Cambridge International AS & A Level Economics 9708 syllabus.

  Syllabus overview
Syllabus for examination in 2022.

1 Syllabus overview

1.1 Content
This table gives an overview of the syllabus content for Cambridge International AS and A Level Economics.

All candidates study these AS Level A Level candidates also study these
topics additional topics
1 Basic economic • Scarcity, choice and opportunity • Efficient resource allocation
ideas and resource cost • Externalities and market failure
allocation • Positive and normative statements • Social costs and benefits;
• Factors of production cost-benefit analysis
• Resource allocation in different
economic systems and issues of
transition
• Production possibility curves
• Money
• Classification of goods and services
2T
 he price system • Demand and supply curves • Law of diminishing marginal utility
and the micro • Price elasticity, income elasticity • Indifference curves
economy and cross-elasticities of demand • Budget lines
• Price elasticity of supply • Types of cost, revenue and profit,
• Interaction of demand and supply short-run and long-run production
• Market equilibrium and • Different market structures
disequilibrium • Growth and survival of firms
• Consumer and producer surplus • Differing objectives of a firm
3 Government • Maximum and minimum prices • Policies to achieve efficient
microeconomic • Taxes (direct and indirect) resource allocation and correct
intervention market failure
• Subsidies
• Equity and policies towards income
• Transfer payments
and wealth redistribution
• Direct provision of goods and
• Labour market forces and
services
government intervention:
• Nationalisation and privatisation
–– Demand and supply of labour
–– Wage determination in perfect
markets
–– Wage determination in
imperfect markets
• Government failure in
microeconomic intervention

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 Cambridge International AS & A Level Economics 9708 syllabus.   Syllabus overview
Syllabus for examination in 2022.

All candidates study these AS Level A Level candidates also study these
topics additional topics
4 The macro • Aggregate Demand and Aggregate • Economic growth, economic
economy Supply analysis development and sustainability
• Inflation • National Income statistics
• Balance of payments • Classification of countries
• Exchange rates • Employment/unemployment
• The terms of trade • The circular flow of income
• Principles of absolute and • Money supply (theory)
comparative advantage • Keynesian and Monetarist schools
• Protectionism • The demand for money and
interest rate determination
• Policies towards developing
economies; policies of trade and
aid
5G
 overnment macro • Types of policy: fiscal, monetary • Government macro policy aims
intervention and supply side policy • Inter-connectedness of problems
• Policies to correct balance of • Effectiveness of policy options to
payments disequilibrium meet all macroeconomic objectives
• Policies to correct inflation and
deflation

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Cambridge International AS & A Level Economics 9708 syllabus.   Syllabus content
Syllabus for examination in 2022.

3 Syllabus content

Candidates for Cambridge International AS Level should study the AS Level content for Paper 1 and Paper 2.
Candidates for Cambridge International A Level should study all the syllabus content.

The AS & A Level syllabus content is divided into five topic areas:
1 Basic economic ideas and resource allocation
2 The price system and the micro economy
3 Government microeconomic intervention
4 The macro economy
5 Government macroeconomic intervention

3.1 AS Level content – Paper 1 and Paper 2

1   Basic economic ideas and resource allocation (AS Level)
a) Scarcity, choice and opportunity cost • the fundamental economic problem
• the meaning of scarcity and the inevitability
of choices at all levels (individual, firms,
governments)
• the basic questions of what will be produced,
how and for whom
• the meaning of the term, ‘ceteris paribus’
• the margin and decision making at the margin
• short run, long run, very long run
b) Positive and normative statements • the distinction between facts and value
judgements
c) Factors of production • the rewards to the factors of production: land,
labour, capital and enterprise
• specialisation and division of labour
d) Resource allocation in different economic • decision making in market, planned and mixed
systems and issues of transition economies
• the role of the factor enterprise in a modern
economy
e) Production possibility curves • shape and shifts of the curve
• constant and increasing opportunity costs
f) Money • functions and characteristics in a modern
economy
• barter, cash and bank deposits, cheques, near
money, liquidity
g) Classification of goods and services • free goods, private goods (economic goods)
and public goods
• merit goods and demerit goods as the outcome
of imperfect information by consumers.

