Knowledge Map - Microeconomics

This updated version of the Knowledge Map is based on the NEC Qualifying Test (both regional and national) in past years.

Block Topic Subtopics Pre Division DR Division AS Division

Explain the meaning of scarcity in relation to

Scarcity Explain the meaning of scarcity Explain the meaning of scarcity
sustainability

Identify examples of natural resources, human Identify and explain the four factors of Identify and explain the four factors of
Factors of production
resources, and capital goods production production

• Explain the meaning ot opportunity cost and its

• Explain why a choice must be made
relationship to choice and free goods
Opportunity cost • Describe the trade-offs Explain the meaning of opportunity cost
• Distinguish between opportunity cost and
• Identify the opportunity cost
other costs using examples

Economic Principles Basic economic questions Identify basic economic questions Identify basic economic questions

Distinguish between positive and normative Distinguish between positive and normative
Methods of economics
economics economics

Distinguish between market economy and

Economic systems command economy, especially in terms of Distinguish between economic systems Distinguish between economic systems
resource allocation

• Explain economic growth by using PPC model

• Understand the concept of PPC Draw a diagram to illustrate increasing and
Production possibility curve (PPC) • Explain the different points in, on and out of
• Identify factors that shift the PPC constant opportunity cost in the PPC model
the PPC line

The law of demand Identify the law of demand Identify the law of demand Explain the law of demand

The demand curve Identify the demand curve Identify the demand curve Identify the demand curve

The non-price determinants of demand

Demand and Demand Curve (factors that change demand or shift the demand Identify factors that change demand Identify and analyse factors that change demand Distinguish factors that change demand
curve)
Movements along and shifts of the demand Identify movements along and shifts of the Identify movements along and shifts of the Examine the movements along and shifts of the
curve demand curve demand curve demand curve

Linear demand functions, demand schedules Analyse demand functions, demand schedules Apply linear demand functions, demand
and graphs and graphs schedules and graphs

The law of supply Identify the law of supply Identify the law of supply Explain the law of supply

The supply curve Identify the supply curve Identify the supply curve Identify the supply curve

How Market The non-price determinants of supply (factors

Works Supply and Supply Curve Identify factors that change supply Identify and analyse factors that change supply Distinguish factors that change supply
that change supply or shift the supply curve)

Movements along and shifts of the supply Identify movements along and shifts of the supply Identify movements along and shifts of the supply Examine the movements along and shifts of the
curve curve curve supply curve

Apply linear supply functions, demand schedules

Linear supply functions, equations and graphs Analyse supply functions, equations and graphs
and graphs

• Understand how the market force (supply and

Market Equilibrium, Disequilibrium and Calculate market Equilibrium, Disequilibrium and
Equilibrium (Comparative Static Analysis) demand) determine the price of goods Apply changes in Equilibrium
Changes in Equilibrium Changes in Equilibrium
• Explain the meaning of market equilirium

Understand the definition of consumer and Calculate producer and consumer surplus
Consumer and Producer Surplus
producer surplus according to the diagram
Market Efficiency
Distinguish between allocative efficiency and Distinguish between allocative efficiency and
Allocative efficiency
productive efficiency productive efficiency

Price elasticity of demand and its determinants

Applications of price elasticity of demand

• Analyse price elasticity of demand and its • Analyse price elasticity of demand and its
determinants determinants
Cross price elasticity of demand and its • Distinguish applications of price elasticity of • Distinguish applications of price elasticity of
determinants demand demand
• Identify cross-price elasticity of demand and • Identify cross-price elasticity of demand and
determinants determinants
Applications of cross price elasticity of demand • Explain the concept of price elasticity of • Identify applications of cross-price elasticity of • Identify applications of cross-price elasticity of
demand and price elasticity of supply demand demand
Elasticity and its Application
• Simple calculation of the price elasticity of • Identify income elasticity of demand and its • Identify income elasticity of demand and its
Income elasticity of demand and its demand/supply determinants determinants
determinants • Distinguish applications of income elasticity of • Distinguish applications of income elasticity of
demand demand
Applications of income elasticity of demand • Analyse price elasticity of supply and its • Analyse price elasticity of supply and its
determinants determinants
• Distinguish applications of price elasticity of • Distinguish applications of price elasticity of
supply supply
Price elasticity of supply and its determinants

