Overview

This theme builds on the content of Theme 1: Introduction to markets and market failure and focuses on business
economics.

Students will need to build upon the knowledge, skills and understanding developed from Theme 1 in Theme 3,
making connections across these two microeconomic themes in Paper 1, and across Themes 1, 2, 3 and 4 in Paper 3.

Content

This theme examines how the number and size of market participants, and the level of contestability, affect the
pricing and nature of competition among firms. Students will consider the size and growth of firms through exploring
organic growth, mergers and takeovers. They will look at the reasons for demergers and why some firms tend to
remain small.

Students will look at the rational assumption that firms are profit maximisers and then challenge this by looking at
alternative business objectives. Revenues, costs and profits are explored before linking these ideas to different market
structures. Students will then be able to analyse and evaluate the pricing and output decisions of firms in different contexts and understand the role of competition in business decision making. Supply and demand analysis is specifically applied to the labour market to see how wages are determined in competitive and non-competitive markets.

At the end of this theme students should be capable of making an appraisal of government intervention aimed at promoting competitive markets.

This theme will provide a coherent coverage of microeconomic content, drawing on local, national and global contexts.
Great Applied Micro Examples for your Exams in 2019
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