EDEXCEL A LEVEL MICROECONOMICS
EXAM QUESTIONS WITH 100%
CORRECT ANSWERS L LATEST
VERSION 2025/2026.
Factors influencing demand for labour - ANS 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 - ANS 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
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,Market failures in labour markets - ANS 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 - ANS 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 - ANS If increases elasticity of S(labour)
-> lower wages
If D(labour) if elastic -> min wage will increase unemployment
Explain wage determination in competitive labour market - ANS Firms are wage takers -> set
W where S = D
S(labour) is perfectly elastic -> AC = MC -> max profits at MRP = MC -> employ Q₁
Positive statement (def.) - ANS Evidence based statement which can be proven true or false
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, Normative statement (def.) - ANS Value judgment which cannot be tested
Scarcity (def.) - ANS Lack of resources to fulfil everyone's wants and needs
Renewable resources (def.) - ANS Resources which can be replenished over time
Non-renewable resources (def.) - ANS Resources which cannot be replenished once they are
used
PPF (def.) - ANS Max amount of two goods that can possibly be produced in economy with
given set of resources, time and technology
Capital goods (def.) - ANS Useful not in themselves but for goods and services they can help
produce in future
Opportunity cost (def.) - ANS Value of next best alternative forgone
Pareto efficiency (def.) - ANS State of allocation of resources in which it is impossible to make
any one party better off without making at least one party worse off
Allocative efficiency (def.) - ANS When value consumers place on good or service (reflected in
price) = cost of resources used up in production
Specialisation (def.) - ANS When worker concentrates on performing specific task or narrow
range of tasks in production process
3 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
EXAM QUESTIONS WITH 100%
CORRECT ANSWERS L LATEST
VERSION 2025/2026.
Factors influencing demand for labour - ANS 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 - ANS 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
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,Market failures in labour markets - ANS 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 - ANS 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 - ANS If increases elasticity of S(labour)
-> lower wages
If D(labour) if elastic -> min wage will increase unemployment
Explain wage determination in competitive labour market - ANS Firms are wage takers -> set
W where S = D
S(labour) is perfectly elastic -> AC = MC -> max profits at MRP = MC -> employ Q₁
Positive statement (def.) - ANS Evidence based statement which can be proven true or false
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, Normative statement (def.) - ANS Value judgment which cannot be tested
Scarcity (def.) - ANS Lack of resources to fulfil everyone's wants and needs
Renewable resources (def.) - ANS Resources which can be replenished over time
Non-renewable resources (def.) - ANS Resources which cannot be replenished once they are
used
PPF (def.) - ANS Max amount of two goods that can possibly be produced in economy with
given set of resources, time and technology
Capital goods (def.) - ANS Useful not in themselves but for goods and services they can help
produce in future
Opportunity cost (def.) - ANS Value of next best alternative forgone
Pareto efficiency (def.) - ANS State of allocation of resources in which it is impossible to make
any one party better off without making at least one party worse off
Allocative efficiency (def.) - ANS When value consumers place on good or service (reflected in
price) = cost of resources used up in production
Specialisation (def.) - ANS When worker concentrates on performing specific task or narrow
range of tasks in production process
3 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
