Key term
Edexcel A-Level Economics B 9EB0
Scarcity, Choice and Potential Conflicts
Enterprise, Business and the Economy
Introducing the Market
Topic overviewConsumer objectives and the demand curveMovements along and shifts of the demand curveProducer objectives and the supply curveMovements along and shifts of the supply curveEquilibrium price and quantityExcess demand, excess supply and market forcesShifts in demand and supply in real marketsLimitations of the supply and demand modelFunctions of the price mechanismMass markets, niche markets and market growthMarket research and consumer insightMarket segmentationMarket mapping and competitive advantageAdding value, pricing decisions and dynamic markets
The Role of Credit in the Economy
Topic overviewBanks and the channelling of savings into investmentBank lending, interest rates and collateralRisk in business decision-makingLimited and unlimited liabilityLoans, overdrafts and trade creditVenture capital, share capital and leasingOwner's capital, retained profit and other sources of financeChallenges in obtaining credit and the impact of credit on the economy
Market Failure and Government Intervention
Revenue, Costs, Profits and Cash
Topic overviewSales volume and sales revenueFixed, variable, total and average costsPercentage change in revenue, costs and profitContribution and the break-even pointMargin of safety and the limitations of break-even analysisProfit as an incentive: market entry and exitGross, operating and net profitProfit margins and how firms increase profitCash flow, cash-flow forecasting and business survival
Business Growth and Competitive Advantage
Topic overviewObjectives of business growthInternal and external economies of scaleDiseconomies of scale and the problems of growthCorporate culture in a growing businessOrganic and inorganic growthHorizontal, vertical and conglomerate integrationInnovation, research and development and competitive advantageState funding for research and developmentThe product life cycle and extension strategiesMarket information in the digital economyDigital technology and the supply side of businessThe long tail and wider geographical marketsCosts, prices and firm survival in a digital marketHow small firms compete
Firms, Consumers and Elasticities of Demand
Topic overviewCalculating and interpreting price elasticity of demandFactors influencing price elasticity of demandPrice elasticity of demand and total revenuePrice elasticity of demand in niche and mass marketsPricing strategiesChoosing the right pricing strategyOnline sales, price comparison and pricing decisionsNon-price competition and the demand curveDevising a marketing approachIncome elasticity of demand
Productive Efficiency
Life in a Global Economy
Topic overviewCharacteristics of globalisationCauses of globalisation over the last fifty yearsGrowth in the UK and the BRIC economiesIndicators of growth and developmentDeveloped, emerging and developing economiesMean and median incomesSpecialisation and the gains from international tradeTrading blocsVisible and invisible trade and the impact of cheap importsExchange rate changes and their impact on firmsReading exchange rate and effective exchange rate data
The Economic Cycle
Topic overviewThe economic cycle: boom, slowdown, recession and recoveryImplications of the economic cycle for firmsThe circular flow of income, injections and withdrawalsAggregate demand and its componentsAggregate supply, input costs and productivityInflation, deflation and disinflationPrice indices and the rate of inflationReal and nominal values, constant and current pricesDemand-pull and cost-push inflationThe impact of inflation on firms and individualsEmployment, underemployment and the measurement of unemploymentThe causes of unemploymentThe impact of unemployment on firms and individuals
Introduction to Macroeconomic Policy
Globalisation
Topic overviewThe growing economic power of China and IndiaAfrica and other emerging marketsRising incomes, firms and shifting employment patternsNominal and real valuesIndex numbersTrade liberalisation and economic growthSpecialisation and comparative advantageForeign direct investment and growthTrade creation and trade diversionTrading blocs and the single marketTrading blocs, firms and growing interdependenceProtectionism: tariffs, quotas and other trade barriersTrade negotiations and international institutionsExchange rate changes and the Eurozone
Economic Factors in Business Expansion
Topic overviewPush factors: saturated markets and competitionPull factors: economies of scale and risk spreadingOffshoring and outsourcingExtending the product life cycle through overseas marketsRaising capacity utilisationAssessing a market: disposable income and exchange ratesEase of doing business, infrastructure and political stabilityLocation of production: costs, labour and natural resourcesLocation of production: trade blocs, incentives and return on investment
Impact of Globalisation on Global Companies
Topic overviewGlobalisation and glocalisationEthnocentric, polycentric and geocentric approaches to global marketsPrice and non-price competition in global marketsBranding and differentiation in global marketsCultural and language barriers in global marketsAdapting marketing strategy for niche and mass markets
Impact of Globalisation on Local and National Economies
Topic overviewMultinational corporations and local labour marketsMultinational corporations and local firmsMultinationals, the local community and the environmentForeign direct investment, growth and the balance of paymentsTechnology transfer, skills and business cultureMultinationals and consumersTax revenues and transfer pricingStakeholder conflicts, pay and working conditionsEmissions, waste disposal and supply chain ethicsEthical marketing: labelling and promotionControlling multinational corporations
