Edexcel A-Level Economics Theme 1
With Complete Solutions Latest Update
Ad Valorem Tax - ANSWER-A tax that is a percentage of the value of the good.
Administrative Costs - ANSWER-The expenditure of the government on intervening in markets.
Allocative - ANSWER-Allocating scarce resources among competing users.
Allocative Efficiency - ANSWER-Social welfare is maximised in the production of goods and services.
Anchoring - ANSWER-Having a refrance point. E.g. Anchors that establish prices, RRP £349.99 but you
pay £59.99.
Calculation for PED - ANSWER-% differance in demand ÷ % differance in price.
Calculation for PES - ANSWER-% change in quantity supplied ÷ % change in price.
Calculation for XED - ANSWER-% change in quantity demanded of good X ÷ % change in price of good Y.
Calculation for YED - ANSWER-% change in demand ÷ % change in income.
Capital Goods - ANSWER-Goods used to make consumer goods and services.
Ceteris Paribus - ANSWER-All other factors remain the same.
Choice Architecture - ANSWER-Uses nudge theory to encourage certain behaviour. E.g. Smart building
designs encourage people to take the stairs.
Command Economy - ANSWER-Resources are allocated by the governemt.
Comparative Advantage - ANSWER-Gains you get from specialising in on product.
Compliments - ANSWER-Two goods that, if the price of one increases the demand for the other
decreases.
Consumer Goods - ANSWER-Goods and services that satisfy our needs.
Consumer Surplus - ANSWER-The differance between the price the consumer would be prepared to pay
and the price they actually pay.
Cross-Price Elasticity of Demand (XED) - ANSWER-A measure of the sensetivity of quantity demanded of
a good or service to a change in the price of another good or service. Regards compliments and
substitutes.
Demand - ANSWER-The relationship between the price of a product and the quantity people want to
buy.
Demerit Goods - ANSWER-Goods that are considered socially undesirable and are over consumed within
society. E.g. Cigarettes.
Direct Tax - ANSWER-Tax on an individual or organisation.
Division of Labour - ANSWER-Specialised use of workers within an organisation.
, Edexcel A-Level Economics Theme 1
With Complete Solutions Latest Update
Economic Problem - ANSWER-Making choices on how to allocate scarce resources to best meet our
needs and wants.
Economies of Scale - ANSWER-Buying in bulk and getting goods with deals lowering the unit cost.
Effective Demand - ANSWER-Consumer demand is backed up with the ability to purchase.
Elastic - ANSWER-The responsiveness of demand/supply is more than proportionate to a change in
price.
Elasticity - ANSWER-The responsiveness of one variable to another.
Equillibrium - ANSWER-The interaction of supply and demand. The point where price and quantity
create neither excess supply or excess demand.
External Costs - ANSWER-Those experianced by third parties.
Factors of Production - ANSWER-1. Land
2. Labour
3. Capital
4. Enterprise
Framing - ANSWER-By framing something in a differant way, you create a differant response. E.g. Low-
Fat. Its actually lower fat.
Free Market Economy - ANSWER-There is no governmen intervention at all.
Free-Rider Principle - ANSWER-Some can benefit from a good or service without paying for it.
GDP - ANSWER-Gross Domestic Product. The output of goods and services.
Geographical Mobility - ANSWER-The willingness of worker to mive location.
Government Failure - ANSWER-Occurs when there is no intervention in markets and resources are mis-
allocated.
Habitual Behaviour - ANSWER-Defult behaviour and repeat choices made by consumers. Government
uses this to its advantage. E.g. Everyone is an organ doner, you can only opt out instead of opting in.
Herd Behaviour - ANSWER-Making decisions based on what other people do. E.g Binge drinking on
freshers week.
Heuristics - ANSWER-Best described as rules of thumb for decision making. Helps people make quick,
satisfactory, but not perfect, choices.
Imperfect Information - ANSWER-Correct information on what to produce is not known leading to over
or under production.
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