Economic contexts

In Stage 1 Economics, students learn through inquiry. Teachers integrate problem-based scenarios from different contexts to facilitate development of students' skills and conceptual  understandings.

Teachers select scenarios for inquiry based on the interests and needs of their students so that economic concepts and skills from the core topic (thinking like an economist) are integrated in authentic ways. Teachers determine the depth and breadth of each context for their teaching programs.

Teachers ensure that economic concepts and skills are integrated, as appropriate, over the range of scenarios studied. Individual scenarios may focus on selected concepts and skills, and students may explore further economic concepts as appropriate.

The following contexts may form the basis for teachers to present scenarios for inquiry:

• markets in action
• economic decision-making
• government involvement in the economy
• trade in the global economy
• school-developed context.

Markets in action

Markets in action provides an introduction to the nature of markets, and how market forces interact to allocate scarce resources.

The interaction of buyers and sellers in free markets enables goods, services, and resources to be allocated prices. Relative prices, and changes in prices, reflect the forces of demand and supply and help solve the economic problem. Resources move towards where they are in shortest supply, relative to demand, and away from where they are least demanded.

In developing an understanding of this mechanism, students investigate the interaction of consumer behaviour, demand, seller behaviour, and supply. They use the demand–supply model to determine price and to explain price changes and the effect of price changes on quantity traded.

Students use the demand–supply model to understand the determination of equilibrium market price, examine the factors that affect demand and supply, investigate why price changes, analyse the effect of price changes on quantity traded; and investigate and recognise market failure.

Economic decision-making

In understanding strategic decision-making within the context of a market, students delve into the decision-making environment through the analysis of the extent and characteristics of different market structures which affect choice behaviour among participants in the market.

Students explore the basis of categorisation of these behaviours as they deepen their understanding of the role of participants in the market. Students develop an understanding of outcomes in the market which occur as a result of the motivations, opportunities, and decision-making abilities of consumers and firms within the market. The framework of these structural variables is explored through the following:

• monopolies
• oligopolies
• monopolistic competition
• perfect competition.

Students explore production choices using the production possibility frontier (PPF) model to illustrate the concepts of opportunity cost, trade-offs, and the effects on economic growth.

Students investigate factors that influence economic capacity, including technology and changes in the supply of the factors of production, and analyse their impact.

Students develop an understanding and ability to make decisions using cost-benefit analysis (CBA) as a technique in decision-making used by economists.

Students understand and explore the ideas of private costs and benefits, external costs and benefits, and social costs and benefits, and how these are used by economists to guide decision-making.

Government involvement in the economy

Students develop an understanding of situations where a government takes action in an economy to modify market outcomes. They consider the following government involvement:

• allocation of resources to the production of goods and services that are undersupplied by the market
• redistribution of income in order to address inequality
• regulation of situations where the market solution may be inconsistent with society’s values, or may incur costs for those not involved in making the economic decision
• stabilisation of the economy (e.g. taking measures to achieve stated objectives such as full employment, price stability, and/or economic growth).

Students refer to the circular-flow model to explore the effects of government involvement in the economy.

Trade in the global economy

Students develop an understanding of arguments for and against the free trade of goods and services between nations. They explore the concept of specialisation and interdependence.

Students use comparative advantage to explore the costs and benefits involved when individuals and nations specialise. They analyse trade-protection strategies used to achieve economic outcomes.

School-developed context

Teachers can choose to develop a scenario in which students have the opportunity to apply economic concepts and skills.