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QUESTIONSEdexcel AEdexcel A

A-LEVEL ECONOMICS

2020 Edition

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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

1.1 Nature of economicsa. Positive and Normative Statementsb. Free market economies, mixed economy and command

economyc. Specialisation and division of labourd. Production possibility frontiers *

1.2 How markets work *a. Demand and Supply **b. Diminishing Marginal Utilityc. Price Elasticity of Demand (PED)d. Cross Price Elasticity of Demand (XED)e. Income Elasticity of Demand (YED)f. Price Elasticity of Supply (PES)g. Price Mechanismh. Consumer Surplusi. Producer Surplusj. Taxes **k. Subsidies **

1.3 Market failure *a. Externalitiesb. Public goodsc. Information gaps

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CONTENTS

Theme 1: Introduction to Markets and Market Failure

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910

1317182223242525272730

333738

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2.6. Macroeconomic Objectives and Policies **a. Demand policies

• Monetary policy - interest rates, quantitative easing,money supply

• Fiscal policyb. Supply policies

• Market policies• Interventionist policies

c. Policy objectives, conflicts and trade-offs

Theme 3: Business Behaviour & the Labour Market3.1 Business growth

a. Business growthb. Demergers

3.2 Business objectives *a. Business objectives

• Profit maximisation• Revenue maximisation• Sales maximisation• Satisficing

b. Diagrams and formulae to illustrate the different businessobjectives:• Profit maximisation• Revenue maximisation• Sales maximisation

3.3 Revenues, costs and profitsa. Revenueb. Costsc. Economies and diseconomies of scaled. Normal profits, supernormal profits and losses

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100100101

1.1 Nature of Economics

Positive and Normative Statements

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1. (2018 - Paper 1 AS-Level - Q1)

• Statement 1: Cuba has a healthcare system with a patient todoctor ratio of 155:1.

• Statement 2: Other countries ought to adopt a similarhealthcare system to that which exists in Cuba.

(a) Which one of the following best describes the two statementsabove?

(1 mark)

Statement 1 Statement 2A Normative NormativeB Normative PositiveC Positive NormativeD Positive Positive

(b) Cuba’s population is estimated to be 11 million. With referenceto Statement 1 above, calculate the estimated number of doctorsin 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.

Cross Price Elasticity of Demand (XED)

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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 lotterytickets 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 -31.25B -0.16C 0.8D 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 closesubstitutes is: (1 mark)

A – 2.1B – 0.1C + 0.1D + 2.1

2.2 and 2.3 Aggregate Demand/Aggregate Supply

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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 toshow the likely impact of an increase in government spending oninfrastructure on a country’s price level and real output.

(4 marks)

(b) Which one of the following would be an example ofgovernment spending on Infrastructure?

(1 mark)An increase in:

A construction work on new railway linesB interest payments on the national debtC salaries for teachersD unemployment benefit payments

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Policy objectives, conflicts and trade-offs116. (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)

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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.

3.2 Business Objectives

Profit maximisation, Revenue maximisation, Sales Maximisation

(a) Calculate the change in total supernormal profit if Emilychanges her objective from profit maximisation to revenuemaximisation. You are advised to show your working.

(4 marks)

(b) Emily now decides to change her objective from revenuemaximisation to sales maximisation. This change will lead to:

(1 mark)A a decrease in the number of customersB a decrease in the price of treatmentsC an increase in productive efficiencyD an increase in the level of profit

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(a) Which one of the following is a fixed cost to Starbucks? (1 mark)

A CoffeeB MilkC PackagingD 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 acappuccino 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 scaleB benefit from internal economies of scaleC focus more on its core businessD increase its market share

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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 quantitativeeasing following the Global Financial Crisis of 2008.

(2 marks)

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

(1 mark)

A Banks charge higher interest rates on higher risk loansB Banks do not create any external costs or benefits in

their operationsC Banks know that the government will bear the risk of

customers defaulting on loansD 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)

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