2020 Edition

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A-LEVEL ECONOMICS

QUESTIONSEdexcel A
 This workbook includes questions from past exam
papers. They cover all 4 themes, and are arranged
according to topic and in order of appearance in the
specification.

A detailed table of contents has been provided to you.

You should attempt each question 2-3x. Repetition is
key to success.

Focus on questions that cover topics you’re weakest

in first. Once you become more confident with these,
move on to attempt the rest of the workbook.

Key Questions to Note:

• Questions marked with an asterisk (*) are examined
regularly and have appear in exams each year.

• Questions marked with two asterisks (**) indicate

questions tested rigourously, sometimes multple
times within the same paper.

• Solutions to these questions can be found within the

community section on the website:
www.excesslearning.com

1
CONTENTS

Theme 1:
Introduction to Markets and Market Failure
1.1 Nature of economics
a. Positive and Normative Statements 8
b. Free market economies, mixed economy and command 8
economy
c. Specialisation and division of labour 9
d. Production possibility frontiers * 10

1.2 How markets work *

a. Demand and Supply ** 13
b. Diminishing Marginal Utility 17
c. Price Elasticity of Demand (PED) 18
d. Cross Price Elasticity of Demand (XED) 22
e. Income Elasticity of Demand (YED) 23
f. Price Elasticity of Supply (PES) 24
g. Price Mechanism 25
h. Consumer Surplus 25
i. Producer Surplus 27
j. Taxes ** 27
k. Subsidies ** 30

1.3 Market failure *

a. Externalities 33
b. Public goods 37
c. Information gaps 38

2
2.6. Macroeconomic Objectives and Policies **
a. Demand policies
• Monetary policy - interest rates, quantitative easing, 89
money supply
• Fiscal policy 91
b. Supply policies 92
• Market policies
• Interventionist policies
c. Policy objectives, conflicts and trade-offs 94

Theme 3:
Business Behaviour & the Labour Market
3.1 Business growth 96
a. Business growth
b. Demergers

3.2 Business objectives * 98

a. Business objectives
• Profit maximisation
• Revenue maximisation
• Sales maximisation
• Satisficing
b. Diagrams and formulae to illustrate the different business
objectives:
• Profit maximisation
• Revenue maximisation
• Sales maximisation

3.3 Revenues, costs and profits

a. Revenue 100
b. Costs 100
c. Economies and diseconomies of scale 101
d. Normal profits, supernormal profits and losses

4
 1.1 Nature of Economics
Positive and Normative Statements
1. (2018 - Paper 1 AS-Level - Q1)

• Statement 1: Cuba has a healthcare system with a patient to

doctor ratio of 155:1.
• Statement 2: Other countries ought to adopt a similar
healthcare system to that which exists in Cuba.

(a) Which one of the following best describes the two statements
above?
(1 mark)

Statement 1 Statement 2
A Normative Normative
B Normative Positive
C Positive Normative
D Positive Positive

(b) Cuba’s population is estimated to be 11 million. With reference

to Statement 1 above, calculate the estimated number of doctors
in Cuba. You are advised to show your working.
(2 marks)

(c) Define the term ‘command economy’.

(1 mark)

Free Market Economies, Mixed Economy and

Command Economy
2. (2019 - Paper 1 A-Level - Q5)

Free market economics is being challenged. The arguments for and

against are being increasingly discussed within many countries.

7
 Cross Price Elasticity of Demand (XED)

18. (2018 - Paper 1 A-Level - Q2b)

Research conducted for HMRC estimated the cross elasticity of

demand for using gaming machines to be 1.28 in response to
changes in the price of national lottery tickets.

(Source: https://www.gov.uk/government/uploads/system/uploads/
attachment_data/file/322845/report313.pdf)

In October 2013 Camelot increased the price of a national lottery

ticket from £1 to £2.

