Why Study Economics?

Economics examines the role of consumers, businesses, governments and other organisations in the decision making about the allocation of resources, the production of goods and services and the affect that these decisions may have on material and non-material living standards. Developing students’ understanding of economics will enable them to appreciate the reasons behind these decisions and the intended and unintended consequences. Through studying economics students develop a range of skills including the ability to gather, organise, analyse and synthesise a wide selection of economic information. They undertake independent inquiry, think critically and work collaboratively with their peers to develop viable solutions to contemporary economic issues. They utilise the economic models and tools of economists effectively to analyse and evaluate the decisions made by key economic agents and, in the process, appreciate the different viewpoints about the issues that may affect a modern economy. Further study in the field of Economics can lead to a broad range of career opportunities such as stockbroking, insurance, business analysis, banking and finance, journalism and public policy.

Structure

The study is made up of four units.

Unit 1: The behaviour of consumers and businesses

Unit 2: Contemporary economic issues

Unit 3: Australia’s economic prosperity

Unit 4: Managing the economy

Outcomes

Outcomes define what students know and will able to do as a result of undertaking the study.

Unit 1: The behaviour of consumers and businesses

Economics is a dynamic and constantly evolving field. As a social science, Economics is interested in the way humans behave and the decisions made to meet the needs and wants of society. In this unit students explore their role in the economy, how they interact with businesses and the way economic models and theories have been developed to explain the causes and effects of human action. Students explore some fundamental economic concepts. They examine basic economic models where consumers and businesses engage in mutually beneficial transactions and investigate the motivations and consequences of both consumer and business behaviour. They examine how individuals might respond to incentives and how technology may have altered the way businesses and consumers interact. Students are encouraged to investigate contemporary examples and case studies to enhance their understanding of the introductory economic concepts. Students examine a simple microeconomic model to explain changes in prices and quantities traded. Through close examination of one or more key markets they gain insight into the factors that may affect the way resources are allocated in an economy and how market power can affect efficiency and living standards.

Outcome 1

On completion of this unit the student should be able to describe the basic economic problem, discuss the role of consumers and businesses in the economy and analyse the factors that influence decision making.

Outcome 2

On completion of this unit the student should be able to explain the role of relative prices and other non-price factors in the allocation of resources in a market-based economy.

Unit 2: Contemporary economic issues

Students focus on the possible trade-off between the pursuit of growth in incomes and production and the goal of environmental sustainability and long-term economic prosperity. They investigate the importance of economic growth in terms of raising living standards and evaluate how achievement of this goal might result in degradation of the environment and the loss of key resources. Students examine whether the goals of economic growth and environmental sustainability can be compatible and discuss the effect of different policies on the achievement of these important goals.

Economic growth is generally associated with improvements in living standards as real incomes grow over time. Students explore how the benefits of economic growth are shared in an economy and begin to appreciate that efforts to increase economic efficiency might lead to a more inequitable distribution of income. They evaluate the role of government intervention in markets and discuss whether achieving greater equality causes a decline in economic growth and average living standards. Through the analysis of specific policy measures, students analyse and question the nature of this key trade-off and evaluate whether there is a degree of compatibility between equity and efficiency.

Students consider the influence on the world’s living standards of the decisions made and the actions taken in the global economy by investigating one or more contemporary global issues and the trade-offs involved. Through an examination of the issue, students gain a greater appreciation of additional factors that can affect living standards in both Australia and in other nations. They consider the perspectives of relevant stakeholders and evaluate the validity of individual and collective responses to global issues.

Outcome 1

On completion of this unit the student should be able to explain the factors and policies that may influence economic growth and environmental sustainability, and analyse the potential trade-off.

Outcome 2

On completion of this unit the student should be able to explain the factors and policies that may influence equity in the distribution of income and efficiency of resource allocation, and analyse the potential trade-off.

Outcome 3

On completion of this unit the student should be able to explain the factors that may influence a global economic issue/s and evaluate potential consequences associated with actions to address the issue/s.

