Key term
Eduqas A-Level Economics A520QS
Scarcity, Choice and the Economic Problem
Topic overviewScarcity, choice and the basic economic problemThe factors of production and their rewardsOpportunity cost for individuals, firms and governmentEconomic goods, free goods and the three fundamental questionsThe production possibility frontier and its shapeMovements along and shifts in the frontierEfficiency, unemployed resources and the frontierSpecialisation, the division of labour and exchangeProductivity and how it is raised
Demand, Supply and Market Equilibrium
Topic overviewProduct markets and the objectives of economic agentsMarginal utility and the derivation of demandThe demand curve and why it slopes downwardThe conditions of demand and shifts in the demand curveSupply and why the supply curve slopes upwardThe conditions of supply and shifts in the supply curveEquilibrium price and output in a competitive marketShifts in demand and supply and the new equilibriumConsumer surplus, producer surplus and market welfare
Elasticities of Demand and Supply
Topic overviewPrice elasticity of demand and its calculationWhat determines price elasticity of demandPrice elasticity of demand and total revenueElasticity along a straight-line demand curveIncome elasticity of demand, normal and inferior goodsCross price elasticity of demand, substitutes and complementsPrice elasticity of supply and its determinantsElasticity and the incidence of taxes and subsidiesElasticity in decision-making by firms and government
The Labour Market
Topic overviewThe demand for labour and what shifts itThe supply of labour and what shifts itWage determination in a competitive labour marketThe elasticity of demand and supply of labourWage differentials and their causesLabour market flexibility and trade union powerWelfare payments, income tax and labour market performanceThe national minimum wageMigration and the labour market
Costs, Revenues, Profits and the Growth of Firms
Topic overviewPrices, profit and the allocation of resourcesThe short run, the long run and diminishing returnsTotal, average and marginal productFixed and variable costs in the short runAverage and marginal cost curves and their shapesTotal, average and marginal revenueEconomies and diseconomies of scale and the long run average cost curveProfit maximisation and the MC = MR ruleNormal profit, abnormal profit and economic profitInternal and external growth and types of integrationProductive, allocative, dynamic and Pareto efficiency
Market Structures
Topic overviewMarket structure, contestability and barriers to entryBusiness objectives and satisficingPerfect competition and its assumptionsShort run and long run equilibrium in perfect competitionThe efficiency of perfect competitionMonopolistic competition and its assumptionsShort run and long run equilibrium in monopolistic competitionThe efficiency of monopolistic competitionMonopoly and its assumptionsMonopoly compared with perfect competitionThe costs and benefits of monopolyOligopoly, interdependence and concentration ratiosPrice and non-price competition, collusion and price leadershipGame theory and the Nash equilibrium
Competition Policy and Privatisation
Topic overviewWhy governments are concerned about monopoly powerMerger control and market investigationsCartels, restrictive practices and abuse of dominanceCompetition authorities and how they workRegulating natural monopolies and the utilitiesContestable markets and barriers to entryThe limits of competition as a policy goalPrivatisation and the forms it takesEvaluating privatisation and the case for renationalisation
Market Failure and Government Intervention
Topic overviewMarket failure and economic efficiencyExternalities, welfare loss and the socially efficient outputPublic goods, free riding and property rightsMerit goods, demerit goods and information failureMonopoly power, factor immobility and volatile pricesTaxation, subsidies and tradable pollution permitsRegulation, state provision and information provisionMaximum and minimum prices in agriculture, housing and labourGovernment failure and distortions in marketsIncome inequality as a market failure
The Circular Flow and Aggregate Demand
Topic overviewThe circular flow of incomeInjections, withdrawals and equilibrium national incomeThe multiplierThe acceleratorAggregate demand and its componentsConsumption and savingInvestment and its determinantsGovernment spending and net tradeThe AD function: why it slopes down and what shifts it
Aggregate Supply and the Phillips Curve
Topic overviewAggregate supply and the AD/AS frameworkThe short run aggregate supply curveShifts in short run aggregate supplyThe Neo-Classical long run aggregate supply curveThe Keynesian long run aggregate supply curveShifts in long run aggregate supplyMacroeconomic equilibrium and adjustment to the long runThe short run Phillips curveExpectations, the long run Phillips curve and the NAIRUShifts in the long run Phillips curve
Economic Growth
Topic overviewMacroeconomic policy objectives and the conflicts between themMeasuring economic growthActual growth and potential growthIllustrating growth on the PPF and in AD/AS analysisOutput gapsThe business cycle and recessionThe causes of economic growthPolicy instruments used to create growthThe benefits and costs of economic growth
Unemployment
