Economics and Entrepreneurship: Markets, Policy and Viability
Microeconomics
The demand curve slopes downward; supply slopes upward; equilibrium clears the market. A movement along a curve follows a price change, while a shift follows a non-price factor (income, tastes, related-good prices, expectations). Elasticity governs pricing: when demand is elastic (|Ed| > 1), a price cut raises total revenue; when inelastic, a price rise raises revenue. Learn cost curves - fixed, variable, average, marginal - and market structures from perfect competition to monopoly, including how much pricing power each allows.
Macroeconomics and credit
Track inflation, interest rates, money supply, monetary versus fiscal policy, GDP, unemployment, balance of payments and exchange rates. Nominal versus real values is a permanent trap. Higher policy rates raise borrowing costs, squeeze debt-service capacity and typically raise bad debts - link this directly to credit risk appetite and pricing spreads.
Entrepreneurship
The examiner wants traits (opportunity spotting, risk-taking, persistence), the business plan, market research, SWOT, sources of finance (equity, debt, grants, trade credit, microfinance), and the break-even calculation.
Traps
- Confusing a shift of demand with a movement along it.
- Assuming a price rise always increases revenue regardless of elasticity.
- Mixing fixed costs into contribution margin.
Worked example: break-even
Fixed costs 240,000; selling price 500; variable cost 300. Contribution per unit = 200. Break-even = 240,000 ÷ 200 = 1,200 units. Margin of safety = (actual sales − 1,200) units, expressed as a percentage of actual sales.