Edexcel A-Level Economics Complete Questions
And 100% Verified Answers
Absolute advantage
When a country's output of a product per unit of input is greater than that of any
other country.
Absolute poverty
When a person does not have the income or wealth to fulfil their basic needs.
Aggregate Demand (AD)
The total demand/spending in an economy at a given price level over a given period
of time. Made up of consumption, investment, government spending and net external
demand.
Aggregate Supply (AS)
The total amount of goods and services that can be supplied in an economy at a
given price level over a given period of time.
Aid
The transfer of resources from one country to another.
Allocative efficiency
Where the price of a good is equal to the price consumers are willing to pay. This
occurs when all resources are allocated efficiently.
Asymmetric information
Where buyers have more information than sellers in a market, or vice versa.
Automatic stabilisers
Parts of fiscal policy that automatically react to changes in the economic cycle.
Average Cost (AC)
The cost of production per unit of output.
Average Revenue (AR)
The revenue per unit sold.
Backward vertical integration
Where a firm merges with or takes over a firm further back in the production process.
Balance of payments
A record of the international transactions of an economy.
Bank rate
The official rate of interest set by the central bank (e.g. by the Monetary Policy
Committee of the Bank of England)
Barriers to entry
Potential difficulties that make it hard for firms to enter a market.
Barriers to exit
Potential difficulties that make it hard for firms to leave a market.
Black market
Economic activity that occurs without taxation and government intervention.
Budget deficit
,When government spending exceeds tax revenues.
Budget surplus
When tax revenues exceed government spending.
Capital account of the balance of payments
A part of the balance of payments that shows transfers of non-monetary and fixed
assets into and out of the economy.
Cartel
A group of products who collude to limit output in order to keep prices high.
Central bank
The institution responsible for issuing banknotes in an economy, acting as a lender
of last resort, and implementing monetary policy.
Ceteris paribus
All other things remaining equal
Circular flow of income
The flow of national output, income and expenditure between firms and households.
Command economy
An economy where only the government determines the allocation of resources.
Comparative advantage
When the opportunity cost of producing a good or service is lower than that of any
other country.
Competition policy
Government policy aimed at reducing monopoly power in order to increase efficiency
and to ensure fairness for consumers.
Concentration ratio
A measure of the dominance of firms in a market.
Conglomerate integration
Where a firm merges with or takes over a firm in a completely different market.
Consumer surplus
The difference between the price a consumer pays and the price they were willing to
pay.
Consumption
The purchase of goods and services.
Contestability
The degree to which new entrants find it easy to enter the market.
Cost-push inflation
Inflation caused by rising costs of production.
Cross elasticity of demand (XED)
A measure of the responsiveness of demand of one good/service to a change in
price of another good/service.
Current account of the balance of payments
A part of the balance of payments that consists of: trade in goods, trade in services,
primary income and secondary income.
Cyclical unemployment
Unemployment caused by a lack of demand in the economy.
,Deflation
The sustained fall in the average price of goods and services in an economy over a
period of time.
Demand-pull inflation
Inflation caused by increased demand in the economy.
Demand-side policy
Government policy that aims to alter aggregate demand in the economy.
Demerger
Where a firm sells of a part/parts of its business to create separate firms.
Deregulation
Removing government legislation that could restrict competition.
Derived demand
The demand for a good or service due to its use in making another good or service.
Developed countries
Relatively rich, industrialised countries with a high GDP per capita.
Developing countries
Relatively poor countries that tend to rely on labour-intensive industries, with a low
GDP per capita.
Diseconomies of scale
Where average cost rises as output rises.
Disinflation
A fall in the rate of inflation.
Disposable income
Income available for households to spend after their tax obligations are fulfilled.
Dividend
A share in a firm's profits paid to shareholders.
Divorce of ownership from control
When the owner of a firm ceases to control its day-to-day operations, which can lead
to the principal-agent problem.
Dynamic efficiency
Where firms improve efficiency in the long run by investing in R&D of products, or
investing in the production process.
Economic cycle
The fluctuation in actual growth rates over a period of time.
Economic development
An assessment of the standards of living and overall welfare of a country's
population.
Economic growth
An increase in an economy's productive potential.
Economic integration
The process by which the economies of different countries become more closely
linked.
Economically active population
The people in an economy who are old enough to and capable of working.
, Economies of scale
Where average cost falls as output rises.
Emerging countries
Countries that are further along the development process than most developing
countries, but are not yet fully developed.
Equilibrium
Where supply equals demand in a market or economy.
Equity
Fairness
Exchange rate
The price of one currency expressed in terms of another.
Externalities
The costs and benefits of the production and consumption of a good or service that
are felt by third parties.
Factors of production
The four inputs used to produce what people want: land, labour, capital and
enterprise.
Financial account of the balance of payments
A part of the balance of payments that shows the movements of financial assets.
Financial sector
Firms that provide financial services.
Fiscal policy
Government policy that determines the levels of government spending and taxation.
Fixed costs
Costs that do not vary with output in the short run.
Foreign Direct Investment (FDI)
When a firm in one country makes an investment in a different country.
Forward vertical integration
Where a firm merges with or takes over a firm further forward in the production
process.
Free market
A market where there is no government intervention.
Free rider problem
Once a public good is provided, there is no way to stop people who haven't paid for
the good from benefiting from it.
Free trade
International trade with no restrictions.
Frictional unemployment
The unemployment experienced by people who are between jobs.
Full employment
Where everyone who is of working age and who wants a job can get one at current
wage rates.
Globalisation
The increasing integration of economies internationally.
