Many people assume that the study of economics is all about money, but it is actually more focussed on the choices that households, firms and governments make. There is significant debate over the motives behind the decision-making process. Are we truly rational creatures, or are we influenced by a broad range of biases?
Essay 1 on the 2022 AQA A level economics paper 1 questioned whether high speed internet connection should be provided, free of charge to all households. Here is a model answer which addresses this question:
The eight richest people on the planet hold as much wealth as the poorest half of the world’s population put together. The richest of these, Jeff Bezos, has a level of wealth that you wouldn’t match if you earned $180,000 every day from when Jesus was born up to the present day.
Aggregate demand is the total demand for all goods and services, made up of four different components:
Economics is traditionally based on the assumption that consumers always act rationally and with total self-interest, sometimes known as 'homo-economicus'. Behavioural economics challenges this assumption in a number of ways:
Monopolistic competition in the short run. Firms are price makers with a downward sloping demand curve. Supernormal profits may be earned at the profit maximising output MC=MR.
With Donald Trump's tariffs headline news, this Plant Money video is a great example of the unintended effects of protectionist policies.
The trade creation and trade diversion diagrams are some of the toughest in macroeconomics but mastering them can be a route to the top mark bands in essay questions about economic integration.
Perfect competition in the short run. Firms are price takers with a horizontal demand curve. Supernormal profits may be earned at the profit maximising output MC=MR
Essay 3 on the 2022 AQA A level economics paper assessed the different policy options to reduce income inequality. Here is an exemplar response:
The focus of the 20 mark question in the 2022 Edexcel AS business paper was a discussion of whether a chocolate manufacturer should expand their distribution channels or implement a competitive pricing strategy. Here is an exemplar response.
In Oligopoly, demand for a firm is price elastic in response to a price rise but price inelastic in response to a price cut. This results in the kinked demand curve and prices remain rigid at this point, even if cost conditions change between MC and MC1.
