A Level Economics Revision Guide for A2 Syllabus by Rana Irfan Mahmood

A Level Economics (A2) Notes by Rana Irfan Mehmood

Chapter 11: Consumer Behavior Analysis 5
11.1 Marginal Utility Approach……….…………………………………………………………………………. 5
11.2 Marginal Utility and Individual Demand Curve…………………………………………………… 7
11.3 Law Of Equi-Marginal Utility………………………………….…………………………………………… 8
11.4 Ordinal Approach to Consumer Equilibrium…………………………………………………….. 14
11.5 Budget Lines………………………………………………….…………………………………………………. 14
11.6 Indifference Curve (IC) ……..………..…………………………………………………………………….17
11.7 Marginal Rate of Substation………………………………………………..…………………………… 18
11.8 Properties of Indifference Curves…………………………………………...……………………….. 18
11.9 Changes in consumer equilibrium……………………………………………………………………..22
11.10 Derivation of demand curve IC approach: (X & Y Normal goods) …………..………… 27
11.11 Role of advertisement and consumer equilibrium (I.C approach) …………..…………28
11.12 How far is the theory of consumer behavior valid? …………..…………..…………..……. 29
Questions from Paper 3 MCQ’s...……………………………………………………………………………………………. 30
Questions from Paper 4 Theory...……………………………………………………………………………………………. 43
Chapter 12: Production, Cost and Revenue
12.1 Short run production analysis……………………………………..…………..…………..………….. 47
12.2 Long Run Production…………..…………..…………..…………..…………..…………..……………. 49
12.3 Production indifference curve / ISO Quant …………..…………..…………..…………..…….50
12.4 Economics vs Accounting Costs…………..…………..…………..…………..…………..…………. 51
12.5 Short run Cost Concepts…………..…………..…………..…………..…………..…………..………. 52
12.6 Long run Cost Concepts…………..…………..…………..…………..…………..…………..………… 55
12.7 Minimum Efficient Scale of an Industry …………..…………..…………..…………..………….57
12.8 Economies of Scale …………..…………..…………..…………..…………..…………..…………..…. 57
12.9 Diseconomies of Scale …………..…………..…………..…………..…………..…………..…………. 59
12.10 Small Scale Business and its benefits…………..…………..…………..…………..……………… 60
12.11 Small Scale Business and its…………..…………..…………..…………..…………..………………. 61
12.12 Total Revenue, Marginal Revenue and Average Revenue Curves…………..………….61
12.13 Relationship Between AR, MR & TR Under Perfect Competition…………..…………. 61
12.14 Relationship Between AR, MR & TR Under Imperfect Competition………………….. 62
12.15 Elasticity of demand and revenue…………..…………..…………..…………..…………..……… 62
Questions from Paper 3 MCQ’s...…………………………………………………………………………………………….. 63
Questions from Paper 4 Theory...……………………………………………………………………………………………. 81
Chapter 13: Market Structure
13.1 Perfect Competition …………………………..………………………………………………………….. 82
13.2 Monopoly…………..…………..…………..…………..…………..…………..…………..…………..…… 87
13.3 Price Discrimination…………..…………..…………..…………..…………..…………..…………..… 91
13.4 Elasticity of demand and revenue…………..…………..…………..…………..…………..……. 94
13.5 Oligopoly …………..…………..…………..…………..…………..…………..…………..………………… 96
13.6 Contestable Markets…………..…………..…………..…………..…………..…………..………….. 102
13.7 Other Objectives of a Firm…………..…………..…………..…………..…………..………………. 103
13.8 The Concentration Ratio…………..…………..…………..…………..…………..…………..…….. 105
13.9 Nudge Theory …………..…………..…………..…………..…………..…………..…………..……….. 105
Questions from Paper 3 MCQ’s...………………………………………………………………………………………….. 106
Questions from Paper 4 Theory...………………………………………………………………………………………….. 137
Chapter 14: Market Failure and Economic Efficiency
14.1 Market failure …………………………………………………………………………………………………141
14.2 Understanding externalities…………..…………..…………..…………..…………..……………. 141
14.3 14.3.1 (i) Negative production externalities…………..…………..…………..…………… 142
(ii) Negative consumption externalities…………..…………..…………..……….. 143
14.4 14.4.1 (i) Positive production externalities…………..…………..…………..…………….. 145
(ii) Positive consumption externalities…………..…………..…………..………….146
14.5 Case of merit goods……………………………………………………………….………………………. 147
14.6 Cost Benefit analysis ……………………………………………………………….…………………….. 147
14.7 Economy Efficiency ……………………………………………………………….………………………. 148
14.8 The Two Parts of economic Efficiency …………………………………………………………… 149
14.9 Dynamic Efficiency ……………………………………………………………….……………………….. 150
14.10 X – Efficiency ……………………………………………………………….………………..………………. 150
14.11 Pareto Efficiency ……………………………………………………………….…………………………… 151
Questions from Paper 3 MCQ’s...………………………………………………………………………………….………. 152
Questions from Paper 4 Theory...…………………………………………………………………………………….……. 173
Chapter 15: Labour Market
15.1 Supply of an individual labour ……………………………………..………………………….…… 176
15.2 Labor supply to a firm or industry…………..…………..…………..…………..……………….. 177
15.3 Determinants of labor supply in an economy…………..…………..…………..…………… 177
15.4 Perfect labor market …………..…………..…………..…………..…………..…………..…………..178
15.5 Demand for Labor…………..…………..…………..…………..…………..…………..………………. 179
15.6 Demand for Labor and Marginal Productivity theory…………..…………..……………..179