Global Labour Markets
Inequality and Re-Distribution
Topic overviewAbsolute and relative poverty and how they are measuredMeasuring inequality: the Lorenz curve and the Gini coefficientReducing poverty: growth, development and international aidThe impact of inequality on individuals, firms and the economyRe-distribution of income and wealth through taxation and services
Competition and Market Power
Topic overviewMarket structures across the spectrum of competitionPerfect competition and what the model explainsMarket structure, pricing strategies and consumersNon-price competition and the limitations of perfect competitionContestability, ease of entry and barriers to entryBarriers to entry, market structure and economies of scaleConcentration ratios, interdependence and tacit agreementPrice discriminationAverage and marginal cost, revenue and profitContribution, business objectives and pricing strategiesProductive and allocative efficiencyProductivity, market orientation and interrelated markets
Market Power and Market Failure
Topic overviewCartels, collusion and restrictive practicesMonopsony, natural monopoly and power in the labour marketThe implications of market failure for firms, consumers and governmentPromoting competition: anti-competitive practices, mergers and privatisationRegulating natural monopolies and protecting consumers and employeesThe Competition and Markets Authority and EU competition policyThe benefits and costs of regulation
Market Failure Across the Economy
Macroeconomic Policies and Impact on Firms and Individuals
Topic overviewAggregate demand and its componentsAggregate supply, full capacity output and the output gapThe multiplier effectShifts in AD and AS: inflation, unemployment and growthFiscal policy: government spending and taxationMonetary policy: the Bank of England, interest rates and quantitative easingDemand-side policies on the AD/AS diagram: investment, jobs and pricesTime lags, policy conflicts and the limits of demand-side policyMarket-based supply-side policiesInterventionist supply-side policiesSupply-side policies on the AD/AS diagram: strengths and weaknessesComparing macroeconomic policies and judging their success
Risk and the Financial Sector
Topic overviewRisk and uncertainty in business decisionsEconomic shocks and their impact on firmsExchange rate risk and forward marketsInsurance and the management of business riskMobilising savings and lending for business investmentAssessing creditor risk and lending to individualsPayments, equity markets and the exchange of goods and servicesThe central bank: the MPC, monetary policy and financial regulationThe Global Financial Crisis and banking regulation
Inequality and Re-Distribution
- 5 subtopics
- 15 things to know
- Papers 2 and 3
What Inequality and Re-Distribution covers
Inequality and Re-Distribution is examined in Paper 2, Competing in the global economy, and in Paper 3, The economic environment and business. It covers absolute and relative poverty and how they are measured, measuring inequality: the Lorenz curve and the Gini coefficient, reducing poverty: growth, development and international aid, the impact of inequality on individuals, firms and the economy and re-distribution of income and wealth through taxation and services.
Where it is assessed
Papers 2 and 3
Competing in the global economy, then the synoptic paper on the pre-released context.
Check the Pearson Edexcel specification ↗The 5 subtopics
Each one has its own page.
- Absolute and relative poverty and how they are measuredAbsolute and relative poverty, how relative poverty behaves when incomes change, the national relative low income threshold and equivalised income, absolute low income in the UK, the international extreme poverty line and purchasing power parity, the Multidimensional Poverty Index and Human Development Index, calculating a poverty threshold, survey understatement, and persistent poverty.Open →
- Measuring inequality: the Lorenz curve and the Gini coefficientThe Lorenz curve and the line of equality, reading and plotting cumulative shares, the Gini coefficient, its range and calculating it, interpreting a rising coefficient, disposable against original income, identical coefficients with different distributions, the quintile share ratio and calculating it, wealth against income, and a higher personal allowance.Open →
- Reducing poverty: growth, development and international aidEconomic growth against development, how growth reduces poverty and why it may not, inclusive growth, the trickle-down hypothesis and its criticism, supply-side policies for the poorest, microfinance, the poverty cycle, bilateral and multilateral aid, tied and untied aid and criticisms of aid, NGOs, debt relief, export market access, direct policies, and conditional cash transfers.Open →
- The impact of inequality on individuals, firms and the economyThe effects of inequality on the poorest, relative deprivation and social mobility, low pay and productivity, efficiency wages and staff turnover, income distribution and a firm's market, redistribution and aggregate demand through the marginal propensity to consume and calculating it, the costs of inequality and the argument that some benefits an economy, growth, public finances, and instability.Open →
- Re-distribution of income and wealth through taxation and servicesIncome and wealth and why wealth is less equal, house prices, progressive and regressive taxes and identifying them, marginal tax rates, the poverty and unemployment traps and calculating what a worker keeps, benefit tapers, the Laffer curve, wealth taxes and their difficulties, services in kind, arguments against redistribution, and universal against means-tested benefits.Open →
What you need to know
Answer each one before you reveal it.
