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AQA AS-Level Economics 7136
Economic Methodology and the Economic Problem
Price Determination in a Competitive Market
Topic overviewDemand, the demand curve, income and wealthSubstitutes, complements and consumer preferencesPrice elasticity of demand and total revenueThe determinants of price elasticity of demandIncome and cross elasticity of demandThe determinants of supplyPrice elasticity of supplyEquilibrium, disequilibrium and how a market clearsShifts in demand and supply, and the price mechanismThe interrelationship between markets
Production, Costs and Revenue
Perfect Competition, Imperfectly Competitive Markets and Monopoly
The Market Mechanism, Market Failure and Government Intervention
Topic overviewHow markets and prices allocate resourcesThe meaning of market failurePublic goods, private goods and quasi-public goodsPositive and negative externalitiesMerit and demerit goodsMarket imperfectionsAn inequitable distribution of income and wealthIndirect taxes and subsidiesPrice controls, state provision and regulationEvaluating intervention and the mixed economyGovernment failure
The Measurement of Macroeconomic Performance
How the Macroeconomy Works
Topic overviewThe circular flow of incomeThe aggregate demand and aggregate supply curvesWhat shifts short-run and long-run aggregate supplyMacroeconomic equilibrium and economic shocksConsumption and investmentGovernment spending and net exportsThe accelerator, saving and investmentAggregate demand and the level of economic activityThe determinants of aggregate supply
Economic Performance
Topic overviewShort-run and long-run economic growthThe economic cycle and output gapsDemand-side and supply-side shocksMeasuring unemployment and the types of unemploymentThe determinants of employment and policies to reduce unemploymentInflation and deflationThe quantity theory of moneyConsequences of inflation and deflationThe balance of payments on current accountOutput gaps and the growth-inflation conflictReconciling policy objectives in the AD/AS model
Financial Markets and Monetary Policy
Fiscal Policy and Supply-Side Policies
Production, Costs and Revenue
- 4 subtopics
- 18 things to know
- Papers 1 and 3
What Production, Costs and Revenue covers
Production, costs and revenue is examined on Papers 1 and 3. It builds the cost and revenue curves that every theory of the firm depends on, from specialisation and diminishing returns through to profit.
Where it is assessed
Papers 1 and 3
Markets and market failure, then the synoptic paper.
Check the AQA specification ↗The 4 subtopics
Each one has its own page. AQA AS Economics students sit this topic in the first year.
- Production, productivity and specialisationProduction and productivity, the division of labour, and why specialisation needs a means of exchange.Open →
- Costs of production in the short and long runThe short run and long run, fixed and variable costs, total and average cost, and the shape of each curve.Open →
- Economies and diseconomies of scaleInternal and external economies, the sources of each, diseconomies, and minimum efficient scale.Open →
- Revenue and profitTotal, average and marginal revenue, why average revenue is the demand curve, and how profit is calculated.Open →
What you need to know
Answer each one before you reveal it.
Your recallNot started
Numbers
What is average cost, and how is it calculated?
Evaluation
What are internal economies of scale, and how do managerial economies arise?
Numbers
What is total revenue, what is it when 500 units sell at £41, and how is average revenue calculated?
Numbers
Why does average revenue equal price, and why is it the firm's demand curve?
Numbers
What is profit, and how is it calculated?
Process
What is the typical shape of the short-run average cost curve?
Key term
How is productivity defined?
Key term
How do the short run and long run differ, and what is marginal product?
Process
What are returns to scale, and how do diminishing returns affect short-run costs?
Process
How do returns to scale differ from the law of diminishing returns?
Process
How does technological change affect productivity and costs, and what does innovation add to it?
Process
How does technological change destroy and create markets?
Who and when
Which economist is associated with the concept of creative destruction?
Numbers
State the formula for total cost.
Numbers
State the formula for average cost.
Numbers
State the formula for average revenue.
Numbers
State the formula for profit.
Take Production, Costs and Revenue further
The same content, four other ways.
Commonly confused
Pairs that lose marks when they are blurred together.
Fixed cost vs Variable cost
Fixed cost: a cost that does not vary with the level of output. Variable cost: a cost that rises and falls with the level of output.
Internal economies of scale vs External economies of scale
Internal economies of scale: cost savings that arise from the growth of the firm itself. External economies of scale: cost savings that arise from the growth of the whole industry.
Invention vs Innovation
Invention: the creation of a new idea or process. Innovation: putting a new idea into practical, commercial use.
Questions from this topic
Each one with the model answer underneath.
- 1
What is production in economics?
Model answer
Production turns inputs — the services of factors such as capital and labour — into finished output.
- 2
How is productivity defined?
Model answer
Productivity measures the output per unit of input over a given period of time.
- 3
What does labour productivity measure?
Model answer
Labour productivity is the output per worker or per hour worked over a given period of time.
- 4
Define specialisation in an economic context.
Model answer
Specialisation occurs when individuals, firms or countries concentrate on producing a limited range of goods or services.
- 5
What is meant by the division of labour?
Model answer
Division of labour is the breaking down of a production process into separate tasks, with each worker specialising in one or a few tasks.
- 6
How does specialisation lead to increased productivity?
Model answer
Workers become more efficient at their specific tasks through repetition and practice, producing more output per unit of input.
What is inside Levo
Six ways to work the same material.
Production, Costs and Revenue revision questions
- Is Production, Costs and Revenue examined at AS in AQA Economics?
- Yes. It sits in Papers 1 and 3, which you take in the first year, so it is on the AS paper as well as counting towards the full A level.
- What does Production, Costs and Revenue cover in AQA AS-Level Economics?
- 4 subtopics: production, productivity and specialisation, costs of production in the short and long run, economies and diseconomies of scale and revenue and profit. Each one has its own page with questions and model answers.
- How is Production, Costs and Revenue organised?
- By the AQA 7136 specification, subtopic by subtopic, so it matches the order you are taught it in.
Every question in Production, Costs and Revenue, 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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