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Summary A Level Economics Concepts
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A Level Economics Concepts
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Microeconomics Concepts1. Demand and Supply:
Law of Demand: As the price of a good falls, the quantity demanded increases,
ceteris paribus.
Law of Supply: As the price of a good rises, the quantity supplied increases, ceteris
paribus.
Market Equilibrium: The point where quantity demanded equals quantity supplied,
determining the equilibrium price and quantity.
Shifts vs. Movements:
o Shift in Demand/Supply: Caused by non-price factors (e.g., income, tastes,
technology).
o Movement along Demand/Supply Curve: Caused by a change in the price of
the good.
2. Elasticities:
Price Elasticity of Demand (PED): PED=% change in quantity demanded
% change in pricePED=% change in price% change in quantity demanded
o Elastic: PED > 1 (responsive to price changes).
o Inelastic: PED < 1 (not responsive to price changes).
Income Elasticity of Demand (YED): YED=% change in quantity demanded
% change in incomeYED=% change in income% change in quantity demanded
o Normal Goods: YED > 0.
o Inferior Goods: YED < 0.
Cross Elasticity of Demand (XED): XED=
% change in quantity demanded of Good A% change in price of Good BXED=% cha
nge in price of Good B% change in quantity demanded of Good A
o Substitutes: XED > 0.
o Complements: XED < 0.
3. Market Structures:
Perfect Competition: Many firms, homogeneous products, no barriers to entry.
Monopoly: Single firm, significant barriers to entry, price maker.
Oligopoly: Few firms, interdependence, potential for collusion.
Monopolistic Competition: Many firms, differentiated products, some market
power.
4. Market Failures:
Public Goods: Non-rivalrous and non-excludable (e.g., street lighting).
Externalities:
o Negative Externalities: Social cost > private cost (e.g., pollution).
o Positive Externalities: Social benefit > private benefit (e.g., education).
Merit Goods: Under-consumed if left to the free market (e.g., healthcare).
Demerit Goods: Over-consumed if left to the free market (e.g., cigarettes).
5. Government Intervention:
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