(b) Explain the likely impact of the price increase of national lottery
tickets on thedemand for using gaming machines.
(2 marks)

19a. (2017 - Paper 1 A-Level - Q1b)

Research conducted in New Zealand in 2014 estimated the cross

elasticity of demand for e-cigarettes to be 0.16 in response to
changes in the price of tobacco. This implies that a 5% increase in
the price of tobacco will cause the percentage change in demand
for e-cigarettes to be:
(1 mark)
A -31.25
B -0.16
C 0.8
D 31.25

20. (2019 - Paper 1 AS-Level - Q3)

Amazon Prime, Netflix and NowTV all charge £7.99 per month for
streaming very similar film and television services.

(a) The most likely cross price elasticity of demand for close
substitutes is: (1 mark)
A – 2.1
B – 0.1
C + 0.1
D + 2.1
21
 2.2 and 2.3 Aggregate Demand/
Aggregate Supply
84. (2019 - Paper 2, A-Level - Q2)

The International Monetary Fund has called on the G20 group of

large industrialised countries to boost government spending on
infrastructure.

(Source: https://www.theguardian.com/business/2016/jul/23/
imf-calls-for-more-government-spending-as-rate-cuts-lose-their-impact)

(a) Draw an aggregate demand and aggregate supply diagram to

show the likely impact of an increase in government spending on
infrastructure on a country’s price level and real output.
(4 marks)

(b) Which one of the following would be an example of

government spending on Infrastructure?
(1 mark)
An increase in:
A construction work on new railway lines
B interest payments on the national debt
C salaries for teachers
D unemployment benefit payments

73
 Policy objectives, conflicts and trade-offs
116. (2019 - Paper 2 A-Level - Q6d)

With reference to Extract C, discuss the potential conflicts between

macroeconomic objectives when the central bank attempts to
control inflation. (12 marks)

117. (2019 - Paper 2 AS-Level - Q6f,g)

Evaluate the use of interest rate changes as a means of controlling

UK inflation. (20 marks)

Evaluate the potential conflicts between the objective of economic

growth and two other UK macroeconomic objectives.
(20 marks)

118. (2018 - Paper 2 AS-Level - Q6g)

Evaluate the likely impact of high inflation on the UK government’s

macroeconomic objectives.
(20 marks)
95
 3.2 Business Objectives
Profit maximisation, Revenue maximisation, Sales
Maximisation

122. (2018 - Paper 1 A-Level - Q4)

Emily owns and operates a nail ink salon. The diagram shows
the cost and revenus curves for treatments at her nail ink salon.
Initially, Emily sets her price to maximise profits.

(a) Calculate the change in total supernormal profit if Emily

changes her objective from profit maximisation to revenue
maximisation. You are advised to show your working.
(4 marks)

(b) Emily now decides to change her objective from revenue

maximisation to sales maximisation. This change will lead to:
(1 mark)
A a decrease in the number of customers
B a decrease in the price of treatments
C an increase in productive efficiency
D an increase in the level of profit
99
 (a) Which one of the following is a fixed cost to Starbucks?
(1 mark)
A Coffee
B Milk
C Packaging
D Rent

(b) Explain the difference between fixed costs and variable costs.
(2 marks)

(c) With reference to Figure 1, calculate the profit (in pence) for a
cappuccino drink. You are advised to show your working.
(2 marks)

Economies and Diseconomies of Scale

127. (2019 - Paper 1 A-Level - Q4)

In 2016, the insurance group Esure undertook a demerger with

its GoCompare price comparison website.

(a) The most likely reason for this demerger was to:
(1 mark)
A benefit from external economies of scale
B benefit from internal economies of scale
C focus more on its core business
D increase its market share
102
4.4 The Financial Sector
Role of the financial sector

162. (Specimen - Paper 2 A-Level - Q3)

(a) Explain one role of financial markets. (2 marks)

(b) Explain one reason why the UK central bank used quantitative
easing following the Global Financial Crisis of 2008.
(2 marks)

(c) Which one of the following would be the most likely cause of
market failure in the financial sector?
(1 mark)

A Banks charge higher interest rates on higher risk loans

B Banks do not create any external costs or benefits in
their operations
C Banks know that the government will bear the risk of
customers defaulting on loans
D Banks and their customers have symmetric information

163. (2019 - Paper 2 A-Level - Q6a)

With reference to Extract A, explain the role of forward markets in

currencies. (5 marks)

132
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