Your recallNot started
Key term
What is relative deprivation?
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How are income and wealth related?
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In a recession, median income falls faster than the incomes of the poorest households. What happens to measured relative poverty, and why is that misleading?
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What does it mean if one country's Lorenz curve lies further from the line of equality than another's?
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State the usual national definition of a household in relative low income.
Numbers
The area between the line of equality and the Lorenz curve is 0.18. Calculate the Gini coefficient.
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What is the difference between economic growth and economic development?
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Give two effects of income inequality on individuals at the bottom of the distribution.
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Distinguish income from wealth.
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How is absolute low income measured in the UK?
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A country's Gini coefficient rises from 0.32 to 0.38. Describe what has happened to its income distribution.
Evaluation
State the trickle-down hypothesis and the main criticism of it.
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How does high inequality reduce social mobility?
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Why is wealth distributed more unequally than income in most economies?
Take Inequality and Re-Distribution further
The same content, four other ways.
Commonly confused
Pairs that lose marks when they are blurred together.
Absolute poverty vs Relative poverty
Absolute poverty: a situation in which a household cannot afford the basic necessities of life such as food, clean water, shelter, clothing and health care. Relative poverty: Having an income so far below the average of the society a household lives in that it cannot take part in normal community life, so the threshold moves as typical incomes move.
Income vs Wealth
Income: a flow of money received over a period, such as wages, interest or rent. Wealth: The stock of assets owned at a point in time, such as property, pensions and savings, and it is far more unequally distributed.
Lorenz curve vs Gini coefficient
Lorenz curve: a graph plotting the cumulative percentage of total income received against the cumulative percentage of the population, ranked from poorest to richest. Gini coefficient: A single number between 0 and 1 measuring how far a distribution departs from perfect equality, found from the area enclosed against the 45° line.
Questions from this topic
Each one with the model answer underneath.
- 1
Define absolute poverty.
Model answer
Absolute poverty is a situation in which a household cannot afford the basic necessities of life such as food, clean water, shelter, clothing and health care.
- 2
Define relative poverty.
Model answer
Relative poverty is having an income so far below the average of the society a household lives in that it cannot take part in the normal life of that community.
- 3
Why can a country almost eliminate absolute poverty and still have widespread relative poverty?
Model answer
Growth can lift everyone above subsistence while incomes at the bottom remain far below the median, so those households are still excluded from ordinary living standards.
- 4
What happens to measured relative poverty if every household's income doubles?
Model answer
It does not change, because the median doubles as well and each household's position relative to the poverty line is unchanged.
- 5
In a recession, median income falls faster than the incomes of the poorest households. What happens to measured relative poverty, and why is that misleading?
Model answer
Measured relative poverty falls because the poverty line moves down with the median, even though the poorest households are no better off in real terms.
- 6
State the usual national definition of a household in relative low income.
Model answer
A household whose equivalised disposable income is below 60% of the contemporary median household income.
What is inside Levo
Six ways to work the same material.
Inequality and Re-Distribution revision questions
- What does Inequality and Re-Distribution cover in Edexcel A-Level Economics B?
- 5 subtopics: absolute and relative poverty and how they are measured, measuring inequality: the lorenz curve and the gini coefficient, reducing poverty: growth, development and international aid, the impact of inequality on individuals, firms and the economy and re-distribution of income and wealth through taxation and services. Each one has its own page with questions and model answers.
- How is Inequality and Re-Distribution organised?
- By the Edexcel 9EB0 specification, subtopic by subtopic, so it matches the order you are taught it in.
Every question in Inequality and Re-Distribution, 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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