Pearson edexcel a level 3 gce (9ec0 03) economics a advanced paper micro economics & macro economics question paper + mark scheme may 2024

Edexcel Economics A level Paper 3
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1. Demand: The quantity of a good/service that consumers are willing and able to
buy at a given price in a given time period.
2. Factors shifting demand curve: P opulation
A dvertisement
S ubstitutes
I ncome
F ashion/trends
I nterest rates
C omplements
3. PED: How responsive QD is to a change in price.

% change in QD / % change in price.
4. % change calculation: change/original * 100

change = new - original
5. PED values + meanings: = 0: perfectly inelastic
= 1: unit elastic
< 1: inelastic demand
> 1: elastic demand
= infinity: perfectly elastic
6. Factors of PED + explain: S ubstitutes (more substitutes = more elastic)
P ercentage of income (higher % of income = elastic)
L uxury/necessity (luxury = elastic, necessity = inelastic)
A ddictive (addictive = inelastic)
T ime period (LR = elastic)
7. PED and TR relation: PED = elastic:
- if price increases, TR decreases.
- if price decreases, TR increases.

PED = inelastic:
- if price increases, TR increases.
- if price decreases, TR decreases.
8. XED: Measures the responsiveness of a change in quantity demand of good A to
a change in price of good B.

% change in QD of A / % change in price of B.
9. XED = +: Goods A and B are substitutes:
> 1: elastic (close substitutes)
<1: inelastic (weak substitutes)


, Edexcel Economics A level Paper 3
Study online at https://quizlet.com/_bow6xl
10. XED = -: Goods A and B are complements:
> 1: elastic (close complements)
< 1: inelastic (weak complements)
11. XED = 0: Unrelated goods.

Any change in the price of one of the goods will lead to no change in the quantity
demanded of the other good.
12. YED: Measures the responsiveness of quantity demanded to a change in in-
come.

% change in QD / % change in Y (income).
13. YED = +: Normal good: QD increases as income increases.
> 1: elastic (luxury)
< 1: inelastic (necessity)
14. YED = -: Inferior good: QD decreases as income increases.
e.g: bus tickets, train tickets...
15. TR =: P x Q
16. Profit =: TR - TC
17. Elasticity of demand + indirect tax: Demand = elastic:
Indirect tax = effective.
Demand will be very responsive (large decrease).

Demand = inelastic
Indirect tax = less effective.
Demand won't be very responsive (slight decrease).
e.g: tax on cigs (addictive = inelastic).
18. Elasticity of demand + subsidies: Demand = elastic:
Subsidies = effective.
Large increase in demand.

Demand = inelastic:
Subsidies = less effective.
Small increase in demand.
19. Explain how businesses use PED: - To maximise TR.
- Employment.
- Stocks.
- Output.
20. Explain how businesses use YED: - Pricing decisions.
- Employment.


, Edexcel Economics A level Paper 3
Study online at https://quizlet.com/_bow6xl
- Stocks.
- Output.
21. Explain how businesses use XED: - Pricing decisions.
- Non-price competition.
- Employment.
- Stocks.
- Output.
22. Drawbacks of using demand elasticities: - Estimation.
- PED varies along the demand curve.
- Uncertainty with market conditions.
23. Elasticity along the demand curve: - Midpoint of a linear demand curve =
unitary = 1
- Above the midpoint demand = elastic = >1
- Below the midpoint demand = inelastic = <1term-22
24. Externality: Indirect cost/benefit to an uninvolved third party that arises as an
effect of another party's activity.
25. Social cost =: Private cost + external cost.
26. Social benefit =: Private benefit + external benefit.
27. Social optimum: MSB = MSC
28. Market failure: When the free market fails to allocate scarce resources to the
social optimum level of output.
29. Positive production externality: Underproduced.

Examples: work training, R+D.


30. Negative production externality: Overproduced.

Examples: pollution, deforestation, resource degradation, farting.

31. Positive consumption externality: Underconsumed.

Examples: merit goods (education, healthcare, fruits, veg).