Key term
WJEC A-Level Economics 1520QS
Scarcity and Choice
Topic overviewScarcity, choice and opportunity costProduction possibility frontiers (PPFs): Production possibility frontier diagrams to depict choiceProduction possibility frontiers (PPFs): Factors which may shift the PPF inwards or outwardsSpecialisation, division of labour and exchange: Advantages and disadvantages of specialisationSpecialisation, division of labour and exchange: Productivity
Demand and Supply in Product Markets
Topic overviewFactors influencing demand and supply in product markets: Product marketFactors influencing demand and supply: Main influences on demand and supply in product marketsThe determination of equilibrium price: Equilibrium price and output, and disequilibriumThe determination of equilibrium price: How the market adjusts to a new equilibriumThe determination of equilibrium price: Consumer and producer surplus on the diagramConsumer and producer surplusPrice, income and cross price elasticities: Price elasticity of demandPrice, income and cross price elasticities: Income and cross price elasticity of demandPrice, income and cross price elasticities: Price elasticity of supply, uses of elasticity and tax incidence
Demand and Supply in Labour Markets
Topic overviewWage determination: Demand for labour as a derived demandWage determination: Equilibrium wage rate and shifts in labour demand and supplyWage determination: Elasticity of demand for labour and Elasticity of supply of labourWage determination: Causes of wage differentials, Effects of wage differentials, and wages in WalesLabour market issues: Factors which affect flexibility in labour marketsLabour market issues: Effects of the statutory national minimum wage on labour marketsLabour market issues: Impact of migration on labour markets
Resource Allocation
Market Failure
Topic overviewUnderstanding market failure: Market failureUnderstanding market failure: Public goods, Merit and demerit goodsUnderstanding market failure: ExternalitiesUnderstanding market failure: Externalities of consumption and monopoly powerUnderstanding market failure: Information asymmetries and gaps, Income inequalityUnderstanding market failure: Volatile prices and externality diagramsWhy and how governments intervene in markets: Reasons for government intervention in marketsWhy and how governments intervene in markets: Maximum prices, road pricing, pollution permits and other interventionsWhy and how governments intervene in markets: Evaluating government interventionThe effects of government intervention: Government intervention can create distortions in marketsThe effects of government intervention: Reasons for government failure
Macroeconomic Theory (AS)
Topic overviewThe circular flow of income model: Flows in the circular flow modelThe circular flow of income model: Injections into and withdrawals from the circular flowThe circular flow of income model: Model to explain the concept of national income equilibriumThe units of aggregate demand (AD): Units of aggregate demand: consumptionThe units of aggregate demand (AD): Factors affecting consumption and investment, and the AD curveThe AD function: Why an AD function will slope downward from left to rightThe AD function: Changes in the unitsThe aggregate supply (AS) function: Shape of the Keynesian long run aggregate supply curveThe aggregate supply (AS) function: Factors which might result in a shift in LRASAD/AS analysis
Government Policy Objectives
Topic overviewEconomic growth: Actual and potential growth, output gaps and the business cycleEconomic growth: Benefits of economic growth for households, government and firmsEconomic growth: Illustrating growth on PPF and AD/AS diagramsUnemployment (AS): Measurement and typesUnemployment (AS): CostsUnemployment (AS): Causes
Policy Instruments (AS)
Topic overviewFiscal policy: FrameworkFiscal policy: Direct and indirect taxes and demand side fiscal policyFiscal policy: Automatic stabilisers, time lags and the Laffer curveMonetary policy: Bank of England and the Monetary Policy Committee, Inflation targetMonetary policy: Bank Rate and the transmission mechanismExchange rates and exchange rate policy: Exchange rates in a free marketExchange rates and exchange rate policy: Exchange rate policySupply side policies: Aims of supply side policiesSupply side policies: Market-based supply side policies and Limitations of supply side policies
International Trade (AS)
Costs, Revenues and Profits
Topic overviewCosts, revenues and profits: Law of diminishing returnsCosts, revenues and profits: Product, total and average costsCosts, revenues and profits: Total, average and marginal values for revenue and costsCosts, revenues and profits: Internal and external economies and diseconomies of scaleCosts, revenues and profits: Concept of profit maximisationThe growth of firms: How and why firms might growThe growth of firms: Types of integration/ mergersEfficiency
Market Structures
