PAPER 3 ECONOMICS EDEXCEL QUESTIONS WITH COMPLETE ANSWERS 2025

PAPER 3 ECONOMICS EDEXCEL
QUESTIONS WITH COMPLETE
ANSWERS 2025


Micro hheffects: hh- hhANSWER: hhP hh- hhprice

O hh- hhoutput

P hh- hhprofits

S hh- hhstructure hhof hhmarkets

I hh- hhinefficiency

C hh- hhcompetition

L hh- hhlabour hhmarkets

E hh- hhexternalities

Macro hheffects: hh- hhANSWER: hhD hh- hhdevelopment

I hh- hhinflation

G hh- hhgrowth

E hh- hhemployment

S hh- hhstructure hhof hheconomy

T hh- hhtrade hhbalance

I hh- hhinequality

F hh- hhfiscal hhbalance

25 hhmark hhessay hhquestion hhon hh- hhThe hhpossible hhmicro hhand hhmacro hheconomic hheffects
hhof hhincreasing hhVAT hhin hhthe hhUK hh: hh- hhANSWER: hh- hhDefine hhthe hhkey hhterm

- hhTry hhand hhuse hhapplication hhe.g. hhVAT hhin hhUK hhis hh20%. hh

, - hhSome hhthings hhare hhexempt hhfrom hhVAT. hh

MICRO hh1
- hhIncrease hhretail hhprices hh- hhif hhpassed hhonto hhconsumer
- hhRise hhin hhVAT hhcauses hha hhpivotal hhshift hhin hhthe hhsupply hhcurve, hhand hhif hhdemand hhis
hhprice hhinelastic hhsuppliers hhcan hhraise hhprices hhwithout hha hhbig hhloss hhto hhsales.

- hhBUT hhsome hhfirms hhwill hhkeep hhprices hhlower hhin hhan hhattempt hhto hhgain hhmarket hhshare.
hhThis hhdepends hhon hhhow hhprofitable hhthey hhare.

In hhan hholigopoly hhfor hhexample hhprotecting hhmarket hhshare hhis hha hhkey hhobjective. hh


MICRO hh2
- hhMay hhlead hhto hhan hhincrease hhinequality hhdue hhto hhregressive hhtax hhon hhlow hhincome
hhfamilies. hh

- hhIt hhhas hha hhregressive hheffect hh- hhtakes hh11% hhof hhdisposable hhincome hhin hhthe hhpoorest
hh20% hhof hhincome hhdistribution, hhyet hhonly hh5% hhof hhincome hhin hhhigher hhearners. hh

- hhDepends hhon hhwhether hhthere hhis hhany hhchange hhto hhthe hhscoop hhof hhVAT hh- hhsome
hhexempt hhand hhif hhits hhprivate hhschools hhfor hhexample, hhmay hhbe hhprogressive. hh




MACRO hh1
> hhRise hhin hhVAT hhwill hhcause hhinflation, hhcausing hha hhfall hhin hhreal hhdisposable hhincome.
hhThis hhcould hhcause hha hhfall hhin hhGDP hhgrowth hhand hhrise hhin hhunemployment. hh

> hhIt hhmakes hhthings hhmore hhexpensive hh- hhwill hhhave hhthe hhbibles hhimpact hhon hhlow hhincome
hhfamilies. hhStandards hhof hhliving hhmay hhpotentially hhfall. hhCauses hha hhfall hhin hhconsumption

hhand hhconsumer hhspending. hh

> hhThis hhdepends hhupon hhwhether, hhthe hhrise hhis hhtemporary hhor hhpermanent. hhIt hhalso
hhdepends hhon hhwhether hhwages hhetc hhare hhrising hhwith hhit. hh




MACRO hh2
> hhA hhjump hhin hhVAT hhwould hhincrease hhtax hhrevenue hhfor hhthe hhgovernment, hhhelp hhto hhlower
hhthe hhfiscal hhdeficit hhand hheventually hhlead hhto hha hhlower hhlevel hhof hhnational hhdebt. hh

> hhCan hhspend hhmore hhon hhpublic hhservices hh- hhinvest hhetc hhlink hhto hhsupply hhside hhpolicies.
> hhBUT hhthe hhgovernment hhmight hhbe hhmore hhbetter hhoff hhwidening hhthe hhscope hhof hhitems
hhthat hhinclude hhVAT. hh




Come hhto hha hhfinal hhjudgment. hh
Evaluation hhpoints hhto hhconsider-

- hhmight hhit hhlead hhto hhtax hhavoidance
- hhis hhit hhtemporary hhor hhpermanent
- hhWould hhother hhtaxes hhto hhfall hhto hhmake hhit hhmore hhneutr