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
Productive Efficiency
- 6 subtopics
- 18 things to know
- Papers 2 and 3
What Productive Efficiency covers
Productive Efficiency is examined in Paper 2, Competing in the global economy, and in Paper 3, The economic environment and business. It covers productivity, wages and competitiveness, labour intensive and capital intensive production, capacity utilisation, quality control, quality assurance and Total Quality Management, Kaizen, just in time and lean production and average costs, waste and product development lead times.
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 6 subtopics
Each one has its own page.
- Productivity, wages and competitivenessProductivity and the formula for labour productivity, calculating output per worker and per hour, production against productivity, factors influencing productivity, capital investment and training, unit labour costs and calculating them, wages and competitiveness, international competitiveness, long-run growth, jobs, and measuring service productivity.Open →
- Labour intensive and capital intensive productionLabour intensive and capital intensive production with examples, relative factor prices, the advantages and disadvantages of each method, personalised services, capital intensity and break-even output, vulnerability to falling demand, low-wage economies, automation and cost structure, and intensity as a matter of degree.Open →
- Capacity utilisationFull and spare capacity, the formula for capacity utilisation and calculating it and maximum output, falling average cost at higher utilisation, the problems of low and very high utilisation, targeting around 90%, ways to raise utilisation, rationalisation, price cuts, seasonal utilisation, and when to add capacity.Open →
- Quality control, quality assurance and Total Quality ManagementQuality control against quality assurance, Total Quality Management and the culture change and costs it needs, end-of-line inspection, getting it right first time, quality and revenue, quality circles, accredited standards, quality in the digital economy, recall costs, demand, niche markets, and minimum quality for low-price firms.Open →
- Kaizen, just in time and lean productionKaizen, employee involvement and its benefits and main limitation, just-in-time stock management, its cost savings, supplier reliability and main risk, just in time against just in case, cash flow, lean production and the waste it removes, competitive advantage, responsiveness to demand, and volatile demand.Open →
- Average costs, waste and product development lead timesAverage cost and calculating it, reducing waste and price competitiveness, lean production against economies of scale, lead time in product development and the advantages, lower risk and better cash flow of a short one, simultaneous engineering, the social value of less waste, calculating profit, and why lower average cost does not guarantee profit.Open →
What you need to know
Answer each one before you reveal it.
Your recallNot started
Key term
Why does a firm competing on low price still need a minimum standard of quality?
Key term
Define productivity.
Key term
Define labour intensive production.
Key term
Define Kaizen.
Key term
Define average cost.
Key term
What is the formula for labour productivity?
Key term
Define capital intensive production.
Key term
Define full capacity.
Key term
Distinguish between quality control and quality assurance.
Key term
Why does Kaizen depend on the involvement of ordinary employees?
Numbers
A firm's total cost is £180,000 at an output of 6,000 units. Calculate its average cost.
Numbers
Twelve workers produce 960 units in a week. Calculate labour productivity per worker.
Key term
Give one example of a labour intensive industry and one of a capital intensive industry.
Key term
Define spare capacity.
Evaluation
What is the main weakness of relying on inspection at the end of the production line?
Key term
Define just-in-time stock management.
Numbers
A firm cuts total cost from £180,000 to £162,000 while still producing 6,000 units. Calculate the new average cost and the percentage fall.
Take Productive Efficiency further
The same content, four other ways.
Commonly confused
Pairs that lose marks when they are blurred together.
Production vs Productivity
Production: the total amount a firm or an economy actually turns out in a period. Productivity: output per unit of input in a given period, such as output per worker or per hour worked.
Quality control vs Quality assurance
Quality control: inspecting finished output at the end of the process to find and remove defective items. Quality assurance: building checks into every stage so that defects are not produced in the first place.
Just in time vs Just in case
Just in time: a stock system in which components arrive from suppliers exactly when they are needed, so almost none is held. Just in case: a stock system holding a buffer of materials as protection against late delivery or disruption.
Questions from this topic
Each one with the model answer underneath.
- 1
Define productivity.
Model answer
Productivity is output per unit of input in a given period of time.
- 2
What is the formula for labour productivity?
Model answer
Labour productivity is total output divided by the number of workers, or by the number of hours worked.
- 3
Twelve workers produce 960 units in a week. Calculate labour productivity per worker.
Model answer
Labour productivity is 80 units per worker per week.
- 4
A factory produces 6,000 units using 250 labour hours. Calculate output per labour hour.
Model answer
Output is 24 units per labour hour.
- 5
Distinguish between production and productivity.
Model answer
Production is the total amount produced, while productivity is the amount produced per unit of input.
- 6
Name three factors that influence labour productivity.
Model answer
The skills and training of the workforce, the quantity and quality of capital equipment, and worker motivation all influence labour productivity.
What is inside Levo
Six ways to work the same material.
Productive Efficiency revision questions
- What does Productive Efficiency cover in Edexcel A-Level Economics B?
- 6 subtopics: productivity, wages and competitiveness, labour intensive and capital intensive production, capacity utilisation, quality control, quality assurance and total quality management, kaizen, just in time and lean production and average costs, waste and product development lead times. Each one has its own page with questions and model answers.
- How is Productive Efficiency organised?
- By the Edexcel 9EB0 specification, subtopic by subtopic, so it matches the order you are taught it in.
Every question in Productive Efficiency, 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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