• Scarcity, choice and opportunity cost
• The three basic economic problems
• Specialization and exchange
• Positive and normative statements

• Types / stages of production
• Types of goods and services produced
• Division of labour
• Factors of production
• Production and costs in the short run and long run
• Expansion and integration of firms

• Forms of ownership
• Shares and bonds as sources of capital

S5 Economics Subject Structure

Cycle No.

Contents / Key Points

1 – 2

1.    Competition and Market Structure

• Perfect competition and imperfect competition(monopolistic competition, oligopoly and monopoly )
• Profit maximization and output determination

3 – 12

2.    Efficiency, Equity and the Role of Government

• Consumer surplus and producer surplus
• Competition and efficiency
• The roles of government :
• Market failure
• Equity and income inequality

13 - 15

3     Measurement of Economic Performance – National Income

• Meaning of national income (GDP / GNP)
• Circular flow of economic activities
• GDP at current and constant market prices
• GDP at factor cost
• Per capita GDP: growth rate of GDP
• GNP = GDP + income from abroad
• Uses and limitations of national statistics as an indicator of economic welfare and for international comparison
• Measurement of the general price level

16 – 17

4.    Macroeconomic Problems

• Inflation and deflation
• Unemployment and underemployment
• Business Cycle

18 – 20

5.     National Income Determination and Price Level

• Aggregate demand
• Reasons for a downward sloping AD curve
• Determinants of aggregate demand
• Aggregate supply
• Reasons for an upward sloping SR AS curve
• Reasons for a vertical long run AS curve
• Factors affecting short run and long run AS
• Determination of level of output and price
• Determination of the equilibrium level of output and price level in the AS – AD model
• Change in the equilibrium level of output and price level caused by change(s) in the AD and /  or AS.

21 - 24

6.    Fiscal policy

• Principles of taxation
• Two common classifications of taxation
• Comparison of the effects of progressive tax, proportional tax and regressive tax
• Comparison of the effects of direct taxes and indirect taxes
• Government revenue in Hong Kong
• Public expenditure
• The budget
• The budget of the HKSAR Government

S6  Economics Subject Structure

Cycle No.

Contents / Key Points

1

1.    Money & Banking

• Barter
• Money
• Banking
• Hong Kong as a financial centre

2

2.    Money supply and money creation

• The issue of notes and coins in Hong Kong
• Money supply
• Money creation
• The process of money contraction

3

3.    Money demand and money market equilibrium

• Factors affecting the allocation of wealth
• Cost of holding money
• Demand for money
• Money market equilibrium and determination of equilibrium nominal interest rate

4

4.    Monetary policy and quantity theory of money

• Monetary policy
• Quantity theory of money

5 – 6

5.    International Trade (I) – free trade and principle of comparative advantage

• Absolute advantage and comparative advantage
• The principle of comparative advantage
• Distribution of gains from specialization and trade
• The presence of transport costs and transaction costs
• Other reasons for international trade            

7 – 8

6.    International Trade (II) – trade barriers and external trade of Hong Kong

• Free trade vs restricted trade
• Types of trade barriers
• Effects of tariffs and quotas on a small economy
• External trade in Hong Kong

9 – 10

7.    International finance – exchange rate and balance of Payments

• Exchange rate
• Effects of change in exchange rates on international Trade
• The linked exchange rate system in Hong Kong
• The balance of payments account

11 – 12

8.    Monopoly pricing (Elective One)

• Profit-maximisation under simple monopoly pricing
• Comparison between perfect competition and monopoly
• Price discrimination
• Conditions for price discrimination

9.    Anti-competitive behaviours

• Horizontal agreements
• Vertical agreements
• Mergers
• Other forms of anti-competitive behaviours
• Do anti-competitive trade practices always harm consumers?

10.    Competition policy

• Objectives of competition policy
• Dominant firm abusing its market power
• Competition policy: justifications and concerns
• Cross-sector or sector-specific approach?
• Cross-sector competition policy for Hong Kong