Applications of price elasticity of supply

Price ceilings (maximum prices): rationale, Analyse Price ceilings (maximum prices): Calculate price ceilings (maximum prices):
consequences and examples • Understand the concepts of price ceilings and rationale, consequences and examples rationale, consequences and examples
price floors
Controls on Prices (Ceiling and Floor)
• Analyze the price ceilings and price floors:
Price floors (minimum prices): rationale, rationale, consequences and examples Calculate price floors (minimum prices):
Analyse price floors: consequences and examples
consequences and examples rationale, consequences and examples

Negative externalities of production and Define positive externality and negative • Define and calculate social costs (SC) as the
consumption externality sum of private costs (PC) and external costs
(EC), including marginal social costs (MSC),
marginal private costs (MPC) and marginal
Positive externalities of production and Define positive and negative externalities of both external costs (MEC)
consumption consumption and production • Define and calculate social benefits (SB) as the
• Explain the concepts of marginal benefit and sum of private benefits (PB) and external
marginal cost benefits (EB), including marginal social benefits
• Identify the marginal benefit and marginal cost (MSB), marginal private benefits (MPB) and
Externalities and Market Failure Social costs and benefits Define social costs and benefits
of a certain consumption marginal external benefits (MEB)
• Explain the concepts of positive and negative
externalities and being able to give examples
• Define marginal cost and marginal benefit Use of costs and benefits in analysing decisions
Cost-Benefit Analysis
• Apply the concepts of to analyzing externalities (knowledge of net present value is not required)

Identify deadweight welfare losses arising from

Calculate the deadweight loss caused by price
Dead-weight Loss positive and negative externalities, asymmetric
controls
information and moral hazard

Define direct and indirect taxes and draw the

Direct & Indirect taxes
graphs for them

Explain the application and effectiveness of

The Economics of Subsidies Define subsidies and draw the graphs for them measures to tackle different forms of market
Public Sector failure, subsidies

• Explain the application and effectiveness of

measures to tackle different forms of market
• Understand why certain kinds of goods and failure, specific and ad valorem indirect taxes
Government Intervention services are provided by government • Identify other government intervention: price
Specific (fixed amount) taxes and ad valorem • Understand the role of taxes controls, production quotas, prohibitions and
(percentage) taxes licences, regulation and deregulation, direct
provision, pollution permits, property rights,
nationalisation and privatisation, provision of
information, behavioural insights and ‘nudge’
theory

Explain the impact of taxation on consumers, The impact of taxation on consumers, producers,
Impacts on market outcomes
producers, government and economy as a whole. government and economy as a whole.

• Identify different types of goods • Identify different types of economic goods Describe the nature and definition of free goods
Classification of goods and services • Describe key features of different types of • Distinguish between economic goods and free and private goods (economic goods), public
goods goods goods, merit goods and demerit goods
Public Goods and Common Resources
Describe asymmetric information and moral
Asymmetric information
hazard of costs and benefits

Short-run production function:

• fixed and variable factors of production
Define Total cost (TC), average total cost (ATC), • definition and calculation of total product,
The Production Function fixed cost (FC), variable cost (VC), average fixed average product and marginal product
cost (AFC), average variable cost (AVC). • law of diminishing returns (law of variable
proportions)

Short-run cost function:

• definition and calculation of fixed costs (FC)
and variable costs (VC)
• definition and calculation of total, average and
marginal costs (TC, AC, MC), including average
Calculation of TC, ATC, FC,VC, AFC and AVC. total
Definition, drawing and interpretation of cost (ATC), total and average fixed costs (TFC,
Short-Run Production Costs
diagrams that show how changes in output affect AFC) and total and average variable costs (TVC,
costs of production. AVC)
The Cost of Production • explanation of shape of short-run average cost
and marginal cost curves
• Define and calculate total cost (TC), average
total cost (ATC), fixed cost (FC), variable cost
(VC), average fixed cost (AFC), average variable Long-run production function:
Firm Behavior and
cost (AVC). Marginal cost (MC) • no fixed factors of production
the Organization of
• Define calculate total revenue (TR), average • returns to scale
Industry
revenue (AR) and marginal revenue (MR)
Long-Run Production Costs • Understand the goal of a firm- profit Long-run cost function:
maximization, and how to achieve it • explanation of shape of long-run average cost
curve
• concept of minimum efficient scale