And 100% Verified Answers
Absolute advantage
When a country's output of a product per unit of input is greater than that of any
other country.
Absolute poverty
When a person does not have the income or wealth to fulfil their basic needs.
Aggregate Demand (AD)
The total demand/spending in an economy at a given price level over a given period
of time. Made up of consumption, investment, government spending and net external
demand.
Aggregate Supply (AS)
The total amount of goods and services that can be supplied in an economy at a
given price level over a given period of time.
Aid
The transfer of resources from one country to another.
Allocative efficiency
Where the price of a good is equal to the price consumers are willing to pay. This
occurs when all resources are allocated efficiently.
Asymmetric information
Where buyers have more information than sellers in a market, or vice versa.
Automatic stabilisers
Parts of fiscal policy that automatically react to changes in the economic cycle.
Average Cost (AC)
The cost of production per unit of output.
Average Revenue (AR)
The revenue per unit sold.
Backward vertical integration
Where a firm merges with or takes over a firm further back in the production process.
Balance of payments
A record of the international transactions of an economy.
Bank rate
The official rate of interest set by the central bank (e.g. by the Monetary Policy
Committee of the Bank of England)
Barriers to entry
Potential difficulties that make it hard for firms to enter a market.
Barriers to exit
Potential difficulties that make it hard for firms to leave a market.
Black market
Economic activity that occurs without taxation and government intervention.
Budget deficit
,When government spending exceeds tax revenues.
Budget surplus
When tax revenues exceed government spending.
Capital account of the balance of payments
A part of the balance of payments that shows transfers of non-monetary and fixed
assets into and out of the economy.
Cartel
A group of products who collude to limit output in order to keep prices high.
Central bank
The institution responsible for issuing banknotes in an economy, acting as a lender
of last resort, and implementing monetary policy.
Ceteris paribus
All other things remaining equal
Circular flow of income
The flow of national output, income and expenditure between firms and households.
Command economy
An economy where only the government determines the allocation of resources.
Comparative advantage
When the opportunity cost of producing a good or service is lower than that of any
other country.
Competition policy
Government policy aimed at reducing monopoly power in order to increase efficiency
and to ensure fairness for consumers.
Concentration ratio
A measure of the dominance of firms in a market.
Conglomerate integration
Where a firm merges with or takes over a firm in a completely different market.
Consumer surplus
The difference between the price a consumer pays and the price they were willing to
pay.
Consumption
The purchase of goods and services.
Contestability
The degree to which new entrants find it easy to enter the market.
Cost-push inflation
Inflation caused by rising costs of production.
Cross elasticity of demand (XED)
A measure of the responsiveness of demand of one good/service to a change in
price of another good/service.
Current account of the balance of payments
A part of the balance of payments that consists of: trade in goods, trade in services,
primary income and secondary income.
Cyclical unemployment
Unemployment caused by a lack of demand in the economy.
,Deflation
The sustained fall in the average price of goods and services in an economy over a
period of time.
Demand-pull inflation
Inflation caused by increased demand in the economy.
Demand-side policy
Government policy that aims to alter aggregate demand in the economy.
Demerger
Where a firm sells of a part/parts of its business to create separate firms.
Deregulation
Removing government legislation that could restrict competition.
Derived demand
The demand for a good or service due to its use in making another good or service.
Developed countries
Relatively rich, industrialised countries with a high GDP per capita.
Developing countries
Relatively poor countries that tend to rely on labour-intensive industries, with a low
GDP per capita.
Diseconomies of scale
Where average cost rises as output rises.
Disinflation
A fall in the rate of inflation.
Disposable income
Income available for households to spend after their tax obligations are fulfilled.
Dividend
A share in a firm's profits paid to shareholders.
Divorce of ownership from control
When the owner of a firm ceases to control its day-to-day operations, which can lead
to the principal-agent problem.
Dynamic efficiency
Where firms improve efficiency in the long run by investing in R&D of products, or
investing in the production process.
Economic cycle
The fluctuation in actual growth rates over a period of time.
Economic development
An assessment of the standards of living and overall welfare of a country's
population.
Economic growth
An increase in an economy's productive potential.
Economic integration
The process by which the economies of different countries become more closely
linked.
Economically active population
The people in an economy who are old enough to and capable of working.
, Economies of scale
Where average cost falls as output rises.
Emerging countries
Countries that are further along the development process than most developing
countries, but are not yet fully developed.
Equilibrium
Where supply equals demand in a market or economy.
Equity
Fairness
Exchange rate
The price of one currency expressed in terms of another.
Externalities
The costs and benefits of the production and consumption of a good or service that
are felt by third parties.
Factors of production
The four inputs used to produce what people want: land, labour, capital and
enterprise.
Financial account of the balance of payments
A part of the balance of payments that shows the movements of financial assets.
Financial sector
Firms that provide financial services.
Fiscal policy
Government policy that determines the levels of government spending and taxation.
Fixed costs
Costs that do not vary with output in the short run.
Foreign Direct Investment (FDI)
When a firm in one country makes an investment in a different country.
Forward vertical integration
Where a firm merges with or takes over a firm further forward in the production
process.
Free market
A market where there is no government intervention.
Free rider problem
Once a public good is provided, there is no way to stop people who haven't paid for
the good from benefiting from it.
Free trade
International trade with no restrictions.
Frictional unemployment
The unemployment experienced by people who are between jobs.
Full employment
Where everyone who is of working age and who wants a job can get one at current
wage rates.
Globalisation
The increasing integration of economies internationally.
