Edexcel A Level Economics Microeconomics Model Questions and Answers
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Course
Paper 1 Essay Plans - Microeconomics
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PEARSON (PEARSON)
This document provides comprehensive essay plans for Edexcel A-Level Microeconomics, covering a wide range of topics within the subject. It addresses key areas such as the functioning of markets, externalities, and government intervention. Specific themes include the effects of taxes, subsidies, an...
Theme 1
1.2 How markets work
1. How the price function works
1.3 Market Failure
1. Why do externalities occur
2. Evaluate the likely private costs and external costs involved in such major power station construction
projects. Use an appropriate externalities diagram in your answer
3. Evaluate the likely microeconomic consequences of consumers shifting from vehicles powered by fuel
obtained from oil to electric-powered vehicles
1.4 (L8th) and 3.6 (U8th) Government intervention
1. Taxes (L8th)
2. Taxes on sugary drinks effects
3. Subsidies (L8th)
4. Minimum wage (L8th)
5. Tradable permits are less effective than taxation in reducing carbon emissions
6. State provision of public goods vs regulation
7. Controlling mergers (U8th)
8. Controlling monopolies (U8th)
9. Promoting competition / contestability (U8th)
10. Protecting suppliers / employees (U8th)
11. Benefits of nationalisation vs privatisation
12. Why does government failure occur (U8th)
13. Discuss methods of government intervention to protect consumers within the utilities markets, such as
energy and telecommunications
14. Evaluate the methods through the UK government may intervene in an industry such as the water or rail
industry to improve the welfare of consumers
15. Evaluate the issues the competition authorities may face when attempting to regulate the elevator industry
3.1 Business growth
1. Benefits of mergers / growth of business for firms
2. Benefits of mergers / growth of business for consumers
3.2 Business objectives
1. Profit to sales maximisation
2. Should firms pursue profit maximisation
3. Impact of the divorce of ownership and control
3.4 Market structures
1. Oligopoly - to what extent price discrimination benefits consumers
2. Oligopoly - to what extent price discrimination benefits producers
3. Impact of price discrimination on profit
, 4. Reasons why oligopolies may collude
5. Do oligopolies work in the consumers interest
6. To what extent might oligopolies use price and non-price strategies to compete (X2)
7. Impacts of price wars
8. Benefits of a monopoly (for consumers and firms X2)
9. Is something a natural monopoly?
10. How may increased contestability / threat of competition affect incumbent firms behaviour
11. Benefits of contestability
3.5 Labour Market
1. Factors influencing supply of labour
2. Causes of immobility of labour
,What are the functions of the price mechanism?
1. Signalling function
Price signalsinformation to the market players to change their behaviour
E.g. sellers: increase in demand -> price goes up -> signals to supplier to increase output -> increase profit
2. RationingFunction
Rationing provides a method to allocate scarce resources.
Price serves to rationscarce resources when demand exceeds supply
e.g. A shortage of supply will cause price to rise and consumers may not buy it
, Why do externalities occur
1. Negative production externalities
- Eg Pollution - marginal society cost is greater than the marginal private cost
- Loss of economic / social welfare - usually because the costs or benefits that the market gives to individuals
or businesses diverge from the costs or the benefits of society as a whole
2. Positive consumption externalities
- Eg education / healthcare - marginal social benefit is greater than the marginal private benefit
- Positive externalities of consumption is when an individual or firm consumes a good or service, and this
action provides a benefit to an unrelated third part
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