📚 Individuals, Firms, Markets
and Market Failure – AQA A-
Level Economics (With
Examples)
🧍♂️
INDIVIDUAL ECONOMIC DECISION
MAKING
✅ Rational Decision Making
People are assumed to act rationally to maximise benefit.
Consumers want the most satisfaction (utility) from what they
buy.
👉 E.g. Choosing Lidl over Waitrose to save money.
Firms aim to maximise profit.
👉 E.g. Amazon constantly streamlines delivery to cut costs and
boost profit.
📉 Marginal Utility
The more you consume, the less extra satisfaction you get.
👉 E.g. The first slice of pizza is amazing, but by the fourth slice
you’re just full.
👩💼 FIRMS: COSTS, REVENUE & PROFIT
💰 Revenue
Total Revenue (TR) = Price × Quantity
👉 E.g. A bakery selling 100 cupcakes at £2 = £200 TR.
Average Revenue (AR) = TR ÷ Quantity = usually just the price
Marginal Revenue (MR) = extra revenue from selling one more
item
, 📊 Costs
Fixed Costs: don’t change with output
👉 E.g. Rent for a coffee shop = £1,000/month whether you sell 1
coffee or 1,000.
Variable Costs: change with output
👉 E.g. Cost of milk, coffee beans, cups.
Marginal Cost: cost of making one more unit
👉 E.g. Making one extra cupcake might cost 50p in ingredients.
💵 Profit
Normal Profit = just enough to keep a firm in business
Supernormal Profit = anything above that
👉 E.g. Apple making billions in profit from iPhones = supernormal
profit.
🏪 TYPES OF MARKETS
1. Perfect Competition
Lots of small firms, identical products, no price control
👉 E.g. Fruit and veg stalls in a large market.
2. Monopoly
One firm dominates (25%+ market share)
👉 E.g. Google in the search engine market, or Thames Water in
London.
o Can lead to higher prices and less choice.
3. Monopolistic Competition
Many firms, slight product differences
👉 E.g. Coffee shops – Costa, Starbucks, Pret all sell coffee but
brand it differently.
and Market Failure – AQA A-
Level Economics (With
Examples)
🧍♂️
INDIVIDUAL ECONOMIC DECISION
MAKING
✅ Rational Decision Making
People are assumed to act rationally to maximise benefit.
Consumers want the most satisfaction (utility) from what they
buy.
👉 E.g. Choosing Lidl over Waitrose to save money.
Firms aim to maximise profit.
👉 E.g. Amazon constantly streamlines delivery to cut costs and
boost profit.
📉 Marginal Utility
The more you consume, the less extra satisfaction you get.
👉 E.g. The first slice of pizza is amazing, but by the fourth slice
you’re just full.
👩💼 FIRMS: COSTS, REVENUE & PROFIT
💰 Revenue
Total Revenue (TR) = Price × Quantity
👉 E.g. A bakery selling 100 cupcakes at £2 = £200 TR.
Average Revenue (AR) = TR ÷ Quantity = usually just the price
Marginal Revenue (MR) = extra revenue from selling one more
item
, 📊 Costs
Fixed Costs: don’t change with output
👉 E.g. Rent for a coffee shop = £1,000/month whether you sell 1
coffee or 1,000.
Variable Costs: change with output
👉 E.g. Cost of milk, coffee beans, cups.
Marginal Cost: cost of making one more unit
👉 E.g. Making one extra cupcake might cost 50p in ingredients.
💵 Profit
Normal Profit = just enough to keep a firm in business
Supernormal Profit = anything above that
👉 E.g. Apple making billions in profit from iPhones = supernormal
profit.
🏪 TYPES OF MARKETS
1. Perfect Competition
Lots of small firms, identical products, no price control
👉 E.g. Fruit and veg stalls in a large market.
2. Monopoly
One firm dominates (25%+ market share)
👉 E.g. Google in the search engine market, or Thames Water in
London.
o Can lead to higher prices and less choice.
3. Monopolistic Competition
Many firms, slight product differences
👉 E.g. Coffee shops – Costa, Starbucks, Pret all sell coffee but
brand it differently.
