Economics: should I choose it?

Thinking like an economist

Decision-making in markets

Behavioural economics

Economic activity

Applied economic analysis of local, national and international economic issues

An introduction to microeconomics: the market system, resource allocation and government intervention (Unit 3, AoS 1)

This is the foundation, and the only area of study that is purely microeconomic. It opens with relative scarcity, meaning unlimited wants against limited resources, and the opportunity cost that follows, then sets out the nature and conditions of a perfectly competitive market as the benchmark everything else is measured against. Demand and supply come next, with a hard distinction between a movement along a curve caused by a price change and a shift caused by anything else, plus price elasticity of demand and supply and their determinants. Equilibrium shows how price and quantity adjust, and the price mechanism is analysed through its rationing, signalling and incentive functions. Efficiency appears in three named forms, productive, allocative and dynamic, and market failure through externalities, public goods, information failure and common access resources justifies intervention by tax, subsidy, regulation or price control.

Domestic macroeconomic goals (Unit 3, AoS 2)

Three goals define this area: strong and sustainable economic growth, low inflation or price stability, and full employment. For each you need the definition, the stated target, the indicators used to measure it, and the consequences of missing it in either direction. Aggregate demand and aggregate supply are introduced as the machinery behind the goals, together with the factors influencing each, and the business cycle explains how the economy moves between phases and what that does to the goals in turn. Living standards are the destination of every argument here, split into material living standards, tied to real income and consumption, and non-material living standards, covering things like leisure, environmental quality and personal freedom. Gross domestic product is examined as a measure alongside its limitations, and equity in the distribution of income closes the area.

Australia and the international economy (Unit 3, AoS 3)

This area explains how the rest of the world reaches the Australian economy. It starts with the reasons countries trade at all and the benefits that follow, then the balance of payments, split into the current account and the capital and financial account, and what a movement in each one records. Exchange rate determination under a floating rate is the technical core: the demand for and supply of the Australian dollar, the factors that shift each, including interest rate differentials, commodity prices, capital flows and relative inflation, and the consequences of appreciation and depreciation for exporters, importers, inflation and growth. The terms of trade and international competitiveness follow, and the area ends with trends in globalisation and trade agreements, along with their effects on Australian industries.

Aggregate demand policies and domestic economic stability (Unit 4, AoS 1)

Aggregate demand is broken into consumption, investment, government spending and net exports, and you must know what moves each component. The two policies then follow. Budgetary policy covers the instruments on both the receipts and outlays sides, the budget outcome and how it is financed, the role of automatic stabilisers such as progressive income tax and unemployment benefits as against discretionary decisions, and the strengths and limitations of the approach, including implementation lags and political constraints. Monetary policy centres on the Reserve Bank's cash rate target and the transmission mechanisms through which a rate change reaches spending, namely the cost of credit, household cash flow, asset prices and the exchange rate. The area ends with the policy mix and evaluation against the domestic macroeconomic goals and living standards.

Aggregate supply policies (Unit 4, AoS 2)

Aggregate supply policies work on the economy's productive capacity rather than the level of spending, so their effects arrive slowly and show up as improved efficiency and competitiveness. The area divides them in two. Market-based or microeconomic reform policies use competition to force efficiency, through deregulation, privatisation, competition policy and trade liberalisation. Interventionist policies have government act directly, through education and training, infrastructure investment, industry assistance and environmental management. For each you need the mechanism, meaning how it changes incentives, costs or capacity, and an evaluation against the domestic macroeconomic goals, which is where this area separates strong answers from weak ones. The usual argument is that supply-side measures can serve several goals at once, unlike demand policies, but only over long time frames and often with distributional costs.