Module One
EFFICIENCY AND MARKET FAILURE
Introduction
This module should be read in conjunction with the Programme of Study.
The Programme of Study lists the topics that are in the module and gives you the relevant page references to your course book. This module aims to give you more direction as you work through the various topics. It will aim to highlight the most important items in the topic, as well as areas that need particular care. It will also point you towards the resources you should be using.
Remember to double-check the syllabus to make sure you cover all the items that you need to.
Module Overview
The first module of the AL course begins by looking at how consumers make rational choices. You will then learn about market failures due to externalities which are side effects that result from consumption or production. Examples include pollution from production and the negative effects of consuming certain goods such as cigarettes.
As you work through the topics in this module and carry out the reading and note-making as directed, please make sure you attempt all the activities in the textbook to test your understanding. You will find the answers to the textbook questions both in the digital textbook to which you have access and in General Resources.
You will find a glossary on pages 604 to 615 of your textbook. There is also an interactive form of the same glossary provided in the digital textbook. As for AS, at AL, it is very important to keep track of key terms as you work through the course so you can use them in your answers. Highlighting new key terms as come across them will give you an ongoing record of key terms you will need to use in your assignments and learn before the AL exams.
You may also find making flashcards of key terms (with the term on one side and the definition on the other) is a useful revision exercise. It’s a good idea to do this as you work through the modules rather than waiting to the end of the course.
Topics
Topic Two (1.2): Indifference Curves
Topic Three (1.3): Efficiency and Market Failure
Topic Four (1.4): Private Costs and Benefits, Externalities and Social Costs and Benefits