Edexcel A-level Economics
Theme 1 EXAM QUESTIONS
WITH CORRECT SOLVED
ANSWERS.
% Change - CORRECT ANSWER✅✅y2 - y1 / y1 × 100
Ad Valorem Tax - CORRECT ANSWER✅✅Tax levied increases in proportion to the
value of the tax base. (VAT)
- Steeper Gradient relative to the original Supply Curve.
Adam Smith - CORRECT ANSWER✅✅The Father of Economics;
- The Invisible Hand (workings of the Price Mechanism)
- Specialisation
- Division of Labour
Adam Smith's Invisible Hand - CORRECT ANSWER✅✅A hidden hand of the market
operating in a competitive market through the pursuit of self-interest allocated resources
in society's best interest.
Administration Costs - CORRECT ANSWER✅✅The costs which arise in the
formulation, monitoring and enforcing of government measures to correct market failure.
Asymmetric Information - CORRECT ANSWER✅✅Where consumers and producers
have unequal access to information about a good or service in the market.
Barter - CORRECT ANSWER✅✅An exchange of goods/services for other
goods/services.
- Does not involve money.
- Double coincidence of wants.
Capital Goods - CORRECT ANSWER✅✅Goods intended for use in production, rather
than by consumers.
Ceteris Paribus - CORRECT ANSWER✅✅'All other things (factors) remaining the
same'
, The assumption that all other variables within a model remain constant whilst the
change is being considered.
Command Economy - CORRECT ANSWER✅✅Where there is public ownership of
resources and these are allocated by the government.
Consumer Goods - CORRECT ANSWER✅✅Goods designed for use by final
consumers.
Consumer Surplus - CORRECT ANSWER✅✅The difference between how much
buyers are prepared to pay for a good and what they actually pay.
It is represented by the area under the demand curve above the ruling market price.
Consumer Tax - CORRECT ANSWER✅✅Below the new EQ and above the original
EQ.
Consumption Externality - CORRECT ANSWER✅✅An external cost or benefit arising
from a consumption activity.
Cross Price Elasticity of Demand (XED) - CORRECT ANSWER✅✅The
responsiveness of demand for one good to changes in the price of a related good.
(Either substitutes or complements).
% ∆ inQD of Good A/ % ∆ in Price of Good B × 100
Negative Value - Complements (The 2 goods are in Joint Demand; as the Price of Good
A increases the Demand of Good B decreases).
Positive Value - Substitutes (The 2 goods are in Competitive Demand; as the Price of
Good A increases, the Demand of Good B increases.)
Demand - CORRECT ANSWER✅✅The quantity of goods or services that will be
bought at any given price over a period of time.
Demand Curve - CORRECT ANSWER✅✅Shows the quantity of a good or service that
would be bought over a range of different price levels in a given period of time.
Slopes downward - Price and Quantity have an inverse (negative) relationship.
Demerit Goods - CORRECT ANSWER✅✅A good which is over provided by the Market
Mechanism and tends to yield more costs to individuals than they realize.
Examples; Tobacco, Drugs, Alcohol, etc..
Diminishing Marginal Utility - CORRECT ANSWER✅✅As successive units of a good
are consumed, the utility gained from each extra unit will fall.
Direct Taxes - CORRECT ANSWER✅✅Tax paid on incomes or profits.
Example; Income Tax and Corporation Tax.
Theme 1 EXAM QUESTIONS
WITH CORRECT SOLVED
ANSWERS.
% Change - CORRECT ANSWER✅✅y2 - y1 / y1 × 100
Ad Valorem Tax - CORRECT ANSWER✅✅Tax levied increases in proportion to the
value of the tax base. (VAT)
- Steeper Gradient relative to the original Supply Curve.
Adam Smith - CORRECT ANSWER✅✅The Father of Economics;
- The Invisible Hand (workings of the Price Mechanism)
- Specialisation
- Division of Labour
Adam Smith's Invisible Hand - CORRECT ANSWER✅✅A hidden hand of the market
operating in a competitive market through the pursuit of self-interest allocated resources
in society's best interest.
Administration Costs - CORRECT ANSWER✅✅The costs which arise in the
formulation, monitoring and enforcing of government measures to correct market failure.
Asymmetric Information - CORRECT ANSWER✅✅Where consumers and producers
have unequal access to information about a good or service in the market.
Barter - CORRECT ANSWER✅✅An exchange of goods/services for other
goods/services.
- Does not involve money.
- Double coincidence of wants.
Capital Goods - CORRECT ANSWER✅✅Goods intended for use in production, rather
than by consumers.
Ceteris Paribus - CORRECT ANSWER✅✅'All other things (factors) remaining the
same'
, The assumption that all other variables within a model remain constant whilst the
change is being considered.
Command Economy - CORRECT ANSWER✅✅Where there is public ownership of
resources and these are allocated by the government.
Consumer Goods - CORRECT ANSWER✅✅Goods designed for use by final
consumers.
Consumer Surplus - CORRECT ANSWER✅✅The difference between how much
buyers are prepared to pay for a good and what they actually pay.
It is represented by the area under the demand curve above the ruling market price.
Consumer Tax - CORRECT ANSWER✅✅Below the new EQ and above the original
EQ.
Consumption Externality - CORRECT ANSWER✅✅An external cost or benefit arising
from a consumption activity.
Cross Price Elasticity of Demand (XED) - CORRECT ANSWER✅✅The
responsiveness of demand for one good to changes in the price of a related good.
(Either substitutes or complements).
% ∆ inQD of Good A/ % ∆ in Price of Good B × 100
Negative Value - Complements (The 2 goods are in Joint Demand; as the Price of Good
A increases the Demand of Good B decreases).
Positive Value - Substitutes (The 2 goods are in Competitive Demand; as the Price of
Good A increases, the Demand of Good B increases.)
Demand - CORRECT ANSWER✅✅The quantity of goods or services that will be
bought at any given price over a period of time.
Demand Curve - CORRECT ANSWER✅✅Shows the quantity of a good or service that
would be bought over a range of different price levels in a given period of time.
Slopes downward - Price and Quantity have an inverse (negative) relationship.
Demerit Goods - CORRECT ANSWER✅✅A good which is over provided by the Market
Mechanism and tends to yield more costs to individuals than they realize.
Examples; Tobacco, Drugs, Alcohol, etc..
Diminishing Marginal Utility - CORRECT ANSWER✅✅As successive units of a good
are consumed, the utility gained from each extra unit will fall.
Direct Taxes - CORRECT ANSWER✅✅Tax paid on incomes or profits.
Example; Income Tax and Corporation Tax.