Understand the relationship between economies

of scale and decreasing average costs, internal
Production in the long run: returns to scale
and external economies of scale and
diseconomies of scale

Total revenue, average revenue and marginal Define Total revenue (TR) and average revenue
revenue (AR)
Define and calculate the revenues: total, average
Economic profit (sometimes known as and marginal revenue (TR, AR, MR), normal,
abnormal profit) and normal profit (zero subnormal and supernormal profit
Profit Maximization of the Firm
economic profit occurring at the break- even
point)

Survival, social welfare, profit maximisation and Explain traditional profit-maximising objective of
Profit maximization in the short run
growth firms

Identify perfect competitive market based on its Identify perfect competitive market based on its
Assumptions of the model
assumptions assumptions

Identify the revenue curves in a perfect Identify the revenue curves in a perfect
Revenue curves
competition market competition market

Draw a diagram to illustrate the profit

Identify profit maximization point in the short
Introduction of Competitive Market Profit maximization in the short run maximization point in a perfect competition
run
market in the short run

Draw a diagram to illustrate the profit

Profit maximization in the long run Identify profit maximization point in the long run maximization point in a perfect competition
market in the long run

Explain various types of efficiency in a perfect Explain and identify various types of efficiency in
The Efficiency of competitive market
competition market the diagrams of perfect comptition market

Identify and explain the characteristics of Identify and explain the characteristics of
Assumptions of the model
monopoly monopoly

Barriers to entry Explain the barries to entry Explain the barries to entry

• Identify the profit maximizing point of output

Revenue curves Identify and explain the revenue of a monopoly and price
• Apply cost curves to monopoly market

Introduction of Monopoly Explain the meaning and characteristics of

Natural monopoly Explain the meaning of natural monopoly
natural monopoly

• Draw and explain the diagrams of monopoly • Draw and explain the diagrams of monopoly
Monopoly and efficiency • Explain price discrimination in a monpoly • Identify consumer surplus, producer surplus
market and deadweight loss in a monopoly diagram

Explain the rationale and effects of regulating

Policies to regulate monopoly power Identify policies to regulate monopoly power
monopoly

The advantages and disadvantages of monopoly Compare and contrast monopoly and perfect Evaluate the advantages and disadvantages of
Identify different market structures and their
Market Structure compared with perfect competition competion monopoly
characteristics

Abuse of monopoly power Explain the abuse of monopoly power Explain the abuse of monopoly power

Distiguish the characteristics between

Identify and explain the characteristics of
Assumptions of the model monopolistic competition and perfect
monopolistic competiton market
competition

Apply revenue and cost curves in monopolistic

Revenue curves Explain the meanings of revenue curves
competition

Draw a diagram to illustrate the profit

Identify the profit maximization point in a
Profit maximization in the short run maximization point in a monopolistic
monopolistic market in the short run
competition market
Introduction of Monopolistic Competition
Draw a diagram to illustrate the profit
Identify the profit maximization point in a
Profit maximization in the long run maximization point in a monopolistic
monopolistic market in the long run
competition market

Non-price competition Identify non-price competition Explain non-price competition

Identify various efficiency point in monopolistic Distinguish efficiency between monopolistic

Monopolistic competition and efficiency
competition competition and other types of market structure

Monopolistic competition compared with Compare and contrast monopolistic competition Comment on monoplistic competition in
perfect competition and monopoly and other types of market structure relation to perfect competition and monopoly

Assumptions of the model Describe the assumptions of oligopoly Describe the assumptions of oligopoly

Interdependence and game theory Explain interdependence and game theory Apply game theory in oligopoly model
Introduction of Oligopoly
Collusive and non-collusive oligopoly Explain the meaning of collusion Explain the meaning of collusion

Evaluating oligopoly Describe the strategies of oligopolies Explain the strategies of oligopolies

Knowledge Map - Macroeconomics

This updated version of the Knowledge Map is based on the NEC Qualifying Test (both regional and national) in past years.

