to explain:

• why higher interest rates might reduce inflation;

• why unemployment may rise during a recession;

• why countries trade with one another;

• why a tax might change consumer behaviour;

• why government intervention may solve one problem while creating another.

Good economic analysis develops through a chain of reasoning. Rather than simply stating that interest rates affect inflation, you need to explain each link between the change in interest rates, household and business decisions, overall spending and the price level.

Once you understand these connections, Economics becomes much more logical and easier to remember.

Applying Economics to New Situations

Examination questions often ask students to apply economic ideas to unfamiliar situations.

You might be given information about housing, energy prices, supermarkets, wages, international trade or government policy. You must identify which economic ideas are relevant and use them to explain what is happening.

This is one of the most enjoyable parts of the subject. The theory learned in class provides a way of understanding events in the news and decisions made by real businesses.

It also means that simply reproducing a memorised answer is rarely enough. You need to adapt your knowledge to the particular evidence and circumstances in the question.

Does A-Level Economics Involve Maths?

A-Level Economics includes quantitative skills. You may need to calculate percentages, interpret graphs and tables, use index numbers, calculate elasticity and distinguish between real and nominal values.

The mathematics itself is generally manageable. The greater challenge is often deciding which calculation is required and explaining what the result means in an economic context.

You do not need to be an exceptional mathematician, but you should be willing to practise. My separate guide, Do You Need Maths for A-Level Economics?, looks at whether the maths should put you off choosing the subject. If you want to see what the maths actually looks like, with some simple examples, read What Maths Do You Actually Need for A-Level Economics? goes further.

The Skills You Will Develop

A-Level Economics helps students develop a valuable combination of numerical, analytical and written skills.

You will learn how to:

• interpret economic data;

• analyse evidence;

• use economic diagrams;

• construct logical chains of reasoning;

• evaluate competing arguments;

• write well-structured essays;

• apply theory to current affairs;

• reach balanced, supported judgements.

These skills are useful far beyond the economics classroom. They are valued by universities and employers in areas including business, finance, government, law, research, journalism and management.

Is Economics Likely to Suit You?

Economics often appeals to students who are curious about the world and enjoy asking why things happen.

You may enjoy the subject if you are interested in questions such as why houses are expensive, why businesses change their prices, why wages vary between occupations or why governments borrow money.

It combines elements of both essay-based and numerical subjects. You will use data and calculations, but you will also construct arguments, evaluate evidence and write extended answers.

You do not need to arrive knowing a great deal about the economy. What matters more is a willingness to ask questions, follow an argument and consider different explanations.

Further Reading

If you're thinking about studying A-Level Economics, you might also find these guides helpful:

• Economics Isn’t Really About Money — It’s About Choices – Money matters, but Economics is mainly about how people, businesses and governments make choices when resources are limited.

• Do You Need Maths for A-Level Economics? – How much maths is involved, what calculations you'll need and why the maths is usually less daunting than many students expect.

• Is A-Level Economics Difficult? – What students typically find challenging and how to overcome those difficulties.

• Why Study A-Level Economics? – How Economics helps you understand the world and the opportunities it can open up.
  

If you're ready to begin learning the subject itself, the natural next step is Scarcity: The Fundamental Economic Problem.