Advanced Level - Economics

Examination

The examination will consist of two equally weight papers, each of 3 hours duration, and candidates are required to answer all questions.

Both Papers I and II will be divided into three sections: Section A consist of multiple-choice questions; both Section B and C will consist of short questions. All sections will carry weight.

Syllabus

Paper I

1. The scope of economic analysis

(a) Scarcity and the meaning of competition.

(b) Economics as an empirical science: basic postulates and methodology.

(c) The meaning of utility, wealth, and income, and the postulate of maximization.

2. The law of demand and the theorem of exchange

(a) The basic properties of indifference curves, and the money income constant demand curve.

(b) The inverse relationship between price and quantity demanded.

(c) Use value, exchange value, and the concept of consumer's surplus.

(d) Market demand, the equi-marginal principle, and the gains from exchange.

(e) the meaning of price as a criterion of allocation under competition.

3. Cost and supply

(a) The concepts of costs, economic rents, and windfall profits (quasi-rent NOT required).

(b) The law of diminishing marginal productivity.

(c) Cost curves and supply curves( isoquant analysis NOT required)

(d) Resource allocation under price taking.

(e) Monopoly pricing (price searching), including perfect and partial (third degree) price discrimination.

(f) A simple description of oligopoly and monopolistic competition.

4. Government and economic organizations

(a) The nature of the firm: the organization of production with the presence of transaction costs.

(b) Price controls and rent controls.

(c) The implications of non-price allocation.

(d) The incidence and implications of some common taxes.

5. The factor market

(a) The demand for and supply of factors.

(b) The determination of wages in price-takers' market.

(c) The determination of rents.

(d) Present value and investment decisions.

6. The problem of social cost

(a) The meaning of economic efficiency and the Pareto condition.

(b) Property rights and the divergence between private and social cost.

PaperII

7. Income and employment

(a) A brief discussion of national accounting.

(b) An elementary Keynesian model of income determination.

(c) The consumption function and its properties.

(d) Factors affecting investment

(e) The IS-LM model under given prices.

(f) The meaning of unemployment

(g) Causes of unemployment, including the introduction of information or search theory.

8. Money

(a) The nature and functions of money.

(b) Transactions demand for money and asset demand for money, and the Quantity Theory.

(c) Measurements of monetary aggregates (various definitions of money supply).

(d) The supply of money, and deposit creation by commercial banks under a fractional reserve system.

(e) A simple discussion of the effects of monetary and fiscal policies (with emphasis on income and employment).

9. The price level

(a) The concept of price level and the definition of inflation.

(b) The causes and consequences of inflation.

(c) Nominal and real rates of interest, and inflationary expectations.

10. International trade and finance

(a) Gains from trade: the law of comparative advantage.

(b) Protectionism versus free trade: an elementary graphical analysis of the effects of tariffs and quotas (optimal tariffs NOT required).

(c) Balance-of-payments accounting and adjustments.

(d) Exchange rates: a breif discussion of fixed rates, flexible rates, and the Hong Kong linked rate.

References:

1. Kwok Wai Keung & Chan Chi Man. A-Level Microeconomics. Hong Kong : Golden Crown Publications.

2. Kwok Wai Keung & Chan Chi Man. A-Level Microeconomics Study Guide. Hong Kong : Golden Crown Publications.

3. Wong Yuen Chi. HKAL Understanding Microeconomics. Hong Kong: Pilot Publishing Company Ltd.

4. Wong Yuen Chi. HKAL Understanding Microeconomics Study Guide. Hong Kong: Pilot Publishing Company Ltd.

5. Wong Yuen Chi. Understanding Microeconomics HKAL / ASL. Hong Kong: Pilot Publishing Company Ltd.

6. Leung Man Por. Microeconomics. Hong Kong: Hung Fung Book., Ltd.

7. Leung Man Por. Microeconomics Students' Workbook. Hong Kong: Hung Fung Book., Ltd.

8. N.K.Lee. HKAL Exam Study Aids Series Microeconomics Revision Notes. Hong Kong: Sixth Form Publications.

9. Alex T.C. Lam. A-Level Economics: Property Rights and Transaction Costs. Hong Kong: Academic Express Publishing Co.

10. Li Wai Shing. Economic Science 1. Hong Kong: Longman.