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 Cambridge International AS & A Level Economics 9708 syllabus.   Syllabus content
Syllabus for examination in 2022.

2   The price system and the micro economy (AS Level)
a) Demand and supply curves • effective demand
• individual and market demand and supply
• factors influencing demand and supply
b) Price elasticity, income elasticity and • the meaning and calculation of elasticity of
cross-elasticities of demand demand
• the range of elasticities of demand
• the factors affecting elasticity of demand
• the implications for revenue and business
decisions of price, income and cross-elasticities
of demand
c) Price elasticity of supply • meaning and calculation of elasticity of supply
• the range of elasticities of supply
• the factors affecting elasticity of supply
• implications for speed and ease with which
businesses react to changed market conditions
d) Interaction of demand and supply • meaning of equilibrium and disequilibrium
e) Market equilibrium and disequilibrium • effects of changes in supply and demand on
equilibrium price and quantity
• applications of demand and supply analysis
• movements along and shifts of the demand
and supply curves
• joint demand (complements) and alternative
demand (substitutes)
• joint supply
• the workings of the price mechanism; rationing,
signalling and the transmission of preferences
f) Consumer and producer surplus • meaning and significance
• how these are affected by changes in
equilibrium price and quantity

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Cambridge International AS & A Level Economics 9708 syllabus.   Syllabus content
Syllabus for examination in 2022.

3   Government microeconomic intervention (AS Level)

a) Maximum and minimum prices • meaning and effect on the market
b) Taxes (direct and indirect) • impact and incidence of taxes
• specific and ad valorem taxes
• average and marginal rates of taxation
• proportional, progressive and regressive taxes
• the Canons of Taxation
c) Subsidies • impact and incidence of subsidies
d) Transfer payments • meaning and effect on the market
e) Direct provision of goods and services • meaning and effect on the market
f) Nationalisation and privatisation • meaning and effect on the market

4   The macro economy (AS Level)

a) Aggregate Demand (AD) and Aggregate Supply • the shape and determinants of AD and AS
(AS) analysis curves; AD = C + I + G + (X – M)
• the distinction between a movement along and
a shift in AD and AS
• the interaction of AD and AS and the
determination of the level of output, prices and
employment
b) Inflation • the definition of inflation; degrees of inflation
and the measurement of inflation; deflation and
disinflation
• the distinction between money values and real
data
• the causes of inflation (cost-push and demand-
pull inflation)
• the consequences of inflation
c) Balance of payments • the components of the balance of payments
accounts (using the IMF/OECD definition):
current account; capital and financial account;
balancing item
• meaning of balance of payments equilibrium
and disequilibrium
• causes of balance of payments disequilibrium
in each component of the accounts
• consequences of balance of payments
disequilibrium on domestic and external
economy

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 Cambridge International AS & A Level Economics 9708 syllabus.   Syllabus content
Syllabus for examination in 2022.

4.   The macro economy (AS Level) cont.

d) Exchange rates • definitions and measurement of exchange rates
– nominal, real, trade-weighted exchange rates
• the determination of exchange rates – floating,
fixed, managed float
• the factors underlying changes in exchange
rates
• the effects of changing exchange rates on the
domestic and external economy using AD,
Marshall-Lerner and J curve analysis
• depreciation/appreciation
• devaluation/revaluation
e) The terms of trade • the measurement of the terms of trade
• causes of changes in the terms of trade
• the impact of changes in the terms of trade
f) Principles of absolute and comparative • the distinction between absolute and
advantage comparative advantage
• free trade area, customs union, monetary
union, full economic union
• trade creation and trade diversion
• the benefits of free trade, including the trading
possibility curve
g) Protectionism • the meaning of protectionism in the context of
international trade
• different methods of protection and their
impact, for example, tariffs, import duties and
quotas, export subsidies, embargoes, voluntary
export restraints (VERs) and excessive
administrative burdens (‘red tape’)
• the arguments in favour of protectionism

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Cambridge International AS & A Level Economics 9708 syllabus.   Syllabus content
Syllabus for examination in 2022.

