Micro Economics Edexcel A level
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Economics - ANSWER✅✅ The study of human behaviour under scarcity
Scarcity - ANSWER✅✅ Describes any situation in which factors of production are
finite, whereas wants are infinite
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
Consumers - ANSWER✅✅ those who demand goods and services
Producers - ANSWER✅✅ those who supply goods and services
, Government - ANSWER✅✅ those who tax and distribute certain goods and services
to both consumers and producers
Demand - ANSWER✅✅ the quantity of goods consumers are willing to buy at a
given price- an inverse relationship
Supply - ANSWER✅✅ the quantity of goods producers are willing to sell at a given
price- a direct relationship
equilibrium price - ANSWER✅✅ the price at which there is no tendency to change
because planned purchases (demand) are equal to planned sales (supply)
Income effect - ANSWER✅✅ as prices fall, consumers can purchase more- even
with a fixed income
substitution effect - ANSWER✅✅ as the price of one good rises, consumers find
substitute goods more attractive
law of diminishing marginal utility - ANSWER✅✅ For quantity demanded to
increase, prices must fall given that marginal unites generate less utility
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
What causes a shift in the demand curve? - ANSWER✅✅ it is caused by changes in
non-price factors (PASIFICS)
What is PASIFICS - ANSWER✅✅ POPULATION
ADVERTISING
SUBSTITUTIONS
INCOME LEVELS
FASHION/TREND
INTEREST RATES
COMPLEMENTARY GOODS
SPECULATION
What is GDP? - ANSWER✅✅ - Gross domestic product
- the total value of all new goods and services produced in a given year
Recession - ANSWER✅✅ two consecutive quarters of negative GDP growth
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
, 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
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
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
what are the limitations of GDP- C - ANSWER✅✅ Comparisons- Different
estimation techniques and purchasing power make it difficult to make
international/historical comparisons
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
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.
working age population - ANSWER✅✅ all those between the ages of 16-64 years.
Labour force - ANSWER✅✅ all those able and willing to work
employment - ANSWER✅✅ the proportion of the working-age population that is
working
unemployment - ANSWER✅✅ the proportion of the working-age population that is
actively seeking work but not working
underemployment - ANSWER✅✅ employed but seeking more hours
- not doing work that makes use of their full skills and abilities
Ways to measure unemployment - ANSWER✅✅ Claimant count and international
labour organisation
Claimaint Count - ANSWER✅✅ Records the number of people claiming
unemployment-related benefits
Positives and negatives of claimant count - ANSWER✅✅ Positive: Easy and cheap to
collect
Negatives: May be susceptible to political manipulation
, -Exclude people who are out of work, actively seeking work but don't claim
-Fraud could lead to overestimating population
International Labour Organisation - ANSWER✅✅ Surveys and estimated the
number of people who are without a job + actively seeking work + available to start
work in the next two weeks
Positives and negatives of the international labour organisation - ANSWER✅✅
Positives: More accurate
- Based on international standards
Negatives: More costly to
compile
-Only need to work for 1 hour a week to be counted as employed
Inflation - ANSWER✅✅ An increase in the general price level
Index - ANSWER✅✅ A statistical measure of relative change
Real - ANSWER✅✅ When a figure has been adjusted for inflation
nominal - ANSWER✅✅ when a figure has not been adjusted for inflation
Disinflation - ANSWER✅✅ A fall in the rate of inflation- prices are increasing but at
a slower rate
Deflation - ANSWER✅✅ A decrease in the general price level
Hyperinflation - ANSWER✅✅ A rapid, significant and uncontrollable increase in the
general price level
Problems with inflation - ANSWER✅✅ - Erodes the value of money, savings and
wages
- Uncertainty leads to lower consumer and business confidence
- Worsens inequality- worse for those who spend a high proportion of their income
on necessities
Problems with deflation - ANSWER✅✅ - A sign of an economic slowdown
-Discourages consumer spending: downwards spiral
- Debt value increase in real terms; borrowers worse off
The profit incentive - ANSWER✅✅ as prices increase, firms have a larger incentive
to produce more/enter the market
Crowding out of fixed factors - ANSWER✅✅ As firms produce more, marginal costs
increase. Firms must set higher prices to cover these increased costs
What causes a movement along the supply curve? - ANSWER✅✅ change in price
Exam|Brand New Expert Exam
Questions with 100% Correct Verified
Answers|All Graded A+|Latest
Premium Expert Update(2025-
2026)|100% Guaranteed Success.
