Edexcel A-Level Economics FINAL EXAM PREP 2025/2026 COMPLETE QUESTIONS WITH CORRECT DETAILED ANSWERS || 100% GUARANTEED PASS <BRAND NEW VERSION>

Edexcel A-Level Economics FINAL EXAM PREP 2025/2026 COMPLETE QUESTIONS WITH CORRECT DETAILED ANSWERS || 100% GUARANTEED PASS &lt;BRAND NEW VERSION&gt; 1. Economics - ANSWER The study of human behaviour under scarcity 2. Scarcity - ANSWER Describes any situation in which factors of production are finite, whereas wants are infinite 3. Ceteris Paribus - ANSWER latin expression meaning "other things equal" which is another way of saying that all other things are assumed to be constant or unchanging 4. Consumers - ANSWER those who demand goods and services 5. Producers - ANSWER those who supply goods and services 6. Government - ANSWER those who tax and distribute certain goods and services to both consumers and producers 7. Demand - ANSWER the quantity of goods consumers are willing to buy at a given price- an inverse relationship 8. Supply - ANSWER the quantity of goods producers are willing to sell at a given price- a direct relationship 9. Equilibrium price - ANSWER the price at which there is no tendency to change because planned purchases (demand) are equal to planned sales (supply) 10. Income effect - ANSWER as prices fall, consumers can purchase more- even with a fixed income 11. Substitution effect - ANSWER as the price of one good rises, consumers find substitute goods more attractive 12. Law of diminishing marginal utility - ANSWER For quantity demanded to increase, prices must fall given that marginal unites generate less utility 13. What causes a movement along the demand curve? - ANSWER it is when there is a change in quantity demanded due to an increase or decrease in price while all other factors remain constant 14. What causes a shift in the demand curve? - ANSWER it is caused by changes in non-price factors (PASIFICS) 15. What is PASIFICS - ANSWER POPULATION ADVERTISING SUBSTITUTIONS INCOME LEVELS FASHION/TREND INTEREST RATES COMPLEMENTARY GOODS SPECULATION 16. What is GDP? - ANSWER - Gross domestic product - the total value of all new goods and services produced in a given year 17. Recession - ANSWER two consecutive quarters of negative GDP growth 18. What are the limitations of GDP- PC - ANSWER Per capita- population growth leads to an increase in GDP due to greater spending/earning/output. However, individuals may be ported if the rate of population growth is greater than the rate of economic growth 19. What are the limitations of GDP- HE - ANSWER Hidden economy: Unpaid work isn't captured in official figures, such as: caring responsibilities; subsistence farming; black markets; hobbies 20. What are the limitations of GDP- I - ANSWER Inequality- Rising GDP could result from the richest getting richer, rather than everyone, or even the average becoming better off 21. What are the limitations of GDP- ED - ANSWER Environmental degradation- Critics have argued that GDP fails to consider whether economic activity is sustainable, or the damage it might do to the natural world 22. What are the limitations of GDP- C - ANSWER Comparisons- Different estimation techniques and purchasing power make it difficult to make international/historical comparisons 23. What are the limitations of GDP- H - ANSWER Happiness- In 2010, the ONS started measuring well-being alongside economic growth. This measures health, relationships, education and skills, as well as personal finances and the environment 24. Easterlin Paradox - ANSWER Increases in a country's per capita income does not necessarily lead to an increase in happiness.There is little direct relationship within countries. Other factors are more important determinants such as social connections. 25. Absolute advantage - ANSWER When a country's output of a product per unit of input is greater than that of any other country. 26. Absolute poverty - ANSWER When a person does not have the income or wealth to fulfil their basic needs. 27. Aggregate Demand (AD) - ANSWER The total demand/spending in an economy at a given price level over a given period of time. Made up of consumption, investment, government spending and net external demand. 28. Aggregate Supply (AS) - ANSWER The total amount of goods and services that can be supplied in an economy at a given price level over a given period of time. 29. Aid - ANSWER The transfer of resources from one country to another. 30. Allocative efficiency - ANSWER Where the price of a good is equal to the price consumers are willing to pay. This occurs when all resources are allocated efficiently. 31. Asymmetric information - ANSWER Where buyers have more information than sellers in a market, or vice versa. 32. Automatic stabilisers - ANSWER Parts of fiscal policy that automatically react to changes in the economic cycle. 33. Average Cost (AC) - ANSWER The cost of production per unit of output. 34. Average Revenue (AR) - ANSWER The revenue per unit sold. 35. Backward vertical integration - ANSWER Where a firm merges with or takes over a firm further back in the production process. 36. Balance of payments - ANSWER A record of the international transactions of an economy. 37. Bank rate - ANSWER The official rate of interest set by the central bank (e.g. by the Monetary Policy Committee of the Bank of England) 38. Barriers to entry - ANSWER Potential difficulties that make it hard for firms to enter a market. 39. Barriers to exit - ANSWER Potential difficulties that make it hard for firms to leave a market. 40. Black market - ANSWER Economic activity that occurs without taxation and government intervention. 