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EnglandEconomics

Theme 1: Introduction to markets and market failure

4 dot points across 4 inquiry questions. Click any dot point for a focused answer with worked past exam questions where available.

How can governments correct market failure, and why can their intervention make things worse?

Indirect taxes, subsidies, maximum and minimum prices, tradable pollution permits, state provision, regulation and information provision, and the causes of government failure.
An Edexcel A-Level Economics A answer to government intervention in markets, covering indirect taxes, subsidies, price controls, tradable pollution permits, state provision, regulation and information provision, and the causes of government failure including unintended consequences.
12 min answer →

How do the forces of demand and supply set prices and allocate resources in a free market?

Demand and supply, the determinants and elasticities (PED, YED, XED, PES), the price mechanism and its functions, consumer and producer surplus, and the basics of consumer behaviour.
An Edexcel A-Level Economics A answer to how markets work, covering the determinants of demand and supply, price, income and cross elasticities, price elasticity of supply, the rationing, signalling and incentive functions of the price mechanism, and consumer and producer surplus.
12 min answer →

Why does a free market sometimes allocate resources in ways that reduce society's welfare?

Externalities, public goods, information gaps and the merit and demerit good distinction, and how each causes the market to misallocate resources.
An Edexcel A-Level Economics A answer to market failure, covering positive and negative externalities of production and consumption, public goods and the free-rider problem, information gaps, merit and demerit goods, and why each leads to a misallocation of resources.
10 min answer →

Why does scarcity force every economy to make choices, and how do economists model those choices?

The economic problem of scarcity, the methodology of economics as a social science, positive and normative statements, the production possibility frontier, specialisation and the functions of money.
An Edexcel A-Level Economics A answer to the nature of economics, covering scarcity and the economic problem, positive and normative statements, the production possibility frontier, specialisation, the division of labour and the functions of money.
9 min answer →