AQA ECONOMICS A COMPREHENSIVE 2026 EXAM
QUESTIONS AND ANSWERS RATED A+
✔✔Positive Externalities - ✔✔benefits created by a public good that are shared by the
primary consumer of the good and by society more generally
✔✔Negative Externalities - ✔✔a cost imposed without compensation on third parties by
the production or consumption of sellers or buyers. Example: a manufacturer dumps
toxic chemicals into a river, killing the fish sought by sports fishers; an external cost or a
spillover cost
✔✔Merit Goods - ✔✔Goods that are held to be desirable for consumers, but which are
under-provided by the market. Reasons for under-provision: Good may have positive
externalities, or consumer ignorance about the benefits of the good.
✔✔Demerit Goods - ✔✔Goods that are thought to be harmful to consumers/society, eg
cigarettes and addictive drugs. They are over-produced and consumed.
✔✔Income Inequality - ✔✔the unequal distribution of household or individual income
across the various participants in an economy
✔✔Wealth Inequality - ✔✔The unequal distribution of assets within a population
✔✔Private Costs - ✔✔the costs of an economic activity directly borne by the immediate
producer or consumer (excluding externalities)
✔✔Social Costs - ✔✔the full resource costs of an economic activity, including
externalities. Private costs + external costs
✔✔Private Benefits - ✔✔The benefits directly accruing to those taking a particular
action
✔✔Social Benefits - ✔✔External Benefits + Private Benefits.
✔✔Imperfect Information - ✔✔The absence of full knowledge concerning product
characteristics, available prices, and so on.
✔✔Asymmetric Information - ✔✔a situation in which one party to an economic
transaction has less information than the other party
✔✔Government Failure - ✔✔an inefficient allocation of resources caused by
government intervention in the economy
, ✔✔Progressive Taxation - ✔✔the tax as a percentage of income increases as income
increases
✔✔Economic Inequality - ✔✔Differences in the income/wealth of different households
(rich, middle class and poor)
✔✔Government Spending - ✔✔Goods and services that government buys
✔✔Public Expenditure - ✔✔"Spending by central government and local authorities on
providing goods and services, transfer payments and debt repayments."
✔✔Subsidies - ✔✔a sum of money granted by the government or a public body to
assist an industry or business so that the price of a commodity or service may remain
low or competitive.
✔✔Price Controls - ✔✔government-imposed limits on the prices that producers may
charge in the market
✔✔State Provision - ✔✔The government can provide public goods and merit goods
directly to consumers free of charge in order to overcome market failure
✔✔Regulation - ✔✔the use of governmental authority to control or change some
practice in the private sector
✔✔Indirect Taxation - ✔✔a tax imposed upon expenditure. A tax placed upon the
selling price of a product, so it raises the firm's costs and shift the supply curve for the
product vertically upwards by the amount of the tax.
✔✔Causes of Government Failure - ✔✔1) Distortion of Price Signals;
2) Unintended consequences;
3) Excessive administration costs;
4) Information gaps
✔✔Law of Unintended Consequences - ✔✔The actions of government, producer or
consumers will always have effects that are unintended or unanticipated.
✔✔Market Distortion - ✔✔a situation where some incident has caused the market price
to be either higher or lower than the price that would have been obtained in the
presence of a perfectly competitive market
✔✔Rational Economic Decision Making - ✔✔The assumption in economics that all
economic decision-makers act in their best self-interest, trying to maximize the
satisfaction or benefit they receive from their economic-decisions; for example
QUESTIONS AND ANSWERS RATED A+
✔✔Positive Externalities - ✔✔benefits created by a public good that are shared by the
primary consumer of the good and by society more generally
✔✔Negative Externalities - ✔✔a cost imposed without compensation on third parties by
the production or consumption of sellers or buyers. Example: a manufacturer dumps
toxic chemicals into a river, killing the fish sought by sports fishers; an external cost or a
spillover cost
✔✔Merit Goods - ✔✔Goods that are held to be desirable for consumers, but which are
under-provided by the market. Reasons for under-provision: Good may have positive
externalities, or consumer ignorance about the benefits of the good.
✔✔Demerit Goods - ✔✔Goods that are thought to be harmful to consumers/society, eg
cigarettes and addictive drugs. They are over-produced and consumed.
✔✔Income Inequality - ✔✔the unequal distribution of household or individual income
across the various participants in an economy
✔✔Wealth Inequality - ✔✔The unequal distribution of assets within a population
✔✔Private Costs - ✔✔the costs of an economic activity directly borne by the immediate
producer or consumer (excluding externalities)
✔✔Social Costs - ✔✔the full resource costs of an economic activity, including
externalities. Private costs + external costs
✔✔Private Benefits - ✔✔The benefits directly accruing to those taking a particular
action
✔✔Social Benefits - ✔✔External Benefits + Private Benefits.
✔✔Imperfect Information - ✔✔The absence of full knowledge concerning product
characteristics, available prices, and so on.
✔✔Asymmetric Information - ✔✔a situation in which one party to an economic
transaction has less information than the other party
✔✔Government Failure - ✔✔an inefficient allocation of resources caused by
government intervention in the economy
, ✔✔Progressive Taxation - ✔✔the tax as a percentage of income increases as income
increases
✔✔Economic Inequality - ✔✔Differences in the income/wealth of different households
(rich, middle class and poor)
✔✔Government Spending - ✔✔Goods and services that government buys
✔✔Public Expenditure - ✔✔"Spending by central government and local authorities on
providing goods and services, transfer payments and debt repayments."
✔✔Subsidies - ✔✔a sum of money granted by the government or a public body to
assist an industry or business so that the price of a commodity or service may remain
low or competitive.
✔✔Price Controls - ✔✔government-imposed limits on the prices that producers may
charge in the market
✔✔State Provision - ✔✔The government can provide public goods and merit goods
directly to consumers free of charge in order to overcome market failure
✔✔Regulation - ✔✔the use of governmental authority to control or change some
practice in the private sector
✔✔Indirect Taxation - ✔✔a tax imposed upon expenditure. A tax placed upon the
selling price of a product, so it raises the firm's costs and shift the supply curve for the
product vertically upwards by the amount of the tax.
✔✔Causes of Government Failure - ✔✔1) Distortion of Price Signals;
2) Unintended consequences;
3) Excessive administration costs;
4) Information gaps
✔✔Law of Unintended Consequences - ✔✔The actions of government, producer or
consumers will always have effects that are unintended or unanticipated.
✔✔Market Distortion - ✔✔a situation where some incident has caused the market price
to be either higher or lower than the price that would have been obtained in the
presence of a perfectly competitive market
✔✔Rational Economic Decision Making - ✔✔The assumption in economics that all
economic decision-makers act in their best self-interest, trying to maximize the
satisfaction or benefit they receive from their economic-decisions; for example
