EDEXCEL A LEVEL MICROECONOMICS EXAM
2024/2025 | ACCURATE AND VERIFIED EXAM
QUESTIONS AND ANSWERS FOR GUARANTEED
PASS | LATEST UPDATE
,AD (def.)
Total level of planned real expenditure on g/s produced within country in given time
period
AS (def.)
Total supply of all g/s in economy
AD (eq.)
AD = C + I + G + (X - M)
Factors that affect AD: C
∝ disposable income
∝ employment
∝ 1/interest rate
∝ availability of credit
∝ confidence
∝ wealth
∝ inflation (short run)
∝ 1/inflation (long run)
Factors that affect AD: G
∝ size of public sector
∝ dependency ratio
∝ 1/(business cycle)
∝ 1/(national debt)
Factors that affect AD: I
∝ 1/interest rate
∝ access to credit
∝ abnormal profit
∝ growth
∝ economic state of trade partners
∝ business confidence
Capital expenditure (def.)
Spending over long period of time such as building school, hospital or rail line
Current expenditure (def.)
Immediate spending items such as teacher's and nurses/ wages
Crowing out
When government produces g/s it uses productive resources. Because these resources
are limited, government robs private sector of same resources
Progressive taxation (def.)
As income rises, percentage paid in tax rises
,Regressive taxation (def.)
As income rises, the percentage paid in tax falls
Proportional taxation (def.)
Percentage paid in tax rises in line with income
Direct taxation (def.)
Tax directly on person or organisation
Indirect taxation (def.)
Tax on good or service
Automatic stabilisers (def.)
Changes in government spending and taxation that occur due to changes in economic
cycle, not new decisions by government
Discretionary fiscal policy (def.)
Deliberate changes in government spending and taxation that occur as the result of new
decision by the government
Fiscal deficit (def.)
When spending exceeds tax revenue in one year
Fiscal debt (def.)
Cumulative total of fiscal deficits
Evaluations to fiscal policy
Cyclical v. structural deficit
Opportunity cost
Multiplier effect
Crowding out
Factors influencing demand for labour
Demand for final product - if rise in output > increase in productivity
Relative productivity of labour to capital - substitution effect
£3,000 subsidy for hiring unemployed 18-24 y.o. = half UK's youth minimum wage
Factors influencing supply of labour
Cost of living
Cost of gaining skills
UK uni fees capped at £9,250 per year
Number of workers
UK raises state pension age from 67 to 68
Market failures in labour markets
Geographical immobility - inability of labour to move from one location to another
Occupational immobility - inability of labour to move form one industry to another
, Employer monopsony -> wage-setting power -> wage lower than equilibrium
10% decline in real wages of NHS worker since start of recession
Solutions to market failures in labour market
Education and training
Housing market reform
Wage-setting
UK raises NMW from £7.50 to £7.83
Evaluate solutions to market failures in labour market
If increases elasticity of S(labour) -> lower wages
If D(labour) if elastic -> min wage will increase unemployment
Explain wage determination in competitive labour market
Firms are wage takers -> set W where S = D
S(labour) is perfectly elastic -> AC = MC -> max profits at MRP = MC -> employ Q₁
Positive statement (def.)
Evidence based statement which can be proven true or false
Normative statement (def.)
Value judgment which cannot be tested
Scarcity (def.)
Lack of resources to fulfil everyone's wants and needs
Renewable resources (def.)
Resources which can be replenished over time
Non-renewable resources (def.)
Resources which cannot be replenished once they are used
PPF (def.)
Max amount of two goods that can possibly be produced in economy with given set of
resources, time and technology
2024/2025 | ACCURATE AND VERIFIED EXAM
QUESTIONS AND ANSWERS FOR GUARANTEED
PASS | LATEST UPDATE
,AD (def.)
Total level of planned real expenditure on g/s produced within country in given time
period
AS (def.)
Total supply of all g/s in economy
AD (eq.)
AD = C + I + G + (X - M)
Factors that affect AD: C
∝ disposable income
∝ employment
∝ 1/interest rate
∝ availability of credit
∝ confidence
∝ wealth
∝ inflation (short run)
∝ 1/inflation (long run)
Factors that affect AD: G
∝ size of public sector
∝ dependency ratio
∝ 1/(business cycle)
∝ 1/(national debt)
Factors that affect AD: I
∝ 1/interest rate
∝ access to credit
∝ abnormal profit
∝ growth
∝ economic state of trade partners
∝ business confidence
Capital expenditure (def.)
Spending over long period of time such as building school, hospital or rail line
Current expenditure (def.)
Immediate spending items such as teacher's and nurses/ wages
Crowing out
When government produces g/s it uses productive resources. Because these resources
are limited, government robs private sector of same resources
Progressive taxation (def.)
As income rises, percentage paid in tax rises
,Regressive taxation (def.)
As income rises, the percentage paid in tax falls
Proportional taxation (def.)
Percentage paid in tax rises in line with income
Direct taxation (def.)
Tax directly on person or organisation
Indirect taxation (def.)
Tax on good or service
Automatic stabilisers (def.)
Changes in government spending and taxation that occur due to changes in economic
cycle, not new decisions by government
Discretionary fiscal policy (def.)
Deliberate changes in government spending and taxation that occur as the result of new
decision by the government
Fiscal deficit (def.)
When spending exceeds tax revenue in one year
Fiscal debt (def.)
Cumulative total of fiscal deficits
Evaluations to fiscal policy
Cyclical v. structural deficit
Opportunity cost
Multiplier effect
Crowding out
Factors influencing demand for labour
Demand for final product - if rise in output > increase in productivity
Relative productivity of labour to capital - substitution effect
£3,000 subsidy for hiring unemployed 18-24 y.o. = half UK's youth minimum wage
Factors influencing supply of labour
Cost of living
Cost of gaining skills
UK uni fees capped at £9,250 per year
Number of workers
UK raises state pension age from 67 to 68
Market failures in labour markets
Geographical immobility - inability of labour to move from one location to another
Occupational immobility - inability of labour to move form one industry to another
, Employer monopsony -> wage-setting power -> wage lower than equilibrium
10% decline in real wages of NHS worker since start of recession
Solutions to market failures in labour market
Education and training
Housing market reform
Wage-setting
UK raises NMW from £7.50 to £7.83
Evaluate solutions to market failures in labour market
If increases elasticity of S(labour) -> lower wages
If D(labour) if elastic -> min wage will increase unemployment
Explain wage determination in competitive labour market
Firms are wage takers -> set W where S = D
S(labour) is perfectly elastic -> AC = MC -> max profits at MRP = MC -> employ Q₁
Positive statement (def.)
Evidence based statement which can be proven true or false
Normative statement (def.)
Value judgment which cannot be tested
Scarcity (def.)
Lack of resources to fulfil everyone's wants and needs
Renewable resources (def.)
Resources which can be replenished over time
Non-renewable resources (def.)
Resources which cannot be replenished once they are used
PPF (def.)
Max amount of two goods that can possibly be produced in economy with given set of
resources, time and technology
