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EnglandEconomics

3.1 How markets work

13 dot points across 13 inquiry questions. Click any dot point for a focused answer with worked past exam questions where available.

What happens when markets do not work well?

The benefits of competition, monopoly and market power, the causes of market failure including externalities, merit and demerit goods and public goods, and how government intervenes to correct it.
A focused answer for AQA GCSE Economics on the benefits of competition, monopoly power, the causes of market failure (externalities, merit and demerit goods, public goods), and how the government intervenes.
11 min answer →

How do firms measure their costs, revenue and profit?

The objectives of firms, fixed, variable and total costs, average cost, total and average revenue, and how profit is calculated and why it matters for producers.
A focused answer for AQA GCSE Economics on the objectives of firms, fixed, variable, total and average cost, total and average revenue, and how profit is calculated and why it guides production.
10 min answer →

What determines how much of a good consumers want to buy?

The law of demand, why the demand curve slopes downwards, the difference between a movement along and a shift of demand, and the factors that shift demand.
A focused answer for AQA GCSE Economics on the law of demand, the downward-sloping demand curve, movements versus shifts, and the non-price factors that shift demand.
9 min answer →

Why do average costs often fall as a firm grows larger?

Economies of scale and why they lower average cost, the difference between internal and external economies, diseconomies of scale, and the costs and benefits of business growth.
A focused answer for AQA GCSE Economics on economies of scale, why average cost falls as a firm grows, internal and external economies, diseconomies of scale, and the costs and benefits of growth.
10 min answer →

What resources do firms combine to make goods and services?

The four factors of production (land, labour, capital and enterprise), the rewards to each factor, and how the quantity and quality of factors affect what an economy can produce.
A focused answer for AQA GCSE Economics on the four factors of production, the reward earned by each, and how factor quantity and quality determine an economy's productive potential.
9 min answer →

How is the market price of a good actually set?

Market equilibrium, how the interaction of demand and supply sets the equilibrium price and quantity, how surpluses and shortages are cleared, and how shifts in demand or supply change the equilibrium.
A focused answer for AQA GCSE Economics on market equilibrium, how demand and supply set the equilibrium price and quantity, the clearing of surpluses and shortages, and how shifts change the equilibrium.
10 min answer →

How much does quantity respond when price changes?

Price elasticity of demand and supply, how each is calculated, the meaning of elastic and inelastic, the factors that affect elasticity, and the link between elasticity and revenue.
A focused answer for AQA GCSE Economics on price elasticity of demand and supply, how they are calculated, elastic versus inelastic, the factors affecting elasticity, and the link to total revenue.
10 min answer →

Why do workers, firms and countries specialise in what they produce?

Production and productivity, the division of labour and specialisation, the advantages and disadvantages of specialising, and the role of exchange in a specialised economy.
A focused answer for AQA GCSE Economics on production and productivity, the division of labour, specialisation by workers, firms and countries, its advantages and disadvantages, and why exchange is needed.
9 min answer →

How do markets and prices decide what gets produced?

How markets allocate resources through the price mechanism, the rationing, signalling and incentive functions of price, and the primary, secondary and tertiary sectors of the economy.
A focused answer for AQA GCSE Economics on how markets allocate resources, the rationing, signalling and incentive functions of the price mechanism, and the primary, secondary and tertiary sectors.
10 min answer →

What determines how much of a good firms are willing to sell?

The law of supply, why the supply curve slopes upwards, the difference between a movement along and a shift of supply, and the factors that shift supply.
A focused answer for AQA GCSE Economics on the law of supply, the upward-sloping supply curve, movements versus shifts, and the non-price factors that shift supply.
9 min answer →

Why must every society make choices about how to use its resources?

The economic problem of scarcity, the difference between needs and wants, opportunity cost, and why choices have to be made by consumers, producers and government.
A focused answer for AQA GCSE Economics on the economic problem of scarcity, needs versus wants, the three economic agents, opportunity cost and how choices are made.
9 min answer →

What decides how much workers are paid?

The demand for and supply of labour, how the equilibrium wage is set, why wages differ between jobs, and the meaning of derived demand in the labour market.
A focused answer for AQA GCSE Economics on the demand for and supply of labour, how the equilibrium wage is set, why wages differ between jobs, and the meaning of derived demand.
10 min answer →

How do markets and money help an economy work?

What a market is, the different types of market, the functions of money, the characteristics of money, and how money and markets allow specialisation and exchange to take place.
A focused answer for AQA GCSE Economics on what a market is, types of market, the four functions and characteristics of money, and how money and markets enable specialisation and exchange.
9 min answer →