Numbers
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
Revenue, Costs, Profits and Cash
- 9 subtopics
- 27 things to know
- Papers 1 and 3
What Revenue, Costs, Profits and Cash covers
Revenue, Costs, Profits and Cash is examined in Paper 1, Markets and how they work, and in Paper 3, The economic environment and business. It covers sales volume and sales revenue, fixed, variable, total and average costs, percentage change in revenue, costs and profit, contribution and the break-even point, margin of safety and the limitations of break-even analysis, profit as an incentive: market entry and exit, gross, operating and net profit, profit margins and how firms increase profit and cash flow, cash-flow forecasting and business survival.
Where it is assessed
Papers 1 and 3
Markets and how they work, then the synoptic paper on the pre-released context.
Check the Pearson Edexcel specification ↗The 9 subtopics
Each one has its own page.
- Sales volume and sales revenueSales volume and sales revenue, the formula for sales revenue and calculating revenue, volume and price from it, sales volume against sales value, how a price rise changes revenue, turnover, why revenue alone is a poor measure of success, and promotional discounts.Open →
- Fixed, variable, total and average costsFixed and variable costs, the formulae for total and average cost and calculating each, why average fixed cost falls as output rises, average variable cost, costs when nothing is produced, classifying costs, semi-variable costs, the time period, and falling average total cost.Open →
- Percentage change in revenue, costs and profitThe formula for percentage change, calculating percentage changes in revenue, costs, profit and sales volume, why profit changes faster than revenue, successive percentage changes and why they cannot be added, percentage changes against percentage point changes, and comparing firms of different sizes.Open →
- Contribution and the break-even pointContribution per unit and total contribution, the break-even point and its condition, the contribution formula for break-even output, calculating break-even output, break-even revenue and profit or loss, how changes in price, variable cost and fixed cost move break-even, target profit output, and the break-even chart.Open →
- Margin of safety and the limitations of break-even analysisRecall questions on the margin of safety and its formula, calculating it in units, as a percentage and in revenue, what a narrow one tells a manager, and the assumptions break-even rests on.Open →
- Profit as an incentive: market entry and exitProfit as an incentive and a signal to other firms, how entry lowers price and profit, normal and supernormal profit, why firms exit loss-making markets and what happens to price, barriers to entry, sunk costs as a barrier to exit, profit as a source of growth finance, and freedom of entry and exit.Open →
- Gross, operating and net profitGross profit and cost of sales, operating profit and operating expenses, profit for the year after finance costs and tax, calculating each, the statement of comprehensive income, why interest follows operating profit, a healthy gross profit alongside a loss, and why profit for the year matters to shareholders.Open →
- Profit margins and how firms increase profitProfit against profitability, the formulae for gross profit, operating profit and profit for the year margins and calculating each, working back to cost of sales, a falling operating margin, low-margin supermarkets, raising margins with or without price changes, price cuts and volume, adding value, and cutting costs.Open →
- Cash flow, cash-flow forecasting and business survivalCash flow against profit, how a profitable firm runs out of cash, liquidity and working capital, growing and seasonal firms, improving cash flow without more sales, depreciation, cash-flow forecasts, net cash flow and closing balances and calculating them, negative balances, credit sales timing, and identifying credit needs.Open →
What you need to know
Answer each one before you reveal it.
Your recallNot started
Numbers
How is break-even output worked out from a product's price and its costs?
Evaluation
What does the margin of safety show, and why should a break-even chart be treated with caution?
Key term
Distinguish gross profit from operating profit, and give examples of the costs deducted for each.
Key term
Why can raising output lower average total cost even though total cost rises?
Key term
Define sales volume.
Numbers
State the formula for percentage change.
Key term
Explain what happens to price and profit as new firms enter a profitable market.
Key term
Define profitability.
Key term
Define cash flow.
Key term
Define sales revenue.
Numbers
A firm's sales revenue rises from £480,000 to £552,000. Calculate the percentage change.
Key term
Define contribution per unit.
Key term
Define margin of safety.
Key term
Define normal profit.
Numbers
State the formula for gross profit.
Key term
Explain the difference between profit and profitability.
Key term
What is the difference between profit and cash flow?
Numbers
State the formula for sales revenue.
Key term
Define fixed costs.
Numbers
A firm's total costs fall from £250,000 to £230,000. Calculate the percentage change.
Numbers
State the formula for contribution per unit.
Numbers
State the formula for margin of safety.
Key term
Define supernormal profit.
Key term
Give two items that make up the cost of sales for a manufacturer.
Numbers
State the formula for gross profit margin.
Key term
How can a profitable firm run out of cash?
Take Revenue, Costs, Profits and Cash further
The same content, four other ways.
Commonly confused
Pairs that lose marks when they are blurred together.
Profit vs Cash flow
Profit: what is left when total costs are taken from total revenue, counted when a sale is made rather than when the money changes hands. Cash flow: the movement of money into and out of a business over a period, which can be negative even in a year of successful trading.
Gross profit vs Operating profit
Gross profit: sales revenue minus the direct cost of the goods that were sold, before any overheads are deducted. Operating profit: sales revenue minus both the direct cost of sales and the day-to-day overheads of running the business.
Fixed cost vs Sunk cost
Fixed cost: an outgoing such as rent or insurance that does not change with the level of output, but can still be escaped by shutting the business down. Sunk cost: an outgoing already incurred that cannot be recovered on leaving the industry, so it acts as a barrier to exit.
Questions from this topic
Each one with the model answer underneath.
- 1
Define sales volume.
Model answer
Sales volume is the number of units a business sells in a given period.
- 2
Define sales revenue.
Model answer
Sales revenue is the total value of a firm's sales, found by multiplying the selling price by the quantity sold.
- 3
State the formula for sales revenue.
Model answer
Sales revenue = selling price × sales volume.
- 4
A firm sells 4,500 units at £12 each. Calculate its sales revenue.
Model answer
Sales revenue is £54,000.
- 5
A firm's sales revenue is £81,000 and its selling price is £18 per unit. Calculate its sales volume.
Model answer
Sales volume is 4,500 units.
- 6
A firm earns £96,000 from selling 3,200 units. Calculate the selling price.
Model answer
The selling price is £30 per unit.
What is inside Levo
Six ways to work the same material.
Revenue, Costs, Profits and Cash revision questions
- What does Revenue, Costs, Profits and Cash cover in Edexcel A-Level Economics B?
- 9 subtopics: sales volume and sales revenue, fixed, variable, total and average costs, percentage change in revenue, costs and profit, contribution and the break-even point, margin of safety and the limitations of break-even analysis, profit as an incentive: market entry and exit, gross, operating and net profit, profit margins and how firms increase profit and cash flow, cash-flow forecasting and business survival. Each one has its own page with questions and model answers.
- How is Revenue, Costs, Profits and Cash organised?
- By the Edexcel 9EB0 specification, subtopic by subtopic, so it matches the order you are taught it in.
Every question in Revenue, Costs, Profits and Cash, 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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