Edexcel 2025 A-Level Economics A Paper
Absolute advantage - answers When a country's output of a product per unit of input is
greater than that of any other country.
Absolute poverty - answers When a person does not have the income or wealth to fulfil
their basic needs.
Aggregate Demand (AD) - answers 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) - answers 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 - answers The transfer of resources from one country to another.
Allocative efficiency - answers 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 - answers Where buyers have more information than sellers in
a market, or vice versa.
Automatic stabilisers - answers Parts of fiscal policy that automatically react to changes
in the economic cycle.
Average Cost (AC) - answers The cost of production per unit of output.
Average Revenue (AR) - answers The revenue per unit sold.
Backward vertical integration - answers Where a firm merges with or takes over a firm
further back in the production process.
Balance of payments - answers A record of the international transactions of an
economy.
Bank rate - answers 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 - answers Potential difficulties that make it hard for firms to enter a
market.
Barriers to exit - answers Potential difficulties that make it hard for firms to leave a
market.
,Black market - answers Economic activity that occurs without taxation and government
intervention.
Budget deficit - answers When government spending exceeds tax revenues.
Budget surplus - answers When tax revenues exceed government spending.
Capital account of the balance of payments - answers A part of the balance of
payments that shows transfers of non-monetary and fixed assets into and out of the
economy.
Cartel - answers A group of products who collude to limit output in order to keep prices
high.
Central bank - answers The institution responsible for issuing banknotes in an economy,
acting as a lender of last resort, and implementing monetary policy.
Ceteris paribus - answers All other things remaining equal
Circular flow of income - answers The flow of national output, income and expenditure
between firms and households.
Command economy - answers An economy where only the government determines the
allocation of resources.
Comparative advantage - answers When the opportunity cost of producing a good or
service is lower than that of any other country.
Competition policy - answers Government policy aimed at reducing monopoly power in
order to increase efficiency and to ensure fairness for consumers.
Concentration ratio - answers A measure of the dominance of firms in a market.
Conglomerate integration - answers Where a firm merges with or takes over a firm in a
completely different market.
Consumer surplus - answers The difference between the price a consumer pays and
the price they were willing to pay.
Consumption - answers The purchase of goods and services.
Contestability - answers The degree to which new entrants find it easy to enter the
market.
Cost-push inflation - answers Inflation caused by rising costs of production.
,Cross elasticity of demand (XED) - answers 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 - answers A part of the balance of
payments that consists of: trade in goods, trade in services, primary income and
secondary income.
Cyclical unemployment - answers Unemployment caused by a lack of demand in the
economy.
Deflation - answers The sustained fall in the average price of goods and services in an
economy over a period of time.
Demand-pull inflation - answers Inflation caused by increased demand in the economy.
Demand-side policy - answers Government policy that aims to alter aggregate demand
in the economy.
Demerger - answers Where a firm sells of a part/parts of its business to create separate
firms.
Deregulation - answers Removing government legislation that could restrict competition.
Derived demand - answers The demand for a good or service due to its use in making
another good or service.
Developed countries - answers Relatively rich, industrialised countries with a high GDP
per capita.
Developing countries - answers Relatively poor countries that tend to rely on labour-
intensive industries, with a low GDP per capita.
Diseconomies of scale - answers Where average cost rises as output rises.
Disinflation - answers A fall in the rate of inflation.
Disposable income - answers Income available for households to spend after their tax
obligations are fulfilled.
Dividend - answers A share in a firm's profits paid to shareholders.
Divorce of ownership from control - answers When the owner of a firm ceases to control
its day-to-day operations, which can lead to the principal-agent problem.
Dynamic efficiency - answers Where firms improve efficiency in the long run by
investing in R&D of products, or investing in the production process.
, Economic cycle - answers The fluctuation in actual growth rates over a period of time.
Economic development - answers An assessment of the standards of living and overall
welfare of a country's population.
Economic growth - answers An increase in an economy's productive potential.
Economic integration - answers The process by which the economies of different
countries become more closely linked.
Economically active population - answers The people in an economy who are old
enough to and capable of working.
Economies of scale - answers Where average cost falls as output rises.
Emerging countries - answers Countries that are further along the development process
than most developing countries, but are not yet fully developed.
Equilibrium - answers Where supply equals demand in a market or economy.
Equity - answers Fairness
Exchange rate - answers The price of one currency expressed in terms of another.
Externalities - answers The costs and benefits of the production and consumption of a
good or service that are felt by third parties.
Factors of production - answers The four inputs used to produce what people want:
land, labour, capital and enterprise.
Financial account of the balance of payments - answers A part of the balance of
payments that shows the movements of financial assets.
Financial sector - answers Firms that provide financial services.
Fiscal policy - answers Government policy that determines the levels of government
spending and taxation.
Fixed costs - answers Costs that do not vary with output in the short run.
Foreign Direct Investment (FDI) - answers When a firm in one country makes an
investment in a different country.
Forward vertical integration - answers Where a firm merges with or takes over a firm
further forward in the production process.