Topic overviewBackground to market structuresBusiness objectivesPerfect competition: Perfect competition and its underpinning assumptionsPerfect competition: Efficiency of perfectly competitive marketsMonopolistic competitionMonopoly: Monopoly and its underpinning assumptionsMonopoly: Comparing monopoly with perfect competitionMonopoly: Potential costs and benefits of monopolyOligopoly: Main features of oligopolistic markets and the concept of interdependenceOligopoly: Potential costs and benefits of oligopolyCompetition policy: Why governments are concerned about monopoly powerCompetition policy: Benefits and limits of competitionPrivatisation: Way in which privatisation may increase competitionPrivatisation: Effects of privatisation on competition
Macroeconomic Theory (A2)
Macroeconomic Objectives (A2)
Topic overviewEconomic growth: Actual vs potential economic growth and Causes of growthEconomic growth: Benefits and costs of growthUnemployment (A2): Measurement and typesUnemployment (A2): Costs, measurement and the Phillips curveUnemployment (A2): CausesInflation and deflation: Measurement and calculationInflation and deflation: CausesInflation and deflation: CostsInflation and deflation: DeflationThe balance of payments: Current account imbalances: causesThe balance of payments: Current account imbalances: impactsThe balance of payments: Solutions to current account deficits
Policy Instruments (A2)
Topic overviewControl of the national (public sector) debt: CausesControl of the national (public sector) debt: ImplicationsThe operation of monetary policy: Interest rates and how quantitative easing worksThe operation of monetary policy: Effects and criticisms of quantitative easingThe operation of monetary policy: Quantitative tightening, Funding for Lending and the financial sectorMonetary stability: Asset bubbles and financial crisesFinancial stability
International Trade (A2)
Topic overviewAdvantages and disadvantages of free trade: Advantages of free tradeAdvantages and disadvantages of free trade: Disadvantages of free tradeProtectionism: Free trade compared with protectionist measuresProtectionism: Key methods of protectionismGlobalisation: What globalisation is and what drives it, Benefits of globalisationGlobalisation: Costs of globalisation and Evaluating the net impact of globalisationTrade and the UK: Absolute and comparative advantage, Terms of trade and the gains from tradeTrade and the UK: Disadvantages of international tradeTrade and the UK: Methods of protectionTrade and the UK: Arguments for and against protectionismTrade and the UK: World Trade Organisation and globalisationTrade and the UK: UK’s major export sectors and an integrated world economy
Non-UK Economies
Economic Development
Topic overviewMeasurement: What is meant by economic development and how it is measuredMeasurement: Human development index, More indirect indicators such as access to health and educationObstacles: Why LEDCs may face difficulties in competing with MEDCsObstacles: Relevant obstaclesSolutions: Liberalisation as a route to development, Aid and debt reliefSolutions: Foreign direct investment and trade strategies
Demand and Supply in Product Markets
Price, income and cross price elasticities: Price elasticity of supply, uses of elasticity and tax incidence
- 3 things to know
- AS Units 1 and 2
Overview
Calculating and interpreting price elasticity of supply, how firms and government use the four elasticities, and how elasticity decides who bears an indirect tax or gains from a subsidy, with the Soft Drinks Industry Levy as a case.
What you need to know
Answer each one before you reveal it.
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Key term
What does price elasticity of supply (PES) measure?
Numbers
State the formula for calculating price elasticity of supply.
Questions from this subtopic
Each one with the model answer underneath.
- 1
What does price elasticity of supply (PES) measure?
Model answer
PES measures the responsiveness of quantity supplied to a change in price.
- 2
State the formula for calculating price elasticity of supply.
Model answer
PES = percentage change in quantity supplied ÷ percentage change in price.
- 3
Identify the two components in the PES formula.
Model answer
The numerator is the percentage change in quantity supplied; the denominator is the percentage change in price.
- 4
Calculate the price elasticity of supply when percentage change in quantity supplied = 28 %, percentage change in price = 40 %.
Model answer
Price elasticity of supply = 28 ÷ 40 = 0.7.
- 5
Why is price elasticity of supply normally positive?
Model answer
Because of the direct relationship between price and quantity supplied—when price rises, quantity supplied typically rises.
- 6
When is supply described as price elastic?
Model answer
When PES is greater than 1, meaning quantity supplied is highly responsive to price changes.
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