Block Topic Subtopics Pre Division DR Division AS Division

Draw and label a circular flow diagram and Draw and label a circular flow diagram and
Apply circular flow of income model in
The Economy’s Income and Expenditure The Circular Flow of Income explain the interrelated roles of households, explain the interrelated roles of households,
calculations
businesses, and government in the economy businesses, and government in the economy

• Identify the components of GDP

Real v. Nominal GDP Distinguish between real and nominal GDP Distinguish between real and nominal GDP
• Explain what is included in each component of
GDP
• Distinguish between real and nominal GDP
• Determine the GDP per capita for a certain Comment on GDP in measuring economic
Limitations of GDP Identify the components of GDP
country growth

GDP v. GNP v. GNI Distinguish among GDP, GNP and GNI Distinguish among GDP, GNP and GNI
GDP and economic growth

The Meaning and Significance of Economic Explain the meaning and significance of economic Explain the meaning and significance of economic Explain the meaning and significance of economic
Measuring of a Growth growth growth growth
Nation’s Income
and the Cost of Identify economic growth in various economic Distinguish between short-term and long-term
Living Short-term v. Long-term Growth
models growth in various economic models

Causes and Consequences of Economic Explain the causes and consequences of Explain the causes and consequences of Explain the causes and consequences of
Growth economic growth economic growth economic growth

Measuring Inflation and Deflation Explain various measures of CPI; calculate CPI Calculate inflation and deflation

Describe problems of CPI in measuring Evalutate CPI as an important economic

Problems of CPI • Explain the concept of inflation economic behaviour measurement
• Understand the concept of CPI
CPI and Inflation
• Identify the causes of inflation
• Calculate the rate of inflation Explain the problems of CPI in measuring Discuss the problems of CPI in measuring
Causes and Types of Inflation
economic behaviour economic behaviour

Explain the costs of inflation to various Evaluate the costs of inflation to various
Costs of Inflation
economic agents economic agents

• Distinguish between employment and

• Describe unemployment unemployment
Measuring Unemployment Describe unemployment
• Calcualte the unemployment rate • Apply economic models in measuring
unemployment; claculate unemployment rate

Distinguish and explain various types and causes

Unemployment Types and Causes of Unemployment Identify various types of unemployment Distinguish various types of unemployment
of unemployment
The Real Economy
in the Long-run The Relationship between Unemployment and Explain the relationship between unemployment Evaluate the relationship between
Market and Welfare Inflation and inflation unemployment and inflation

Apply phillips curves in evaluating unemployment

The Phillips Curve Describe phillips curve
and inflation

• Understand and describe lorenz curve Understand and describe lorenz curve
Measuring Economic Inequality (Lorenz Curve,
Economic Inequality • Understand the relationship between lorenz Understand the relationship between lorenz
Gini Coefficient)
curve and gini coefficient curve and gini coefficient

• Explain the concept of aggregate demand

The AD Curve Identify reasons behind the shape of curve
• Identify the diagram of an AD curve

Aggregate Demand and its Curve The Components of AD Identify the components of AD

The Determinants of AD or Causes of Shifts in

Identify the determinates of AD • Identify reasons behind the shape of AD curve,
the AD Curve
SRAS curve and LRAS curve
• Identify the components and determinants of
• Explain the concept of aggregate supply
Short-Run Aggregate Supply (SRAS) Identify reasons behind the shape of curve AD
Short-run • Identify the diagram of an AS curve
• Identify and explain the causes and effects of
Economic shifts in AD curve, AS curve and changes in AD-
Fluctuations AS model
Long-Run Aggregate Supply (LRAS) Identify reasons behind the shape of curve
Aggregate Supply and its Curve
Changes in the AD–AS Model in the Short Run

Equilibrium in the Aggregate Demand–

Aggregate Supply (AD–AS) Model

Business Cycle, Short-term Fluctuations and • Explain the concept of a business cycle
Economic Fluctuations Identify the types of fluctuations Identify the different parts of business cycle
Long-term Trend • Identify different phases of a business cycle

• Explain the concept of fiscal policy

Fiscal policy and short-term demand Identify which policy to use to correct Identify which policy to use to correct
• Identify different tools and the respective goals
management fluctuations fluctuations
of fiscal policy

• Identify which policy would cause which impact

Identify which policy would cause which impact
Fiscal Policy Fiscal policy and its impact on potential output on potential output
on potential output
• Calculate and analyze the impact