Topic overviewThe labour force, economic activity and inactivityMeasuring unemploymentProblems in measuring unemployment accuratelyThe economic and social costs of unemploymentCyclical unemployment and demand side causesFrictional, structural and seasonal unemploymentReal wage unemployment and incentives to workThe natural rate of unemploymentDemand side solutions to unemploymentSupply side solutions to unemploymentChoosing between demand side and supply side approaches
Inflation and Deflation
Topic overviewInflation, deflation and disinflation definedPrice indices, the basket and weightingCalculating index numbers and the inflation rateThe main measures of inflation comparedDemand-pull inflationCost-push inflationThe quantity theory of money and inflation expectationsThe costs of inflationPolicies to control inflationDeflation and the deflationary spiral
The Balance of Payments
Topic overviewThe balance of payments accountsThe current account and its four componentsThe capital and financial accountsWhy the balance of payments sums to zeroCauses of current account imbalancesThe terms of trade and the current accountThe consequences of a deficit or a surplusPolicies to correct a current account deficit
Control of the National Debt
Topic overviewDeficits, surpluses and the national debtMeasurement of the deficit and the debtStructural and cyclical deficitsDiscretionary policy and automatic stabilisersThe cost of servicing debt and credit ratingsRefinancing, confidence and market disciplineCrowding out and the effect of debt on growthAusterity in a downturn and whether debt is always bad
Fiscal Policy
Topic overviewThe budget and the fiscal stanceGovernment spending and where it goesTaxation and the sources of government revenueDirect and indirect taxesFiscal policy, aggregate demand and AD/AS analysisThe Keynesian case for demand side fiscal policyCriticisms of demand side fiscal policyThe Laffer curve and tax ratesSupply side fiscal policy
Monetary Policy and Financial Stability
Topic overviewThe Bank of England and monetary stabilityThe inflation target and the Bank of England remitThe Monetary Policy Committee and how Bank Rate is setThe transmission mechanism of monetary policyInterest rates, aggregate demand and inflationInterest rates and the exchange rateEvaluating interest rates as a policy toolQuantitative easing and how it worksThe risks of quantitative easing and its unwindingDirect intervention in bank lendingThe financial sector and the real economyAsset bubbles and the financial crisis of 2007-08Systemic risk, moral hazard and the lender of last resortRegulating the financial systemUK economic turning points since 1990
Exchange Rates and Supply Side Policies
Topic overviewExchange rate determination in a free marketFactors that cause a currency to appreciate or depreciateThe exchange rate index and effects on households and firmsExchange rates, aggregate demand and the macroeconomic objectivesManaged floats, fixed rates and central bank interventionThe terms of trade and the Marshall-Lerner conditionSupply side policies and long-run aggregate supplyMarket-based and interventionist supply side policiesEvaluating supply side policies
International Trade and Protectionism
Topic overviewWhy countries tradeAbsolute and comparative advantageCalculating comparative advantageThe gains from trade and the terms of tradeLimits and criticisms of comparative advantageThe case for free tradeThe case against free tradeTariffs and their effectsQuotas, subsidies and other methods of protectionThe arguments for and against protectionism
Globalisation and the UK in the World Economy
Topic overviewWhat globalisation is and what drives itThe benefits of globalisationThe costs of globalisationThe United Kingdom in the world economyThe World Trade OrganisationEconomic problems of developed, developing and emerging economiesThe European Union and the single marketThe advantages and disadvantages of membershipEnlargement of the European UnionEconomic and monetary union and the euroOptimal currency areas and the European Central Bank
Economic Development
Topic overviewWhat economic development meansNational income as a measure of developmentPurchasing power parity and comparing countriesThe Human Development IndexOther indicators of developmentEconomic structure and developmentObstacles: health, education and populationObstacles: capital, infrastructure and institutionsObstacles: trade, resources and external conditionsSolutions: liberalisation and foreign investmentSolutions: aid and debt reliefSolutions: industrialisation strategies
Aggregate Supply and the Phillips Curve
- 10 subtopics
- 30 things to know
- All three components
What Aggregate Supply and the Phillips Curve covers
Aggregate Supply and the Phillips Curve is examined in Macroeconomics — assessed across all three components. It covers aggregate supply and the AD/AS framework, the short run aggregate supply curve, shifts in short run aggregate supply, the Neo-Classical long run aggregate supply curve, the Keynesian long run aggregate supply curve, shifts in long run aggregate supply, macroeconomic equilibrium and adjustment to the long run, the short run Phillips curve, expectations, the long run Phillips curve and the NAIRU and shifts in the long run Phillips curve.
Where it is assessed
All three components
Macroeconomics, assessed across Components 1, 2 and 3.
Check the Eduqas specification ↗The 10 subtopics
Each one has its own page.
