Summary Edexcel A Level Economics Paper 3 Exam Notes
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Course
Paper 3 - Microeconomics and Macroeconomics
Institution
PEARSON (PEARSON)
This document is vital for Edexcel A-level Economics Paper 3 revision, offering a comprehensive summary of both micro and macroeconomic principles. It covers microeconomic concepts such as market structures, including perfect competition, monopoly, and oligopoly, along with government intervention ...
Price elasticity of demand
Responsiveness of quantity demanded relative to a change in the price
What impacts PED
Substitutes (more substitutes = more elastic)
Percentage of income (costs more of income = more elastic
Luxury (more luxury = more elastic)
Addictive (more addictive = more inelastic)
Time (over time may change from peak vs off peak times)
Eg cigarettes very price inelastic
,Income elasticity of demand
The responsiveness of quantity demanded relative to a change in income
YED > 1 = demand income is elastic = luxury goods
YED = 0-1 = demand income inelastic = staple goods
YED < 0 = inferior good
YED > 0 = normal good
Cross elasticity of demand
Responsiveness of quantity demanded of one good relative to the change in price of another good
,Externalities
- Private costs and benefits are costs and benefits that are borne solely by the individuals involved in the
transaction
- An externality is a cost or benefit that accrues to someone who is not the buyer (demander) or the seller
(supplier)
- If externalities exist, it means that those involved in the demand and supply of the market are not considering
all the costs and benefits when making their market decisions As a result, the market fails to yield optimal
results
Private benefit
- The benefit of an economic activity to the individual firm / consumer
Social benefit
- The benefit of an economic activity enjoyed by the whole society
External benefit
- Positive externalities - the benefit of an activity enjoyed by the rest of society (those not part of the activity)
Externality diagrams
,
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