EDEXCEL GENERAL CERTIFICATE
OF EDUCATION (GCE)
ADVANCED LEVEL (A-LEVEL) ECONOMICS – 2026
EXAMINATION SERIES
Advanced Economic Analysis, Market Structures,
and Macroeconomic Policy
SPRING SEMESTER EXAM 2026
Income Elasticity of Demand (YED)
The responsiveness of demand to changes in income.
%∆QD / %∆Y × 100
Negative - Inferior Good (Y increases, QD decreases)
Positive - Normal Good (Y increases, QD increases).
Negative Income Elasticity of Demand
Inferior Good (As income increases, QD decreases)
Positive Income Elasticity of Demand
Normal Good (As income increases, QD increases)
1|Page
,Cross Price Elasticity of Demand (XED)
The responsiveness of demand for one good to changes in the price of a related good. (Either
substitutes or complements).
% ∆ inQD of Good A/ % ∆ in Price of Good B × 100
Negative Value - Complements (The 2 goods are in Joint Demand; as the Price of Good A
increases the Demand of Good B decreases).
Positive Value - Substitutes (The 2 goods are in Competitive Demand; as the Price of Good A
increases, the Demand of Good B increases.)
Negative Cross Price Elasticity of Demand
Complements (As the Price of one good increases, the Demand for the second good decreases)
The 2 goods are in Joint Demand.
Positive Cross Price Elasticity of Demand
Substitutes (As the Price of one good increases, the Demand for the second good increases)
The 2 goods are in Competitive Demand.
Supply
The quantity of a good or service that firms are willing to sell at a given price over a given period
of time.
2|Page
,Supply Curve
Shows the quantity of a good or service that firms are willing to sell to a market over a range of
different price levels in a given period of time.
An upward sloping curve - Price and Supply have a direct relationship.
Price Elasticity of Supply
The responsiveness of supply to changes in price.
Pes = %∆QS / %∆P
Equilibrium Price
The price at which the Quantity Demanded and Quantity Supplied are equal, ceteris paribis.
"Market Clearing Price"
Excess Supply
Where the QS exceeds the QD for a good at the current market price.
QS > QD
Excess Demand
When the QD exceeds the QS for a good at the current market price.
QD > QS
3|Page
, Adam Smith's Invisible Hand
A hidden hand of the market operating in a competitive market through the pursuit of self-
interest allocated resources in society's best interest.
Price Mechanism
The use of market forces to allocate resources in order to solve the economic problem of what,
how, and for whom to produce.
The interaction of demand and supply to determine the market clearing price.
Consumer Surplus
The difference between how much buyers are prepared to pay for a good and what they
actually pay.
It is represented by the area under the demand curve above the ruling market price.
Producer Surplus
The difference between the market price which firms receive and the price at which they are
prepared to supply.
It is represented by the area below the ruling market price and above the supply curve.
Tax Incidence when Demand is Inelastic
Consumer Tax Burden > Producer's Tax Burden
4|Page
OF EDUCATION (GCE)
ADVANCED LEVEL (A-LEVEL) ECONOMICS – 2026
EXAMINATION SERIES
Advanced Economic Analysis, Market Structures,
and Macroeconomic Policy
SPRING SEMESTER EXAM 2026
Income Elasticity of Demand (YED)
The responsiveness of demand to changes in income.
%∆QD / %∆Y × 100
Negative - Inferior Good (Y increases, QD decreases)
Positive - Normal Good (Y increases, QD increases).
Negative Income Elasticity of Demand
Inferior Good (As income increases, QD decreases)
Positive Income Elasticity of Demand
Normal Good (As income increases, QD increases)
1|Page
,Cross Price Elasticity of Demand (XED)
The responsiveness of demand for one good to changes in the price of a related good. (Either
substitutes or complements).
% ∆ inQD of Good A/ % ∆ in Price of Good B × 100
Negative Value - Complements (The 2 goods are in Joint Demand; as the Price of Good A
increases the Demand of Good B decreases).
Positive Value - Substitutes (The 2 goods are in Competitive Demand; as the Price of Good A
increases, the Demand of Good B increases.)
Negative Cross Price Elasticity of Demand
Complements (As the Price of one good increases, the Demand for the second good decreases)
The 2 goods are in Joint Demand.
Positive Cross Price Elasticity of Demand
Substitutes (As the Price of one good increases, the Demand for the second good increases)
The 2 goods are in Competitive Demand.
Supply
The quantity of a good or service that firms are willing to sell at a given price over a given period
of time.
2|Page
,Supply Curve
Shows the quantity of a good or service that firms are willing to sell to a market over a range of
different price levels in a given period of time.
An upward sloping curve - Price and Supply have a direct relationship.
Price Elasticity of Supply
The responsiveness of supply to changes in price.
Pes = %∆QS / %∆P
Equilibrium Price
The price at which the Quantity Demanded and Quantity Supplied are equal, ceteris paribis.
"Market Clearing Price"
Excess Supply
Where the QS exceeds the QD for a good at the current market price.
QS > QD
Excess Demand
When the QD exceeds the QS for a good at the current market price.
QD > QS
3|Page
, Adam Smith's Invisible Hand
A hidden hand of the market operating in a competitive market through the pursuit of self-
interest allocated resources in society's best interest.
Price Mechanism
The use of market forces to allocate resources in order to solve the economic problem of what,
how, and for whom to produce.
The interaction of demand and supply to determine the market clearing price.
Consumer Surplus
The difference between how much buyers are prepared to pay for a good and what they
actually pay.
It is represented by the area under the demand curve above the ruling market price.
Producer Surplus
The difference between the market price which firms receive and the price at which they are
prepared to supply.
It is represented by the area below the ruling market price and above the supply curve.
Tax Incidence when Demand is Inelastic
Consumer Tax Burden > Producer's Tax Burden
4|Page