Identify the advantages and disadvantages of

Evaluation of fiscal policy
different fiscal policies

Explain the definition of monetary policy, use the

Explain the concept of money supply and Understand the definition of money supply and
The Money Market tools of monetary policy: interest rates, money
monetary policy monetary policy
supply and credit regulations

• Define changes in interest rates, money supply

and foreign Understand the quantity theory of money (MV =
Definition, Measurement, and Functions of exchange rates PT), broad and narrow money supply, sources of
Explain the definition and the functions of money
Money • Explain how monetary policy measures may money supply in an open economy, transmission
enable the government to achieve its mechanism of monetary policy
macroeconomic aims

• Describe the role of central banks as • Describe the role of central banks as • Describe the role of central banks as
regulators of commercial banks and bankers to regulators of commercial banks and bankers to regulators of commercial banks and • bankers to
Banking and the Expansion of the Money governments. governments. governments.
Supply • Understand that central banks are usually made • Explain that central banks are usually made • Explain that central banks are usually made
responsible for interest rates in order to achieve responsible for interest rates and exchange rates responsible for interest rates and exchange rates
macroeconomic objectives. in order to achieve macroeconomic objectives. in order to achieve macroeconomic objectives.

Explain how the loanable funds market models

the financial sector and the orthodox
The Loanable Funds Market
economists understand thrift to be an important
source for economic growth

• Able to distinct between expansionary and

contractionary monetary policy
Monetary Policy • Explain how changes in interest rates can
Able to distinct between expansionary and
influence the level of aggregate demand in an
contractionary monetary policy
Monetary policy and short-term demand Identify different tools and the respective goals economy.
Explain how changes in interest rates can
management of monetary policy • Conduct AD/AS analysis of the impact of
influence the level of aggregate demand in an
expansionary and contractionary monetary
economy.
policy on the equilibrium national income and
the level of real output, the price level and
employment

Explain that central banks of certain countries,

rather than focusing on the maintenance of both
full employment and a low rate of inflation, are
Monetary policy and Inflation
guided in their monetary policy by the objective
to achieve an explicit or implicit inflation rate
target.

Evaluate the effectiveness of monetary policy

through consideration of factors including:
• the independence of the central bank,
• the ability to adjust interest rates
incrementally,
Evaluation of monetary policy • the ability to implement changes in interest
rates relatively quickly,
• time lags,
• limited effectiveness in increasing aggregate
Macroeconomics demand if the economy is in deep recession and
Policy conflict among government economic objectives.

Explain the definition of supply-side policy

Identify possible supply-side policy measures
include education and training, labour market Evaluate the strengths and weaknesses of Supply-
Supply-side policies and the economy
reforms, lower direct taxes, deregulation, Side Policies
improving incentives to work and invest, and
privatisation.

Explain how investment in education and training

will raise the levels of human capital and have a
Investment in human capital
short-term impact on aggregate demand, but
more importantly will increase LRAS.

Explain how policies that encourage research

and development will have a short-term impact
Investment in new technology on aggregate demand, but more importantly will
result in new technologies and will increase
LRAS.

Explain how increased and improved

infrastructure will have a short-term impact on
Investment in infrastructure
aggregate demand, but more importantly will
increase LRAS.

Explain that targeting specific industries through

policies including tax cuts, tax allowances and
subsidized lending promotes growth in key areas
Industrial policies
of the economy and will have a short-term
impact on aggregate demand but, more
importantly, will increase LRAS.
Supply Side Policy

Explain how factors including: deregulation,

privatization, trade liberalization and
Policies to encourage competition
antimonopoly regulation are used to encourage
competition.

Explain how factors including

• reducing the power of labour trade unions,
• reducing unemployment benefits and
Labour market reforms • abolishing minimum wages
are used to make the labour market more
flexible (more responsive to supply and
demand).

Explain how factors including personal income

tax cuts are used to increase the incentive to
How supply-side policy measures may enable the
Incentive-related policies work, and how cuts in business tax and capital
government to achieve its macroeconomic aims.
gains tax are used to increase the incentive to
invest.

Evaluate the effectiveness of supply-side policies

through consideration of factors including:
• time lags,
• the ability to create employment,
The strengths and weaknesses of supply-side
• the ability to reduce inflationary pressure,
policies
• the impact on economic growth,
• the impact on the government budget,
• the effect on equity,
• the effect on the environment.

