Syllabus: SQA - Higher Course Spec Economics
Module: Economics of the Market
Lesson: Production

Introduction

The “Economics of the Market” unit within the SQA Higher Economics course focuses on foundational microeconomic principles that underpin how markets function. This includes production, resource allocation, and price mechanisms. In this lesson, we zoom in on “Production” — a critical component that gives students the tools to understand how goods and services are created, and how firms operate in response to economic conditions.

This content aligns directly with the SQA Higher course structure and supports key learning aims such as understanding the role of producers, the impact of costs and revenues, and how supply decisions are made in different market environments.

Key Concepts

In the “Production” topic, students are expected to understand:

• Factors of production: land, labour, capital and enterprise — and how these are combined to produce goods and services.

• Costs and revenue: identification and calculation of fixed, variable, total and average costs, along with total and average revenue.

• Profit: understanding how profit is calculated and its significance for producers.

• Supply theory: the shape and shifts of the supply curve, and movements along it.

• Determinants of supply: such as technology, weather, and input costs, and their impact on quantity supplied.

• Equilibrium in markets: how supply and demand interact to set prices and quantities traded.

These concepts form a toolkit for analysing real-world economic behaviour and provide the foundation for more advanced economic thinking.

Real-World Relevance

Production isn’t just theoretical — it’s happening in every sector, every day. Consider UK agriculture, where weather events like floods or droughts directly affect crop yield (a determinant of supply). Or take the shift towards automation in manufacturing — technology lowers production costs, often boosting supply and profitability.

Closer to home, students might look at a local bakery. Rising flour costs (input prices) or the purchase of a new oven (capital investment) affect how much is produced and at what price. Case studies like these help ground abstract terms in everyday experiences, making economics feel tangible and relevant.

How It’s Assessed

Assessment in the SQA Higher Economics course includes both the question paper and an assignment. Key assessment features include:

• Command words such as “describe”, “explain”, “analyse” and “evaluate”.

• Graphical analysis of supply curves, cost-revenue diagrams, and market equilibrium.

• Data-driven questions: interpreting supply data or calculating costs and profit.

• Contextual application: applying concepts to real or hypothetical market scenarios.

Students are expected to use correct terminology, structured reasoning, and to demonstrate economic understanding through both written and numerical responses.

Enterprise Skills Integration

This topic naturally embeds enterprise skills such as:

• Decision-making: evaluating which inputs to use and in what quantities to maximise profit.

• Problem-solving: identifying how to adjust production in response to rising costs or supply chain disruptions.

• Numerical reasoning: calculating costs, revenues and profit using actual data.

• Communication: justifying production decisions using economic evidence.

These are core skills in any workplace, and this unit offers a low-risk environment to practise them using familiar economic scenarios.

Careers Links

This lesson ties into several Gatsby Benchmarks, especially:

• Benchmark 4: Linking curriculum learning to careers.

• Benchmark 5: Encounters with employers and employees.

Relevant career paths include:

• Operations management

• Business and financial analysis

• Supply chain logistics

• Entrepreneurship

• Public sector planning and procurement

Discussing real roles helps students see how economic decisions play out in professional contexts, and gives meaning to abstract classroom content.

Teaching Notes

To make this lesson impactful:

• Use local examples: students engage more when content feels close to home.

• Integrate case studies: small business profiles or news headlines bring theory to life.

• Vary activities: from drawing supply curves to budgeting for a mock business, offer visual, numerical and written tasks.

• Watch out for confusion: students often mix up total and average costs or struggle to identify which factors shift a supply curve vs cause movement along it.

• Extend learning: encourage higher-attaining students to explore economies of scale or supply elasticity as enrichment.