41. Budget deficit - ANSWER When government spending exceeds tax revenues. 42. Budget surplus - ANSWER When tax revenues exceed government spending. 43. Capital account of the balance of payments - ANSWER A part of the balance of payments that shows transfers of non-monetary and fixed assets into and out of the economy. 44. Cartel - ANSWER A group of products who collude to limit output in order to keep prices high. 45. Capital flight - ANSWER When money leaves the economy through outward investment Triggered by economic threat (e.g. hyperinflation) 46. Demographic factors - ANSWER High birth rate links with poverty and environmental damage 47. Debt - ANSWER Links with poverty and inequality 48. Access to credit and banking - ANSWER Difficult to save in a country with a poor banking system 49. Infrastructure - ANSWER Poor infrastructure discourages FDI due to high production costs 50. Education/skills - ANSWER Important for developing human capital Ensures that the economy can be productive and produce high quality goods and services 51. Property rights - ANSWER No property rights mean that entrepreneurs cannot protect their ideas No incentive to innovate 52. Non-economic factors (3) - ANSWER War Corruption External shocks 53. Market-orientated strategies for growth and development (7) - ANSWER Trade liberalisation Promotion of FDI Removal of subsidies Floating exchange rate systems Microfinance schemes Privatisation 54. Trade liberalisation - ANSWER Free trade increases world GDP 55. Promotion of FDI - ANSWER Creates employment Encourages innovation Promotes long-term, sustainable growth Provides developing countries with funds to invest and develop 56. Removal of subsidies - ANSWER Subsidies distort the free market Leads to inefficient allocation of resources However, certain goods will be under-provided (e.g. farming) 57. Floating exchange rate systems - ANSWER Determined by the market mechanism 58. Microfinance schemes - ANSWER Distribution of small loans to individual entrepreneurs to stimulate growth Reduces dependency on primary products Reduces inequality 59. Privatisation - ANSWER Govt. sells a firm to a private company Increases efficiency Increases quality Increases allocative effieciency Increases govt. revenue 60. Interventionist strategies for growth and development (6) - ANSWER Development of human capital Protectionism Managed exchange rates Infrastructure development Joint ventures with global companies Buffer stock schemes 61. Development of human capital - ANSWER Improves productivity Helps countries move up supply chain 62. Advantages of protectionism - ANSWER Reduces trade deficit Protects infant industries 63. Disadvantages of protectionism - ANSWER Distorts the market → loss of allocative efficiency Higher prices Less choice No competition → no incentive to increase efficiency Tariffs are regressive Risk of retaliation 64. Infrastructure development - ANSWER Lower supply costs Increases mobility of labour Attracts FDI Increases employment 65. Joint ventures with global companies - ANSWER Partnership between 2 global firms Increases technological knowledge Foreign markets 66. Advantages of buffer stock schemes - ANSWER Reduces price volatility Incomes of farmers remain stable 67. Disadvantages of buffer stock schemes - ANSWER Historically unsuccessful Govt. may not have financial resources to buy up stock Storage is difficult and expensive 68. Other strategies for growth and development (3) - ANSWER Fairtrade Aid Debt relief 69. Advantages of fairtrade schemes - ANSWER Ensures farmers recieve fair price for goods Helps farmers plan for long-term due to stable income Encourages sustainability, environmental protection and stops child labour 70. Disadvantages of fairtrade: - ANSWER Distorts market Non-fairtrade 71. Advantages of aid - ANSWER Helpful in short-term Helps projects for long-term development 72. Disadvantages of aid - ANSWER Corruption means it may not help Private firms cannot compete 73. Debt relief - ANSWER Partial/total debt forgiveness Main cause of poverty 74. Disadvantages of debt relief - ANSWER Encourages future borrowing Corruption 75. Role of financial market (5) - ANSWER To facilitate saving To lend To facilitate the exchange of goods and services To provide currency markets To provide a market for equities 76. Current government expenditure - ANSWER Ongoing spending (e.g. drugs for NHS) 77. Capital government expenditure - ANSWER Spending on assets that can be reused (e.g. schools) 78. Transfer payments - ANSWER Benefits 79. Changing composition of UK public expenditure - ANSWER Most money spent on pensions and welfare benefits Followed by health and education Defence spending falling 80. What is the biggest source of gov. revenue? (UK) - ANSWER Income tax 81. Effects of spending (4) - ANSWER Productivity and growth Crowding out effect (govt. borrows money to finance spending, interest rates increase, C + I decrease) Level of taxation Equality 82. Progressive tax - ANSWER Tax increases as income increases 83. Regressive tax - ANSWER Those on lowest incomes have highest average rate of tax 84. Proportional tax - ANSWER Fixed rate for all tax payers 85. What does the Laffer curve show - ANSWER Increasing tax will increase tax revenue up to a point 86. Why do tax revenues fall? - ANSWER Disincentives to work harder Emigration Tax evasion/avoidance 87. Example of a redistributive tax - ANSWER Inheritance tax 88. What tax has the UK switched to in more recent times that also harms the lowest income earners? - ANSWER Indirect tax 89. How do indirect taxes affect the price level? And what are the conditions required? - ANSWER Increase the cost of goods → cost push inflation 90. If the good is inelastic (cigarettes, fuel) the cost will be passed onto consumer 91. Taxes in the trade balance - ANSWER Tariffs 92. How does tax affect FDI flows? - ANSWER MNCs are attracted to low & predictable tax rates 93. Discretionary fiscal policy - ANSWER DELIBERATE changes in govt. spending and tax to influence AD 94. Fiscal deficit - ANSWER Expenditure &gt; tax 95. National debt - ANSWER Amount of money govt. borrows 96. Cyclical deficit - ANSWER Temporary deficit e.g. in recession, govt. increases spending 97. Structural deficit - ANSWER Imbalance in govt. revenue and spending 98. Factors influencing the size of fiscal deficits (3) - ANSWER The business cycle Interest payments Privatisation 99. Factors influencing the size of national debt (3) - ANSWER Structural deficit If deficit falls, the debt is reduced Debt can only decrease via a budget surplus 100. Significance of size of fiscal deficits and national debt (4) - ANSWER Govt. borrowing increases demand for credit, increasing interest rates Govt. raises interest rates to encourage investors to buy bonds Higher taxes Crowding out effect 101. Measures to reduce fiscal deficit and national debt (and ev. points) (4) - ANSWER Less govt. spending, higher taxes (low economic growth, disincentive to work) 102. Economic growth → raises tax revenue (ineffective if structural deficit) Govt. bonds (short term solution, have to pay back interest) Default on debt (difficult to get future credit) 103. Measures to reduce poverty (5) - ANSWER Income redistribution (e.g. inheritance tax) Sustained growth Progressive taxes (disincentive to work harder) Improve human capital Govt. spending on healthcare and education 104. Measures to change interest rates and supply of money (1) - ANSWER Monetary policy/QE 105. Measures to increase international competitiveness (3) - ANSWER Decrease unit labour costs Currency devaluation Lower tax 106. Measures to control TNCs (1) - ANSWER Regulation of transfer pricing (tax avoidance/evasion, e.g. Starbucks) 107. Measures when applying macro policies (3) - ANSWER Inaccurate policies - lack of perfect knowledge Risks and uncertainties - consumers react in different ways Inability to control external shocks 108. Backwards vertical integration - ANSWER a joining together into one firm of two or more firms where the purchaser merges with/takes over one or more of its suppliers 109. Conglomerate integration - ANSWER a joining together into one firm of two or more firms producing unrelated products 110. Demerger - ANSWER when a firm splits into two or more independent businesses 111. Divorce of ownership from control - ANSWER when managers and directors of a business are different from the owners of a business (the shareholders) 112. Forward vertical integration - ANSWER a joining together into one firm of two or more firms where the supplier merges with/takes over one or more of its buyers 113. Horizontal integration - ANSWER a joining together of two firms in the same industry at the same stage of production 114. Niche market - ANSWER a small segment of a larger market 115. Merger/integration - ANSWER the joining together of two or more firms under common ownership 116. Not-for-profit organisations - ANSWER organisations that do not aim to make a profit; rather, they use any profit or surplus they generate to support their aims (eg. a charity) 117. Organic or internal growth - ANSWER a firm increasing its size through investment in capital equipment/an increased labour force 118. Private sector organisations - ANSWER organisations owned by individuals or companies rather than the state 119. Public sector organisations - ANSWER organisations owned and controlled by the state 120. Synergy - ANSWER when two or more activities/firms put together can lead to greater outcomes than the sum of the individual parts 121. Vertical integration - ANSWER a joining together into one firm of two or more firms in the same industry at different stages of production 122. Average revenue - ANSWER the average receipts per unit sold // TR÷Q 123. Marginal revenue - ANSWER the addition to total revenue of an extra unit sold // ΔTR÷ΔQ 124. Total revenue - ANSWER the total amount of money received from the sale of any given quantity of output // AR*Q 125. Average product - ANSWER the quantity of output per unit of factor input // total product÷level of output 126. Law of diminishing marginal returns - ANSWER if increasing quantities of a variable input are combined with a fixed input, eventually the marginal product and then the average product of that variable input will decline. 127. Long run - ANSWER the period of time when all factors of production can vary, as does the number of firms in the market, but the level of technology remains constant 128. Marginal product - ANSWER the addition to output produced by an extra unit of input // Δtotal output÷Δlevel of inputs 129. Returns to scale - ANSWER the change in percentage output resulting from a percentage change in all the factors of production 130. Short run - ANSWER the period of time in which at least one factor of production is fixed, as is the number of firms in the market 131. Total product - ANSWER the quantity of output measured in physical units produced by a given number of inputs over a period of time 132. Very long run - ANSWER the period of time in which all factors are variable, as is the number of firms in the market, and the state of technology is variable 133. Average cost - ANSWER the average cost of production per unit // AVC+AFC 134. Average fixed cost - ANSWER TFC÷Q 135. Average variable cost - ANSWER TVC÷Q