- Aggregate supply and the AD/AS frameworkShort run in aggregate supply analysis, long run in aggregate supply analysis and full employment output.Open →
- The short run aggregate supply curveThree main assumptions behind short run aggregate supply analysis and money illusion in SRAS analysis.Open →
- Shifts in short run aggregate supplyHow a government subsidy to producers shifts the SRAS curve, adverse supply shock and favourable supply shock and give an example.Open →
- The Neo-Classical long run aggregate supply curveFull employment level of output in the Neo-Classical model and one criticism of the Neo-Classical assumption of flexible wages.Open →
- The Keynesian long run aggregate supply curveShape of the Keynesian long run aggregate supply curve, term 'sticky wages and one criticism of the Keynesian long run aggregate supply curve.Open →
- Shifts in long run aggregate supplyWhat raises an economy's productive capacity — investment, skills, technology, migration, institutions — and how the Keynesian and Neo-Classical curves each respond.Open →
- Macroeconomic equilibrium and adjustment to the long runLong run equilibrium of the Neo-Classical model and equilibrium at less than full employment.Open →
- The short run Phillips curveShape of the short run Phillips curve and movement along the short run Phillips curve.Open →
- Expectations, the long run Phillips curve and the NAIRUShape and position of the long run Phillips curve, role of inflationary expectations in the expectations-augmented model and adaptive expectations.Open →
- Shifts in the long run Phillips curveWhat moves the natural rate itself, why supply side reform shifts the curve while demand management only moves along it, and how expectations enter.Open →
What you need to know
Answer each one before you reveal it.
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What is the NAIRU, and how does it relate to the long run Phillips curve?
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What does aggregate supply measure?
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Why is the short run aggregate supply curve assumed to slope upwards from left to right?
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Name four factors that can shift the short run aggregate supply curve.
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Describe the shape and position of the Neo-Classical long run aggregate supply curve.
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What causes the long run aggregate supply curve to shift right?
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How do aggregate demand and aggregate supply together determine the equilibrium level of output?
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What relationship does the short run Phillips curve describe?
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What causes the long run Phillips curve to shift?
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Which variables are plotted on the axes of an AD/AS diagram?
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State the three main assumptions behind short run aggregate supply analysis.
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How does a rise in money wages affect the SRAS curve?
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Why do Neo-Classical economists draw LRAS as vertical?
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What do Keynesian and Neo-Classical economists each say the aggregate supply curve will look like in the long run?
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How does net inward migration affect long run aggregate supply?
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How is the equilibrium level of employment determined in AD/AS analysis?
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Which variables are plotted on the axes of a Phillips curve diagram?
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Why do Neo-Classical economists argue that the short run Phillips curve is not stable?
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Give an example of a favourable supply side change that shifts the long run Phillips curve left.
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Why does macroeconomic analysis separate short run aggregate supply from long run aggregate supply?
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Which schools of thought is the upward sloping SRAS curve associated with?
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Explain the effect of a fall in world commodity prices on short run aggregate supply.
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What assumption about product and factor markets underpins Neo-Classical LRAS analysis?
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Describe the shape of the Keynesian long run aggregate supply curve.
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How does investment in education and training affect LRAS?
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Describe the long run equilibrium of the Neo-Classical model.
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Describe the shape of the short run Phillips curve.
Numbers
Which economists developed the expectations-augmented Phillips curve?
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Give an example of an adverse supply side change that shifts the long run Phillips curve right.
Take Aggregate Supply and the Phillips Curve further
The same content, four other ways.
Questions from this topic
Each one with the model answer underneath.
- 1
What does aggregate supply measure?
Model answer
Aggregate supply measures the total quantity of goods and services that all producers in an economy plan to supply. The plan is measured at each possible general price level over a given period.
- 2
Which variables are plotted on the axes of an AD/AS diagram?
Model answer
An AD/AS diagram plots the general price level on the vertical axis. Real national output is plotted on the horizontal axis.
- 3
Why does macroeconomic analysis separate short run aggregate supply from long run aggregate supply?
Model answer
Short run aggregate supply holds input prices and technology fixed, so only output can respond. Long run aggregate supply allows every input price and productive resource to adjust.
- 4
Define the short run in aggregate supply analysis.
Model answer
The short run in macroeconomics is the period over which money wages and other input prices are fixed. Firms can vary output but cannot renegotiate those input costs.
- 5
Define the long run in aggregate supply analysis.
Model answer
The long run in macroeconomics is the period over which all input prices have fully adjusted. Output then depends on the economy's productive capacity rather than on the price level.
- 6
What is meant by full employment output?
Model answer
Full employment output is the level of real output produced when the economy uses its factors of production fully. Some frictional and structural unemployment still remains at that level.
What is inside Levo
Six ways to work the same material.
Aggregate Supply and the Phillips Curve revision questions
- What does Aggregate Supply and the Phillips Curve cover in Eduqas A-Level Economics?
- 10 subtopics: aggregate supply and the ad/as framework, the short run aggregate supply curve, shifts in short run aggregate supply, the neo-classical long run aggregate supply curve, the keynesian long run aggregate supply curve, shifts in long run aggregate supply, macroeconomic equilibrium and adjustment to the long run, the short run phillips curve, expectations, the long run phillips curve and the nairu and shifts in the long run phillips curve. Each one has its own page with questions and model answers.
- How is Aggregate Supply and the Phillips Curve organised?
- By the Eduqas A520QS specification, subtopic by subtopic, so it matches the order you are taught it in.
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