Economics - ANSWER✅✅ The study of human behaviour under scarcity
Scarcity - ANSWER✅✅ Describes any situation in which factors of production are
finite, whereas wants are infinite
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
Consumers - ANSWER✅✅ those who demand goods and services
Producers - ANSWER✅✅ those who supply goods and services
, Government - ANSWER✅✅ those who tax and distribute certain goods and services
to both consumers and producers
Demand - ANSWER✅✅ the quantity of goods consumers are willing to buy at a
given price- an inverse relationship
Supply - ANSWER✅✅ the quantity of goods producers are willing to sell at a given
price- a direct relationship
equilibrium price - ANSWER✅✅ the price at which there is no tendency to change
because planned purchases (demand) are equal to planned sales (supply)
Income effect - ANSWER✅✅ as prices fall, consumers can purchase more- even
with a fixed income
substitution effect - ANSWER✅✅ as the price of one good rises, consumers find
substitute goods more attractive
law of diminishing marginal utility - ANSWER✅✅ For quantity demanded to
increase, prices must fall given that marginal unites generate less utility
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
What causes a shift in the demand curve? - ANSWER✅✅ it is caused by changes in
non-price factors (PASIFICS)
What is PASIFICS - ANSWER✅✅ POPULATION
ADVERTISING
SUBSTITUTIONS
INCOME LEVELS
FASHION/TREND
INTEREST RATES
COMPLEMENTARY GOODS
SPECULATION
What is GDP? - ANSWER✅✅ - Gross domestic product
- the total value of all new goods and services produced in a given year
Recession - ANSWER✅✅ two consecutive quarters of negative GDP growth
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
, 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
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
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
what are the limitations of GDP- C - ANSWER✅✅ Comparisons- Different
estimation techniques and purchasing power make it difficult to make
international/historical comparisons
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
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.
working age population - ANSWER✅✅ all those between the ages of 16-64 years.
Labour force - ANSWER✅✅ all those able and willing to work
employment - ANSWER✅✅ the proportion of the working-age population that is
working
unemployment - ANSWER✅✅ the proportion of the working-age population that is
actively seeking work but not working
underemployment - ANSWER✅✅ employed but seeking more hours
- not doing work that makes use of their full skills and abilities
Ways to measure unemployment - ANSWER✅✅ Claimant count and international
labour organisation
Claimaint Count - ANSWER✅✅ Records the number of people claiming
unemployment-related benefits
Positives and negatives of claimant count - ANSWER✅✅ Positive: Easy and cheap to
collect
Negatives: May be susceptible to political manipulation
, -Exclude people who are out of work, actively seeking work but don't claim
-Fraud could lead to overestimating population
International Labour Organisation - ANSWER✅✅ Surveys and estimated the
number of people who are without a job + actively seeking work + available to start
work in the next two weeks
Positives and negatives of the international labour organisation - ANSWER✅✅
Positives: More accurate
- Based on international standards
Negatives: More costly to
compile
-Only need to work for 1 hour a week to be counted as employed
Inflation - ANSWER✅✅ An increase in the general price level
Index - ANSWER✅✅ A statistical measure of relative change
Real - ANSWER✅✅ When a figure has been adjusted for inflation
nominal - ANSWER✅✅ when a figure has not been adjusted for inflation
Disinflation - ANSWER✅✅ A fall in the rate of inflation- prices are increasing but at
a slower rate
Deflation - ANSWER✅✅ A decrease in the general price level
Hyperinflation - ANSWER✅✅ A rapid, significant and uncontrollable increase in the
general price level
Problems with inflation - ANSWER✅✅ - Erodes the value of money, savings and
wages
- Uncertainty leads to lower consumer and business confidence
- Worsens inequality- worse for those who spend a high proportion of their income
on necessities
Problems with deflation - ANSWER✅✅ - A sign of an economic slowdown
-Discourages consumer spending: downwards spiral
- Debt value increase in real terms; borrowers worse off
The profit incentive - ANSWER✅✅ as prices increase, firms have a larger incentive
to produce more/enter the market
Crowding out of fixed factors - ANSWER✅✅ As firms produce more, marginal costs
increase. Firms must set higher prices to cover these increased costs
What causes a movement along the supply curve? - ANSWER✅✅ change in price
