Edexcel A Level Microeconomics
FINAL EXAM PREP 2025/2026
COMPLETE QUESTIONS WITH
CORRECT DETAILED ANSWERS ||
100% GUARANTEED PASS
<BRAND NEW VERSION>
Advantages of CPEs - ANSWER Lack of competition -> lack of
waste -> efficiency
Equality -> fairness
Certainty -> stability
Large social safety net -> low level of unemployment, most
vulnerable protected
Potential to mobilize resources quickly and efficiently
Ability to override individual self-interest to achieve higher
societal goals
Disadvantages of CPEs - ANSWER Insufficient accuracy when
detecting customer preferences -> allocative and pareto
inefficiency
Small range of choices
Low degree of freedom of choice
Lack of coordination between sectors -> allocative inefficiency
,Lack of incentives -> low labour productivity -> pareto
inefficiency
Interdependence of sectors -> complications in planning
Centralisation of power -> corruption
Distribution of resources -> operational costs
Small range of choices
Low degree of freedom of choice
Conditions of demand - ANSWER ∝ ability: income
∝ willingness: taste
∝ population
∝ P(substitute goods)
∝ 1/P(complementary goods)
Veblen good (def.) - ANSWER Good for which quantity
demanded increases as price increases
PED > 0
Giffen good (def.) - ANSWER Good for which higher price
causes an increase in demand
Income effect > substitution effect
Law of diminishing marginal returns - ANSWER When
increasing quantity of variable factor is applied to given quantity
of fixed factor -> marginal, average and total returns decrease
Types of demand - ANSWER Latent
,Effective
Competitive
Joint
Derived
Composite
Latent demand (def.) - ANSWER There is willingness to
purchase good or service, but consumer lacks purchasing power
to be able to afford product
Effective demand (def.) - ANSWER Quantity of good or
service that consumers are willing and this willingness is backed
up by ability to buy at given price in given time period
Competitive demand (def.) - ANSWER When demand for one
good increases or decreases, demand for another good does
opposite
Joint demand (def.) - ANSWER When demand for one good
increases or decreases, demand for another good follows
Derived demand (def.) - ANSWER Product is demanded only
because of demand for final product it contributes to
Composite demand (def.) - ANSWER When good is demanded
for different purposes. Change in demand for one purpose
affects others
Factors influencing demand for labour - ANSWER Demand for
final product - if rise in output > increase in productivity
Relative productivity of labour to capital - substitution effect
UK raises NMW from £7.50 to £7.83
, £3,000 subsidy for hiring unemployed 18-24 y.o. = half UK's
youth minimum wage
Factors influencing supply of labour - ANSWER Cost of living
Cost of gaining skills
UK uni fees capped at £9,250 per year
Number of workers
UK raises state pension age from 67 to 68
Market failures in labour markets - ANSWER Geographical
immobility - inability of labour to move from one location to
another
Occupational immobility - inability of labour to move form one
industry to another
Employer monopsony -> wage-setting power -> wage lower
than equilibrium
10% decline in real wages of NHS worker since start of
recession
Solutions to market failures in labour market - ANSWER
Education and training
Housing market reform
Wage-setting
UK raises NMW from £7.50 to £7.83
Evaluate solutions to market failures in labour market -
ANSWER If increases elasticity of S(labour) -> lower wages
If D(labour) if elastic -> min wage will increase unemployment
FINAL EXAM PREP 2025/2026
COMPLETE QUESTIONS WITH
CORRECT DETAILED ANSWERS ||
100% GUARANTEED PASS
<BRAND NEW VERSION>
Advantages of CPEs - ANSWER Lack of competition -> lack of
waste -> efficiency
Equality -> fairness
Certainty -> stability
Large social safety net -> low level of unemployment, most
vulnerable protected
Potential to mobilize resources quickly and efficiently
Ability to override individual self-interest to achieve higher
societal goals
Disadvantages of CPEs - ANSWER Insufficient accuracy when
detecting customer preferences -> allocative and pareto
inefficiency
Small range of choices
Low degree of freedom of choice
Lack of coordination between sectors -> allocative inefficiency
,Lack of incentives -> low labour productivity -> pareto
inefficiency
Interdependence of sectors -> complications in planning
Centralisation of power -> corruption
Distribution of resources -> operational costs
Small range of choices
Low degree of freedom of choice
Conditions of demand - ANSWER ∝ ability: income
∝ willingness: taste
∝ population
∝ P(substitute goods)
∝ 1/P(complementary goods)
Veblen good (def.) - ANSWER Good for which quantity
demanded increases as price increases
PED > 0
Giffen good (def.) - ANSWER Good for which higher price
causes an increase in demand
Income effect > substitution effect
Law of diminishing marginal returns - ANSWER When
increasing quantity of variable factor is applied to given quantity
of fixed factor -> marginal, average and total returns decrease
Types of demand - ANSWER Latent
,Effective
Competitive
Joint
Derived
Composite
Latent demand (def.) - ANSWER There is willingness to
purchase good or service, but consumer lacks purchasing power
to be able to afford product
Effective demand (def.) - ANSWER Quantity of good or
service that consumers are willing and this willingness is backed
up by ability to buy at given price in given time period
Competitive demand (def.) - ANSWER When demand for one
good increases or decreases, demand for another good does
opposite
Joint demand (def.) - ANSWER When demand for one good
increases or decreases, demand for another good follows
Derived demand (def.) - ANSWER Product is demanded only
because of demand for final product it contributes to
Composite demand (def.) - ANSWER When good is demanded
for different purposes. Change in demand for one purpose
affects others
Factors influencing demand for labour - ANSWER Demand for
final product - if rise in output > increase in productivity
Relative productivity of labour to capital - substitution effect
UK raises NMW from £7.50 to £7.83
, £3,000 subsidy for hiring unemployed 18-24 y.o. = half UK's
youth minimum wage
Factors influencing supply of labour - ANSWER Cost of living
Cost of gaining skills
UK uni fees capped at £9,250 per year
Number of workers
UK raises state pension age from 67 to 68
Market failures in labour markets - ANSWER Geographical
immobility - inability of labour to move from one location to
another
Occupational immobility - inability of labour to move form one
industry to another
Employer monopsony -> wage-setting power -> wage lower
than equilibrium
10% decline in real wages of NHS worker since start of
recession
Solutions to market failures in labour market - ANSWER
Education and training
Housing market reform
Wage-setting
UK raises NMW from £7.50 to £7.83
Evaluate solutions to market failures in labour market -
ANSWER If increases elasticity of S(labour) -> lower wages
If D(labour) if elastic -> min wage will increase unemployment