Knowledge Map - International Economics and Current Event

This updated version of the Knowledge Map is based on the NEC Qualifying Test (both regional and national) in past years.

Block Topic Subtopics DR Division AS Division

Measurement of terms of trade Explain the terms of trade Explain and calculate the terms of trade

Causes and consequences of changes in terms Explain the causes and consequences of changes
Explain the causes and consequences of changes in terms of trade
of trade in terms of trade

International trade The benefits of trade Explain the causes and benefits of trade Evaluate the costs and benefits of trade

Absolute and comparative advantage Distinguish absoluate and comparative advantage Calculate absolute and comparative advantage

Trade agreements and Trading blocs Explain trade agreements and trade blocs Evaluate trade agreements and trade blocs

Types of trade protection Identify types of trade protetion Explain types of trade protetion

Effects of trade protection Explain the effects of trade protetion Evaluate the effects of trade protetion
Restrictions on free trade
Arguments for trade protection Explain arguments for trade protetion Evaluate arguments for trade protetion

Arguments against trade protection Explain arguments against trade protetion Evaluate arguments against trade protetion
International
Trading

• Identify the components of the current account • Identify the components of the balance of payments
of the balance of payments – trade in goods, accounts (using the IMF/OECD definition): current account; capital and financial account; balancing
trade in services, primary income and secondary item
The components of the balance of payments
income. • Explain the meaning of balance of payments equilibrium and disequilibrium
accounts
• Calculation of deficits and surpluses on the • Identify the causes of balance of payments disequilibrium in each component of the accounts
current account of the balance of payments and • Explain the consequences of balance of payments
its component sections. disequilibrium on domestic and external economy

The balance of payments

Implications of a persistent current account

Explain the reasons for deficits and surpluses. Explain the reasons for deficits and surpluses.
deficit

The relationship between the current account Discuss the impact on GDP, employment,
Identify the relationship between current account and the exchange rate
and the exchange rate inflation and foreign exchange rate

The relationship between the financial account

Identify the relationship between financial account and the exchange rate
and the exchange rate

Identify the range of policies available to achieve

Policies to achieve balance of payments Identify the range of policies available to achieve balance of payments stability and how effective
balance of payments stability and how effective
stability they might be
they might be

Understand the definitions and measurement of

Understand the definitions and measurement of exchange rates – nominal, real, trade-weighted
Determination of freely floating exchange rates exchange rates – nominal, real, trade-weighted
exchange rates
exchange rates

Including changes in demand for exports and

imports, changes in the rate of interest, • Identify the determination of exchange rates – floating, fixed, managed float
Causes of changes in the exchange rate
speculation, and the entry or departure of • Identify the factors underlying changes in exchange rates
Real and Nominal Exchange Rate MNCs.

• Define depreciation/appreciation
• Explain the effects of changing exchange rates on the domestic and external economy using AD,
• Define devaluation/revaluation
Marshall-Lerner and J curve analysis
The effects of exchange rate changes • Identify the effects of foreign exchange rate
• Define and explain depreciation/appreciation
Exchange Rate fluctuations on export and import prices and
• Define and explain devaluation/revaluation
spending on imports and exports via the PED.

Fixed exchange rates Identify different types of exchange systems Evaluations of different types of exchange system

How Policies and Events Affect an Open Equilibrium in Managed exchange rate system Identify the consequences and effects of incidents on currency exchange rate (on graphs)
Economy

Identify the differences between, and the

advantages and disadvantages of, a floating Identify the difference between, and the advantages and disadvantages of, a floating foreign
Evaluation of different exchange rate systems
foreign exchange rate and a fixed foreign exchange rate and a fixed foreign exchange rate system
exchange rate system

• Understand the definition of foreign direct investment

Foreign Direct Investment (FDI) The meaning of FDI and MNCs
• Distinguish between foreign direct investment and foreign portfolio investment

International
Economics
• Explain different roles of IMF and World Bank
• Explain different roles of IMF and World Bank in the development of global economy
Foreign Aid and Multilateral Development The roles of the International Monetary Fund in the development of global economy
• Understand the brief history of IMF and World Bank
Assistance (IMF) and the World Bank • Understand the brief history of IMF and World
• Distinguish IMF and World Bank between other international organizations
Bank