Unit 3: Australia’s economic prosperity

The Australian economy is constantly evolving. The main instrument for allocating resources is the market but the Australian Government also plays a significant role in this regard. In this unit students investigate the role of the market in allocating resources and examine the factors that are likely to affect the price and quantity traded for a range of goods and services. They develop an understanding of the key measures of efficiency and how market systems can result in efficient outcomes. Students consider contemporary issues to explain the need for government intervention in markets and why markets might fail to maximise society’s living standards. As part of a balanced examination, students also consider unintended consequences of government intervention in the market.

In this unit students develop an understanding of the macroeconomy. They investigate the factors that influence the level of aggregate demand and aggregate supply in the economy and use models and theories to explain how changes in these variables might influence the achievement of the Australian Government’s domestic macroeconomic goals and affect living standards.

Australia’s economic prosperity depends, in part, on strong economic relationships with its major trading partners. Students investigate the importance of international economic relationships in terms of their influence on Australia’s living standards. They analyse how international transactions are recorded, predict how economic events might affect the value of the exchange rate and evaluate the effect of trade liberalisation.

Outcome 1

On completion of this unit the student should be able to explain how markets operate to allocate resources, and discuss the effect of government intervention on market outcomes.

Outcome 2

On completion of this unit the student should be able to analyse key contemporary factors that may have influenced the Australian Government’s domestic macroeconomic goals over the past two years and discuss how achievement of these goals may affect living standards.

Outcome 3

On completion of this unit the student should be able to explain the factors that may influence Australia’s international transactions and evaluate how international transactions and trade liberalisation may influence the current account balance, the Australian Government’s domestic macroeconomic goals and living standards in Australia.

Unit 4: Managing the economy

The ability of the Australian Government to achieve its domestic macroeconomic goals has a significant effect on living standards in Australia. The Australian Government can utilise a wide range of policy instruments to influence these goals and to positively affect living standards. Students develop an understanding of how the Australian Government can alter the composition and level of government outlays and receipts to directly and indirectly influence the level of aggregate demand and the achievement of domestic macroeconomic goals.

Area of Study 1 focuses on the role of aggregate demand policies in stabilising the business cycle to achieve the Australian Government’s domestic macroeconomic goals. Students examine the role of the Reserve Bank of Australia (RBA) with a focus on its responsibility to alter the cost and availability of credit in the economy. Students consider each of the transmission mechanisms through which changes to interest rates can affect the level of aggregate demand in the economy and how these changes might affect the achievement of the Australian Government’s domestic macroeconomic goals. Students examine and analyse the effects of the last two Australian Government budgets, and how particular initiatives have helped to stabilise the level of aggregate demand and influenced the achievement of domestic macroeconomic goals.

In Area of Study 2 students consider how the Australian Government utilises aggregate supply policies to manage the Australian economy. If the productive capacity of the economy is expanding, growth in aggregate demand can be met and economic growth can be maintained both now and into the future. Students investigate the role of both market-based and interventionist approaches to managing the supply side of the economy. They evaluate these policy responses in terms of their effect on incentives and consider how they increase competition and efficiency in the economy. Students assess the role of microeconomic reform in terms of its effect on economic prosperity and the achievement of the Australian Government’s domestic macroeconomic goals.

Outcome 1

On completion of this unit the student should be able to discuss the nature and operation of aggregate demand policies and analyse how the policies may influence the Australian Government’s domestic macroeconomic goals and living standards.

Outcome 2

On completion of this unit the student should be able to discuss the nature and operation of aggregate supply policies and analyse how the policies may influence the Australian Government’s domestic macroeconomic goals and living standards.

Assessment

Satisfactory completion

The award of satisfactory completion for a unit is based on a decision that the student has demonstrated achievement of the set of outcomes specified for the unit. This decision will be based on the teacher’s assessment of the student’s performance on assessment tasks designated for the unit.

Levels of achievement

Units 1 and 2

Emmaus College students complete graded Assessment Tasks and Semester Examinations as part of the Assessment process for Units 1 and 2.

Units 3 and 4

The Victorian Curriculum and Assessment Authority supervises the assessment of all students undertaking Units 3 and 4.

Percentage contributions to the study score in VCE Economics are as follows:

Unit 3 School-assessed Coursework	25%
Unit 4 School-assessed Coursework	25%
End-of-year examination	50%