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Edexcel A-Level Economics A 9EC0
The Nature of Economics
Topic overviewEconomics as a social sciencePositive and normative economic statementsThe economic problemWhat a production possibility frontier showsShifts in the PPF, and capital against consumer goodsThe division of labour and its advantagesSpecialisation for trade between countriesThe four functions of moneyFree market, command and mixed economiesThe advantages and disadvantages of the free marketCommand and mixed economies assessed
How Markets Work
Topic overviewRational decision makingDemandPrice, income and cross elasticity: formulae and valuesInterpreting income and cross elasticity of demandWhat determines the elasticity of demandUsing elasticities: taxes, subsidies and business planningElasticity and total revenueSupplyPrice elasticity of supply and its valuesWhat determines elasticity of supply, and the short and long runPrice determinationPrice mechanismConsumer and producer surplusIndirect taxes and the incidence of a taxSubsidies and how their benefit is sharedAlternative views of consumer behaviour
Market Failure
Government Intervention
Measures of Economic Performance
Topic overviewMeasuring growth: real GDP, GDP per capita and GNIPurchasing power parity and the limitations of GDPNational wellbeing and the Easterlin paradoxInflation, deflation and how the CPI measures themThe limitations of the CPI, and the RPIDemand-pull, cost-push and monetary causes of inflationThe effects of inflationMeasuring employment, unemployment and inactivityThe causes of unemployment, migration and skillsThe effects of unemploymentThe components of the current accountCurrent account deficits, surpluses and global imbalances
Aggregate Demand
Aggregate Supply
National Income
Topic overviewThe circular flow of incomeThe distinction between income and wealthInjections, withdrawals and the equilibrium conditionWhat counts as an injection and a withdrawalMacroeconomic equilibrium and shifts in AD and ASThe shape of AS, demand-pull inflation and stagflationThe multiplier processMarginal propensities to consume, save, tax and importCalculating the multiplier and why its size matters
Economic Growth
Topic overviewWhat causes economic growthActual against potential growth, and export-led growthTrend growth and positive and negative output gapsIdentifying an output gap on an AD/AS diagramThe four phases of the trade cycle, and the boomRecession, recovery and the output gapThe impact of economic growth
Macroeconomic Objectives and Policies
Topic overviewPossible macroeconomic objectivesMonetary policy: interest rates and quantitative easingFiscal policy: spending, taxation and the budgetDemand-side policy on an AD/AS diagramThe Bank of England, and policy in the 1930s and 2008The strengths and weaknesses of demand-side policyMarket-based and interventionist supply-side policiesLabour market, skills and infrastructure policiesThe strengths and weaknesses of supply-side policyConflicts between growth, inflation and the current accountThe Phillips curve and the trade-offs in a policy mix
Business Growth
Business Objectives
Revenues, Costs and Profits
Topic overviewTotal, average and marginal revenueRevenue, elasticity and the revenue-maximising outputTotal, fixed, variable, average and marginal costWhy short-run cost curves take their shapeThe long-run average cost curve and returns to scaleTypes of economies and diseconomies of scaleInternal and external economies of scaleNormal profit, supernormal profit and lossesThe short-run and long-run shut-down points
Market Structures
Topic overviewEfficiencyThe assumptions of perfect competition and its revenue curvesPerfect competition: equilibrium and efficiencyThe characteristics of monopolistic competitionMonopolistic competition: short-run and long-run equilibriumExcess capacity and efficiency in monopolistic competitionThe characteristics of oligopoly and concentration ratiosCollusive and non-collusive behaviourGame theory, price and non-price competitionThe characteristics of monopoly and its equilibriumThird degree price discriminationThe costs and benefits of monopoly, and natural monopolyWhat monopsony is and where its power comes fromThe costs and benefits of monopsonyContestable markets and hit-and-run competitionBarriers to entry and exitSunk costs and the degree of contestability
The Labour Market
Topic overviewDemand for labourWhat determines the supply of labourGeographical and occupational immobility of labourWage determination in competitive and monopsony marketsCurrent issues in the UK labour marketMinimum and maximum wages, and public sector payThe elasticity of demand for and supply of labour
Government Intervention in Markets
International Economics
Topic overviewWhat globalisation is and what has driven itThe winners and losers from globalisationAbsolute and comparative advantageThe assumptions and limitations of comparative advantageThe gains and costs of international specialisationPattern of tradeTerms of tradeTypes of trading bloc and the hierarchy of integrationTrade creation, trade diversion and the costs of trading blocsThe World Trade OrganisationWhy governments restrict trade, and the instruments usedThe effects of protectionismBalance of payments in a global contextExchange rate systems, and appreciation against revaluationWhat moves a floating rate, and how governments interveneThe Marshall-Lerner condition and the J-curve effectMeasuring competitiveness: unit labour costs and export pricesWhat determines competitiveness, and the cost of losing it
Poverty and Inequality
Emerging and Developing Economies
Topic overviewThe Human Development Index and its three dimensionsThe limits of the HDI, and other development indicatorsPrimary product dependency, the savings gap and Harrod-DomarPopulation, debt, financial exclusion and infrastructureGovernance, corruption, conflict and geographyMarket-orientated strategies: trade liberalisation and FDIInterventionist strategies: human capital and protectionismInfrastructure, joint ventures and buffer stock schemesThe Lewis model, tourism, primary industries and FairtradeAid, debt relief, the World Bank, the IMF and NGOs
The Financial Sector
The Role of the State in the Macroeconomy
Topic overviewCapital, current and transfer spending, and what drives itThe effects of public expenditure, and crowding outProgressive, proportional and regressive taxesThe Laffer curve and the effects of tax changesAutomatic stabilisers, deficits and the national debtWhat drives deficits and debt, and why their size mattersReducing fiscal deficits and national debtPolicies to reduce poverty and inequalityMonetary, exchange rate and supply-side policy across countriesDirect controls, and why policy works differently elsewhereWhat an external shock is, and the kinds that occurFiscal, monetary and supply-side responses to a shockPolicy lags and the constraints on respondingMeasures to control global companies' (transnationals') operationsProblems facing policymakers when applying policies
Aggregate Demand
- 6 subtopics
- 18 things to know
- Papers 2 and 3
What Aggregate Demand covers
Covers total spending in the economy: the four components of aggregate demand, why the curve slopes downward and what shifts it, and the influences on consumption, investment, government spending and net trade.
