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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
Business Growth
- 6 subtopics
- 18 things to know
- Papers 1 and 3
What Business Growth covers
Covers why firms are the size they are: the reasons some stay small, the ways businesses grow and the risks each route carries, the principal-agent problem, and why firms sometimes break themselves up.
Where it is assessed
Papers 1 and 3
Markets and business behaviour, then the synoptic paper.
Check the Pearson Edexcel specification ↗The 6 subtopics
Each one has its own page.
- Why firms stay small and why they growRecall questions on niche markets, access to finance and owner objectives as reasons to stay small, and on cost, market power and diversification as motives to grow.Open →
- The principal-agent problem and types of organisationRecall questions on the divorce of ownership from control, how asymmetric information creates it, and on public, private, profit and not-for-profit organisations.Open →
- Organic growth and the types of integrationRecall questions on organic growth and on forward vertical, backward vertical, horizontal and conglomerate integration.Open →
- Vertical and horizontal integration assessedRecall questions on supply chain control, market share and rationalisation, set against integration difficulties, culture clashes and regulatory intervention.Open →
- Conglomerate integration and the constraints on growthRecall questions on risk diversification against the lack of synergies, and on market size, finance, owner objectives and competition policy as constraints.Open →
- DemergersRecall questions on what a demerger is, why firms demerge, and its impact on the separated businesses, on workers and on consumers.Open →
What you need to know
Answer each one before you reveal it.
Your recallNot started
Evaluation
Why do some firms deliberately stay small?
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Why might a firm remain small if it operates in a niche market?
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Give three examples of not-for-profit organisations.
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How does organic growth offer a more manageable pace of expansion?
Evaluation
Explain how vertical integration can lead to diseconomies of scale.
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What integration difficulties can arise from horizontal integration?
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How might conglomerate integration cause a loss of strategic focus?
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How do forward and backward vertical integration differ in terms of direction along the supply chain?
Evaluation
Why might a conglomerate pursue a demerger to refocus its operations?
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Why might a demerger lead to job losses?
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Why does asymmetric information give rise to the principal-agent problem?
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Why might a business owner deliberately choose to keep their firm small?
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What objectives might managers pursue instead of profit maximisation?
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Why might a firm pursuing organic growth struggle to achieve rapid economies of scale?
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How does vertical integration provide greater supply chain control?
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How does conglomerate integration provide risk diversification?
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How can diseconomies of scale lead to a demerger?
Take Business Growth further
The same content, four other ways.
Commonly confused
Pairs that lose marks when they are blurred together.
Monopoly vs Monopsony
Monopoly: a market dominated by one seller. Monopsony: a market dominated by one buyer.
Economic rent vs Transfer earnings
Economic rent: earnings above the minimum needed to retain a factor. Transfer earnings: minimum payment needed to retain a factor.
Questions from this topic
Each one with the model answer underneath.
- 1
Why might a firm remain small if it operates in a niche market?
Model answer
Niche markets have limited demand that cannot support large-scale operations, so the firm cannot grow beyond what the market will sustain.
- 2
Why might a business owner deliberately choose to keep their firm small?
Model answer
The owner may prefer to maintain control over the business and avoid the complexities that come with expansion.
- 3
How can lack of access to finance cause a firm to remain small?
Model answer
Without sufficient finance, the firm cannot fund the investment needed for growth, such as expanding capacity or entering new markets.
- 4
Why do some service-based firms find it difficult to scale up?
Model answer
The nature of their product or service requires personalised delivery that does not scale easily, limiting growth potential.
- 5
How can barriers to entry or regulatory constraints keep firms small?
Model answer
These obstacles prevent firms from expanding into larger markets, restricting their ability to grow beyond their current size.
- 6
What cost-related motive explains why firms seek to grow?
Model answer
Firms grow to exploit economies of scale, which reduce average costs as output increases.
What is inside Levo
Six ways to work the same material.
Business Growth revision questions
- What does Business Growth cover in Edexcel A-Level Economics A?
- 6 subtopics: why firms stay small and why they grow, the principal-agent problem and types of organisation, organic growth and the types of integration, vertical and horizontal integration assessed, conglomerate integration and the constraints on growth and demergers. Each one has its own page with questions and model answers.
- How is Business Growth organised?
- By the Edexcel 9EC0 specification, subtopic by subtopic, so it matches the order you are taught it in.
Every question in Business Growth, 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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