From a base of microeconomic theory, this unit enables learners to discuss and evaluate how well microeconomic theories explain our observations of economic agents in the real world. The theoretical workings of the free market provide a useful starting point for explanation and analysis. Imperfections and market failures provide a lead into a discussion of the merits and drawbacks of government intervention. The study of microeconomics encourages the learners to consider the usefulness of theory in explaining observations taken from the real world of economics.

The content of this component encourages learners to adopt a critical approach to their study of
policy through a development of their understanding of the limitations and conflicts which macroeconomic
policies cause. Learners should be able to: recognise the assumptions, relationships and linkages of the
possible impacts of macroeconomic policies; consider the possible impact of macro-economic policies;
recognise the issues which a government faces in managing the macroeconomy; argue for different
approaches; and identify criteria for success and to be able to evaluate the effectiveness of different policy
approaches.