Absolute advantage - answers When a country's output of a product per unit of input is
greater than that of any other country.
Absolute poverty - answers When a person does not have the income or wealth to fulfil
their basic needs.
Aggregate Demand (AD) - answers 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) - answers 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 - answers The transfer of resources from one country to another.
Allocative efficiency - answers 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 - answers Where buyers have more information than sellers in
a market, or vice versa.
Automatic stabilisers - answers Parts of fiscal policy that automatically react to changes
in the economic cycle.
Average Cost (AC) - answers The cost of production per unit of output.
Average Revenue (AR) - answers The revenue per unit sold.
Backward vertical integration - answers Where a firm merges with or takes over a firm
further back in the production process.
Balance of payments - answers A record of the international transactions of an
economy.
Bank rate - answers 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 - answers Potential difficulties that make it hard for firms to enter a
market.
Barriers to exit - answers Potential difficulties that make it hard for firms to leave a
market.
,Black market - answers Economic activity that occurs without taxation and government
intervention.
Budget deficit - answers When government spending exceeds tax revenues.
Budget surplus - answers When tax revenues exceed government spending.
Capital account of the balance of payments - answers A part of the balance of
payments that shows transfers of non-monetary and fixed assets into and out of the
economy.
Cartel - answers A group of products who collude to limit output in order to keep prices
high.
Central bank - answers The institution responsible for issuing banknotes in an economy,
acting as a lender of last resort, and implementing monetary policy.
Ceteris paribus - answers All other things remaining equal
Circular flow of income - answers The flow of national output, income and expenditure
between firms and households.
Command economy - answers An economy where only the government determines the
allocation of resources.
Comparative advantage - answers When the opportunity cost of producing a good or
service is lower than that of any other country.
Competition policy - answers Government policy aimed at reducing monopoly power in
order to increase efficiency and to ensure fairness for consumers.
Concentration ratio - answers A measure of the dominance of firms in a market.
Conglomerate integration - answers Where a firm merges with or takes over a firm in a
completely different market.
Consumer surplus - answers The difference between the price a consumer pays and
the price they were willing to pay.
Consumption - answers The purchase of goods and services.
Contestability - answers The degree to which new entrants find it easy to enter the
market.
Cost-push inflation - answers Inflation caused by rising costs of production.
,Cross elasticity of demand (XED) - answers 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 - answers A part of the balance of
payments that consists of: trade in goods, trade in services, primary income and
secondary income.
Cyclical unemployment - answers Unemployment caused by a lack of demand in the
economy.
Deflation - answers The sustained fall in the average price of goods and services in an
economy over a period of time.
Demand-pull inflation - answers Inflation caused by increased demand in the economy.
Demand-side policy - answers Government policy that aims to alter aggregate demand
in the economy.
Demerger - answers Where a firm sells of a part/parts of its business to create separate
firms.
Deregulation - answers Removing government legislation that could restrict competition.
Derived demand - answers The demand for a good or service due to its use in making
another good or service.
Developed countries - answers Relatively rich, industrialised countries with a high GDP
per capita.
Developing countries - answers Relatively poor countries that tend to rely on labour-
intensive industries, with a low GDP per capita.
Diseconomies of scale - answers Where average cost rises as output rises.
Disinflation - answers A fall in the rate of inflation.
Disposable income - answers Income available for households to spend after their tax
obligations are fulfilled.
Dividend - answers A share in a firm's profits paid to shareholders.
Divorce of ownership from control - answers When the owner of a firm ceases to control
its day-to-day operations, which can lead to the principal-agent problem.
Dynamic efficiency - answers Where firms improve efficiency in the long run by
investing in R&D of products, or investing in the production process.
, Economic cycle - answers The fluctuation in actual growth rates over a period of time.
Economic development - answers An assessment of the standards of living and overall
welfare of a country's population.
Economic growth - answers An increase in an economy's productive potential.
Economic integration - answers The process by which the economies of different
countries become more closely linked.
Economically active population - answers The people in an economy who are old
enough to and capable of working.
Economies of scale - answers Where average cost falls as output rises.
Emerging countries - answers Countries that are further along the development process
than most developing countries, but are not yet fully developed.
Equilibrium - answers Where supply equals demand in a market or economy.
Equity - answers Fairness
Exchange rate - answers The price of one currency expressed in terms of another.
Externalities - answers The costs and benefits of the production and consumption of a
good or service that are felt by third parties.
Factors of production - answers The four inputs used to produce what people want:
land, labour, capital and enterprise.
Financial account of the balance of payments - answers A part of the balance of
payments that shows the movements of financial assets.
Financial sector - answers Firms that provide financial services.
Fiscal policy - answers Government policy that determines the levels of government
spending and taxation.
Fixed costs - answers Costs that do not vary with output in the short run.
Foreign Direct Investment (FDI) - answers When a firm in one country makes an
investment in a different country.
Forward vertical integration - answers Where a firm merges with or takes over a firm
further forward in the production process.
