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EnglandEconomics

Microeconomics: Markets and the price system

5 dot points across 5 inquiry questions. Click any dot point for a focused answer with worked past exam questions where available.

What do consumer and producer surplus measure, and how do they capture the welfare gains from trade?

Consumer and producer surplus: their definition and measurement on a demand-and-supply diagram, how they change when price or the curves shift, and their use in welfare analysis.
An Eduqas A520 answer to consumer and producer surplus, covering their definition and measurement as areas on a demand-and-supply diagram, how each changes when price or the curves shift, the idea of total economic welfare, and how surplus analysis underpins evaluation of markets and intervention.
11 min answer →

How do demand and supply set the equilibrium price, and what functions does the price mechanism perform?

Demand, supply and the price mechanism: the determinants of demand and supply, movements versus shifts, market equilibrium and disequilibrium, and the rationing, signalling and incentive functions of prices.
An Eduqas A520 answer to demand and supply, covering the determinants of each, the difference between a movement and a shift, market equilibrium and disequilibrium (surpluses and shortages), and the rationing, signalling and incentive functions of the price mechanism.
12 min answer →

How do the four elasticities measure responsiveness, and why do they matter for revenue, taxes and producers?

Elasticity: price, income and cross elasticity of demand and price elasticity of supply, their calculation and determinants, and the link between price elasticity of demand and total revenue.
An Eduqas A520 answer to the four elasticities, covering price, income and cross elasticity of demand and price elasticity of supply, how each is calculated and interpreted, their determinants, and the link between price elasticity of demand and total revenue.
13 min answer →

How do economic systems allocate resources, and how does thinking at the margin explain rational choice?

Resource allocation and rational decision-making: free-market, command and mixed economies, allocative and productive efficiency, marginal utility and rational choice, and the assumptions and limits of rational economic behaviour.
An Eduqas A520 answer to resource allocation and rational choice, covering the three economic systems, allocative and productive efficiency, the law of diminishing marginal utility and how thinking at the margin underpins rational decisions, and the behavioural critiques of the rational-agent assumption.
12 min answer →

Why does scarcity force every economy to choose, and how does the production possibility frontier model that choice?

Scarcity, choice and opportunity cost: the basic economic problem, the factors of production, the production possibility frontier, and positive versus normative statements.
An Eduqas A520 answer to the basic economic problem, covering scarcity, choice and opportunity cost, the four factors of production, the production possibility frontier as a model of choice and economic growth, and the distinction between positive and normative statements.
12 min answer →