5   Government macroeconomic intervention (AS Level)

a) Types of policy: fiscal policy, monetary policy, • instruments of each policy
and supply side policy
b) Policies to correct balance of payments • assessment of the effectiveness of fiscal,
disequilibrium monetary and supply side policies to correct a
balance of payments disequilibrium
• expenditure-reducing and expenditure-
switching
c) Policies to correct inflation and deflation • assessment of the effectiveness of fiscal,
monetary and supply side policies to correct
inflation and deflation

3.2 Additional A Level content – Paper 3 and Paper 4

The content of the AS Level is assumed knowledge for the assessment of Paper 3 and Paper 4. However,
the AS Level content will not be the direct focus of questions in Paper 3 and Paper 4.

1   Basic economic ideas and resource allocation (A Level)

a) Efficient resource allocation • productive and allocative efficiency
• Pareto optimality
• dynamic efficiency
b) Externalities and market failure • reasons for market failure
• positive and negative externalities for both
consumers and firms
• inefficient resource allocation
c) Social costs and benefits; cost-benefit analysis • social costs as the sum of private costs and
external costs
• social benefits as the sum of private benefits
and external benefits
• use of cost-benefit analysis in decision-making

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 Cambridge International AS & A Level Economics 9708 syllabus.   Syllabus content
Syllabus for examination in 2022.

2   The price system and the micro economy (A Level)

a) Law of diminishing marginal utility • its relationship to derivation of an individual
demand schedule
• equi-marginal principle
• limitations of marginal utility theory; rational
behaviour versus behavioural economic models
b) Indifference curves and budget lines • income, substitution and price effects for
various types of goods
c) Types of cost, revenue and profit, short-run and • short-run production function: fixed and variable
long-run production factors of production, total product, average
product and marginal product
– law of diminishing returns (law of variable
proportions)
– marginal cost and average cost
– short-run cost function – fixed costs versus
variable costs
– explanation of shape of Short-Run Average
Cost (SRAC)
• long-run production function
– returns to scale
– long-run cost function
– explanation of shape of Long-Run Average
Cost (LRAC)
– relationship between economies of scale
and decreasing costs
– internal and external economies of scale
and diseconomies of scale
• revenue: total, average and marginal
• profit: normal and abnormal (supernormal)
d) Different market structures • perfect competition, imperfect competition
(monopoly, monopolistic competition, oligopoly,
natural monopoly)
• structure of markets as explained by number of
buyers and sellers, nature of product, degree of
freedom of entry and nature of information
• contestable markets and their implications
• concentration ratio
e) Growth and survival of firms • reasons for small firms
• integration, diversification, mergers, cartels

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Cambridge International AS & A Level Economics 9708 syllabus.   Syllabus content
Syllabus for examination in 2022.

2   The price system and the micro economy (A Level) cont.
f) Differing objectives of a firm • traditional profit maximising objective of firm:
– normal and abnormal profit
– relation between elasticity and revenue
• an understanding of other objectives of the
firm:
– survival, strategic, satisficing, sales
maximisation
– principal agent problem, for example the
divorce of ownership from control
– behavioural analysis approach to the
decision-making of a firm; the Prisoner’s
Dilemma, 2 player Pay-off Matrix, kinked
demand curve
• pricing policy:
– including price discrimination, limit
pricing, price leadership and mutual
interdependence in the case of oligopoly
(including game theory)
• comparisons of performance of firms:
– revenue, output, profits, efficiency,
X-inefficiency, barriers to entry and exit,
price competition, non-price competition and
collusion

3   Government microeconomic intervention (A Level)

a) Policies to achieve efficient resource allocation • application of indirect taxes and subsidies
and correct market failure • price and output decisions under nationalisation
and privatisation
• prohibitions and licences
• property rights
• information
• regulatory bodies, deregulation and direct
provision of goods and services
• pollution permits
• behavioural insights and ‘nudge’ theory

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 Cambridge International AS & A Level Economics 9708 syllabus.   Syllabus content
Syllabus for examination in 2022.