15.7 Wages and profits under perfect competition…………..…………..…………..………….. 180
15.8 Critical evaluation of perfect labor market…………..…………..…………..……………….. 181
15.9 Monopsony …………..…………..…………..…………..…………..…………..…………..…………… 182
15.10 Labor with market power…………..…………..…………..…………..…………..…………………183
15.11 Firms and Labor with market power Bilateral monopoly…………..…………..………. 184
15.12 Government role in labor market…………..…………..…………..…………..………………… 185
15.13 Other labour market imperfections …………..…………..…………..…………..……………. 186
15.14 Transfer Earnings and Economic Rent…………..…………..…………..…………..………….. 186
Questions from Paper 3 MCQ’s...………………………………………………………………………………….………. 188
Questions from Paper 4 Theory...…………………………………………………………………………………….…... 206
Chapter 16: National Income
16.1 Gross Domestic Product (GDP) …………..…………..…………..…………..…………..………. 211
16.2 Gross National Product (GNP) …………..…………..…………..…………..…………..………… 211
16.3 Net National Product (NNP) …………..…………..…………..…………..…………..…………… 211
16.4 Measuring GDP with Output Approach…………..…………..…………..…………..……….. 211
16.5 Moving from GDP to GNP…………..…………..…………..…………..…………..………………. 212
16.6 Moving from GNP to NNP…………..…………..…………..…………..…………..…………..…… 212
16.7 Market Price & Factor cost…………..…………..…………..…………..…………..……………… 212
16.8 National Income…………..…………..…………..…………..…………..…………..…………………. 213
16.9 Disposable Personal Income (D.P.I) …………..…………..…………..…………..…………….. 213
16.10 Per capita GDP…………..…………..…………..…………..…………..…………..…………..………. 213
16.11 National Income is a Flow of Production not a Stock…………..…………..…………….. 213
16.12 Importance and Uses of National Income Measurement…………..…………..……… 214
16.13 Obstacles and Problems in Measurement of National Income…………..…………… 214
16.14 Circular Flow of National Income…………..…………..…………..…………..…………..……..214
16.15 In Open Economy…………..…………..…………..…………..…………..…………..…………..…… 214
Questions from Paper 3 MCQ’s...………………………………………………………………… …………….………… 216
Questions from Paper 4 Theory...………………………………………………………………………………………….. 221
Chapter 17: Classical & Keynesian Economics
17.1 Classical Economy…………………………………………………………………………………..……… 222
17.2 Keynesian Economics…………..…………..…………..…………..…………..…………..…………..222
17.3 Consumption and savings according to Keynes …………..…………..…………..…………223
17.4 Paradox of Thrift…………..…………..…………..…………..…………..…………..………………… 226
17.5 Keynesian Theory of Income and Employment…………..…………..…………..…………. 227
17.6 Accelerator…………..…………..…………..…………..…………..…………..…………..……………. 231
17.7 Business cycle and interaction of multiplier and accelerator…………..…………….. 232
17.8 Investment …………..…………..…………..…………..…………..…………..…………..……………. 233
17.9 Marginal Rate of Investment (MEI) and Cost of Funds …………..…………..…………..235
Questions from Paper 3 MCQ’s...………………………………………………………………………………………….. 236
Questions from Paper 4 Theory...………………………………………………………………………………………….. 249
Chapter 18: Macro Economic policies
18.1 Fiscal policy …………………………………………………..…………..………………………………….. 251
18.2 Laffer Curve …………..…………..…………..…………..…………..…………..…………..………….. 255
18.3 (a) Central Bank…………..…………..…………..…………..…………..…………..…………..…….. 256
(b) Monitory policy…………..…………..…………..…………..…………..…………..…………….. 256
18.4 Supply side policies …………..…………..…………..…………..…………..…………..……………. 260
Questions from Paper 3 MCQ’s...………………………………………………………………………………………….. 264
Questions from Paper 4 Theory...………………………………………………………………………………………….. 276
Chapter 19: Money Supply / Money Demand AND UNEMPLOYMENT
19.1 Money supply………………………………………………………………..…………..…..…………….. 279
19.2 Credit creation by commercial banks…………..…………..…………..…………..………….. 279
19.3 Quantity Theory of Money…………..…………..…………..…………..…………....……………. 281
19.4 Liquidity Preference Theory.…………...…………..…………...…………...…………...………. 282
19.5 Loanable fund theory…………………………………………………………………………………….. 283
19.6 Keynesian & Monetarism…………………..…………………..…………………..…………………..285
19.8 Unemployment…………………..…………………..…………………..…………………..……………. 286
19.9 Phillips Curve…………………..…………………..…………………..…………………..……………….. 290
Questions from Paper 3 MCQ’s...………………………………………………………………………………………….. 291
Questions from Paper 4 Theory...………………………………………………………………………………………….. 301
Chapter 20: Economic Growth and Economic Development
20.1 Economic growth and economic development.…………………………………..…………. 304
20.2 Economics Growth …………………..…………………..…………………..…………………..……… 305
20.3 Measurement of growth and economic development…………………..………………. 308
20.4 Actual and potential output or GDP…………………..…………………..……………………… 311
20.5 Economic efficiency & equity…………………..…………………..…………………..……………. 312
20.6 Developed and developing countries…………………..…………………..……………………. 312
20.7 Population growth…………………..…………………..…………………..…………………..………. 318
Questions from Paper 3 MCQ’s...………………………………………………………………………………………….. 320
Questions from Paper 4 Theory...………………………………………………………………………………………….. 332
Answer Keys of MCQ’s
Cambridge Exams Syllabus for 2018 onwards Exams