Where it is assessed
Papers 2 and 3
The national and global economy, then the synoptic paper.
Check the Pearson Edexcel specification ↗The 6 subtopics
Each one has its own page.
- The components of aggregate demandRecall questions on the AD formula, what each component means, and which are the largest and the most volatile.Open →
- The AD curve: why it slopes down and what shifts itRecall questions on the wealth, interest rate and trade effects, and on what moves the curve rather than moving along it.Open →
- Consumption (C)Recall questions on disposable income, saving, interest rates, confidence and wealth as influences on consumer spending.Open →
- Investment (I)Recall questions on gross and net investment and depreciation, the accelerator effect, business confidence and Keynes’s animal spirits, export demand, interest rates, access to credit and the credit crunch, and the effect of government policy and regulation on investment.Open →
- Government expenditure (G)Recall questions on the influences on government spending, including the trade cycle and fiscal policy.Open →
- Net trade (X-M)Recall questions on real income at home and abroad, the exchange rate, protectionism and competitiveness as influences on net trade.Open →
What you need to know
Answer each one before you reveal it.
Your recallNot started
Process
Why does the aggregate demand curve slope downwards?
Numbers
State the formula for calculating aggregate demand.
Process
What causes a shift of the AD curve?
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What does the marginal propensity to consume measure?
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What does the savings ratio measure?
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What does depreciation represent in the context of investment calculations?
Numbers
State the formula for calculating net investment.
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What distinguishes fiscal policy from automatic stabilisers?
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What factors influence government decisions about the level and composition of public spending?
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How is net trade calculated?
Process
If a country experiences rapid economic growth while its trading partners remain stagnant, what would you expect to happen to its trade balance?
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What is aggregate demand?
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What does the AD curve show?
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What is disposable income?
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Define net investment.
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What happens to government expenditure during an economic downturn, and why?
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What does net trade represent for an economy?
Take Aggregate Demand further
The same content, four other ways.
Commonly confused
Pairs that lose marks when they are blurred together.
Gross investment vs Net investment
Gross investment: total spending on capital goods before any allowance for wear and tear. Net investment: spending on capital goods after depreciation has been deducted, which is the addition to the stock.
A movement along the AD curve vs A shift of the AD curve
A movement along the AD curve: a change in real output caused by a change in the general price level. A shift of the AD curve: a change in real output at every price level, caused by one of the four components changing.
Disposable income vs Discretionary income
Disposable income: income remaining after direct taxes have been paid and benefits received. Discretionary income: income remaining after unavoidable committed spending has also been met.
Questions from this topic
Each one with the model answer underneath.
- 1
What is aggregate demand?
Model answer
The total demand for goods and services in an economy at a given price level over a given time period.
- 2
State the formula for calculating aggregate demand.
Model answer
AD = C + I + G + (X - M)
- 3
What does each letter in the AD formula represent?
Model answer
C = consumer spending, I = investment, G = government spending, X = exports, M = imports.
- 4
What does C represent in the aggregate demand formula?
Model answer
Consumer spending, which is household expenditure on goods and services.
- 5
What does I represent in the aggregate demand formula?
Model answer
Investment, which is spending by firms on capital goods.
- 6
What does G represent in the aggregate demand formula?
Model answer
Government spending on goods and services.
What is inside Levo
Six ways to work the same material.
Aggregate Demand revision questions
- What does Aggregate Demand cover in Edexcel A-Level Economics A?
- 6 subtopics: the components of aggregate demand, the ad curve: why it slopes down and what shifts it, consumption (c), investment (i), government expenditure (g) and net trade (x-m). Each one has its own page with questions and model answers.
- How is Aggregate Demand organised?
- By the Edexcel 9EC0 specification, subtopic by subtopic, so it matches the order you are taught it in.
Every question in Aggregate Demand, on a schedule.
Attempt a question from memory, write the correct version, then attempt it again. Levo records the jump between your first attempt and your last, and brings each question back on the day you are due to forget it.
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