3   Government microeconomic intervention (A Level) cont.

b) Equity and policies towards income and wealth • equity versus efficiency
redistribution • price stabilisation
• means tested benefits
• transfer payments
• progressive income taxes, inheritance and
capital taxes
• negative income tax
• poverty trap analysis
• Gini coefficient and the Lorenz curve
• inter-generational equity
c) Labour market forces and government
intervention:
(i)  demand for and supply of labour • factors affecting demand for labour
• derivation of individual firm’s demand for using
marginal revenue product theory
• factors affecting supply for labour
• net advantages and the long-run supply of
labour
(ii)  wage determination in perfect markets • competitive product and factor market forces
determining wage differentials, transfer
earnings and economic rent
(iii) wage determination in imperfect markets • influence of trades unions on wage
determination
• influence of government on wage
determination
• monopsony
d) Government failure in microeconomic • effectiveness of government policies
intervention

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Cambridge International AS & A Level Economics 9708 syllabus.   Syllabus content
Syllabus for examination in 2022.

4   The macro economy (A Level)

a) Economic growth, economic development and • definition of economic growth, economic
sustainability development and sustainability
• actual versus potential growth in national
output; output gap; business (trade) cycle
• factors contributing to economic growth
• costs and benefits of growth, including using
and conserving resources
b) National Income statistics • use of National Income statistics as measures
of economic growth and living standards
• Gross Domestic Product (GDP)/Gross National
Product (GNP)/Gross National Income (GNI)
• national debt (government or public sector
debt)
c) Classification of countries • indicators of living standards and economic
development, monetary, non-monetary,
Human Development Index (HDI), Measure
of Economic Welfare (MEW), Human
Poverty Index (HPI), later supplanted by the
Multidimensional Poverty Index (MPI), and the
Kuznets curve
• characteristics of developed, developing and
emerging (BRICS) economies: by population
growth and structure, income distribution,
economic structure, employment composition,
external trade and urbanisation in developing
economies – comparison of economic growth
rates and living standards over time and
between countries
d) Employment/unemployment • size and components of labour force
• labour productivity
• full employment and natural rate of
unemployment
• causes of unemployment
• consequences of unemployment
• types of unemployment
• unemployment rate; patterns and trends in
(un)employment
• difficulties involved in measuring
unemployment
• policies to correct unemployment

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 Cambridge International AS & A Level Economics 9708 syllabus.   Syllabus content
Syllabus for examination in 2022.

4   The macro economy (A Level) cont.

e) The circular flow of income • closed and open economies
• the circular flow of income between
households, firms, government and the
international economy: the multiplier, average
and marginal propensities to save and consume
• Aggregate Expenditure (AE) function
– meaning, components of AE and their
determinants
– income determination using AE and income
approach; and withdrawal (leakage) and
injection approach
– inflationary and deflationary gaps;
full employment level of income and
equilibrium level of income
– autonomous and induced investment; the
accelerator
f) Money supply (theory) • Quantity theory of money (MV = PT)
• broad and narrow money supply
• sources of money supply in an open economy
(commercial banks and credit creation, role
of central bank, deficit financing, quantitative
easing, total currency flow)
• transmission mechanism of monetary policy
g) Keynesian and Monetarist schools • different theoretical approaches to how the
macro economy functions
h) The demand for money and interest rate • Liquidity Preference theory
determination
i) Policies towards developing economies; • types of aid, nature of dependency
policies of trade and aid • trade and investment, role of multinationals and
Foreign Direct Investment (FDI)
• external debt, role of IMF and World Bank
• impact of corruption, and importance of the
legal framework in an economy

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Cambridge International AS & A Level Economics 9708 syllabus.   Syllabus content
Syllabus for examination in 2022.

5   Government macroeconomic intervention (A Level)

a) Government macro policy aims • on inflation, balance of payments, exchange

rates, unemployment, growth and
development

b) Inter-connectedness of problems • links between macroeconomic problems

and their interrelatedness, for example:
– relationship between internal and
external value of money
– relationship between balance of
payments and inflation
– trade-off between inflation and
unemployment; Phillips curve
c) Effectiveness of policy options to meet all • problems arising from conflicts
macroeconomic objectives between policy objectives on inflation,
unemployment, economic growth, balance
of payments, exchange rates and the
redistribution of income and wealth
• existence of government failure in
macroeconomic policies
• Laffer curve analysis

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