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AQA A-Level Economics

Study notes
1.1.1 Economics as a Social Science and Methodology vs Natural Sciences
1.1.2 Positive and Normative Statements
1.1.3 Value Judgements and Policy Decisions
1.2.1 Purpose of Economic Activity and the Three Economic Questions
1.3.1 Factors of Production and the Environment
1.4.1 Scarcity, Choice and Opportunity Cost
1.5.1 PPF: Allocation, Opportunity Cost, Trade-offs, Unemployment and Growth
1.5.2 Efficiency on the PPF and Applied Use
2.1.1 Rational Decision Making, Incentives and Marginal Reasoning
2.1.2 Utility Theory and Diminishing Marginal Utility
2.2.1 Imperfect and Asymmetric Information
2.3.1 Bounded Rationality, Bounded Self-Control and Common Biases
2.3.2 Altruism, Fairness and the Critique of Full Rationality
2.4.1 Choice Architecture, Framing and Nudges
3.1.1 Demand Curve and Demand-Shift causes
3.2.1 Price Elasticity of Demand: Calculation, Factors and Revenue
3.2.2 Income and Cross Elasticities: Definitions and Market Links
3.3.1 Supply Curve, Incentives and Shifts (including MC Under Perfect Competition)
3.4.1 Price Elasticity of Supply: Calculation, Factors and Interpretation
3.5.1 Market Equilibrium, Disequilibrium and Price Adjustment
3.5.2 Applying the Model and Recognising its Assumptions
3.6.1 Intermarket Links: Joint, Competitive, Composite, Derived Demand and Joint Supply
4.1.1 From Inputs to Output and Measuring Productivity
4.2.1 Benefits of Specialisation and the Role of Money
4.3.1 Short Run vs Long Run; Marginal, Average and Total Returns; the Law of Diminishing Returns
4.3.2 Returns to Scale and Implications for Costs
4.4.1 Types of Cost and Cost Curve Shapes (Short Run vs Long Run)
4.4.2 Drivers of Costs and Applied Calculations
4.5.1 Internal/External Economies, Diseconomies and LRAC Shape
4.5.2 Minimum Efficient Scale and Industry Structure
4.6.1 Revenue Measures, Demand Curve and Relationships
4.7 Profit
4.8.1 Invention vs Innovation and Production Effects
4.8.2 Market Impacts and Creative Destruction
5.1.1 The Spectrum of Competition
5.1.2 Market-Structure Criteria: Firms, Differentiation, Entry
5.2.1 Profit Maximisation and the MR=MC Rule
5.2.2 Alternative Objectives and the Satisficing Principle
5.2.3 Divorce of Ownership from Control: Reasons, Consequences and Effects
5.3.1 Assumptions and Implications for Firm and Industry Behaviour
5.3.2 Short-Run analysis and Profit/Loss Outcomes
5.3.3 Long-Run Equilibrium and Efficiency Results
5.3.4 Perfect Competition as a Benchmark and Critical Evaluation
5.4.1 Characteristics and Assumptions of Monopolistic Competition
5.4.2 Non-Price Competition and Product Differentiation
5.4.3 Short-Run and Long-Run Diagrammatic Analysis
5.5.1 Defining Oligopoly: Structure vs Conduct
5.5.2 Characteristics and Diversity Across Oligopolies
5.5.3 Concentration Ratios: Concept and Calculation
5.5.4 Collusive vs Non-Collusive Oligopoly; Cooperation vs Collusion
5.5.5 The Kinked Demand Curve and Price Rigidity
5.5.6 Strategic Behaviour: Non-Price Rivalry, Cartels and Price Leadership
5.5.7 Pricing, Output, Investment and R&D Decisions
5.5.8 Interdependence, Uncertainty and the Pros and Cons of Oligopoly
5.6.1 Monopoly Model: Profit Maximisation and Diagrams
5.6.2 Sources and Measurement of Monopoly Power
5.6.3 Advantages and Disadvantages; Price-Making Power Across Structures
5.7.1 Conditions for Price Discrimination
5.7.2 Welfare Effects and Stakeholder Impacts
5.7.3 Diagrammatic Analysis of Price Discrimination
5.8.1 Short-Run and Long-Run Benefits from Competition
5.8.2 Beyond Price: Quality, Cost Reduction and Service Improvement
5.8.3 Creative Destruction and Innovation Incentives
5.9.1 Market Contestability and Industry Performance
5.9.2 Sunk Costs and Hit-and-Run Competition
5.10.1 Static Versus Dynamic Efficiency
5.10.2 Productive and Allocative Efficiency Conditions
5.10.3 Drivers of Dynamic Efficiency
5.10.4 Applying Efficiency to Compare Market Structures
5.11.1 Applying Surplus Concepts to Efficiency and Welfare Analysis
6.1.1 Derived Demand, MRP Theory and Labour Demand Curve
6.1.2 Elasticity of Labour Demand
6.2.1 Labour Supply Factors, Curve and Shifts (Market Level)
6.3.1 Wage Determination and Market Forces in Perfectly Competitive Labour Markets
6.4.1 Monopsony, Unions and Imperfect Information: Wage and Employment Effects
6.5.1 Union Power and Effects in Competitive and Monopsony Markets
6.6.1 Minimum Wage: Effects, Advantages and Disadvantages
6.7.1 Wage Discrimination: Conditions, Impacts and Examples
6.7.2 Assessing Wage Discrimination
7.1.1 Income vs Wealth: Key Distinctions
7.1.2. Drivers of Distribution: Labour Markets, Capital and Institutions
7.1.3. Equality vs Equity in Distribution
7.1.4. Measuring Inequality: Lorenz Curve and Gini Coefficient
7.1.5 Benefits and Costs of More Equal or Unequal Distributions
7.1.6 UK Distribution Overview and Key Trends
7.1.7 Value Judgements and Fairness in Assessing Equity
7.1.8 Inequality as a Cause and Consequence of Market Failure
7.1.9 How Values Shape Policy Prescriptions
7.2.1 Relative vs Absolute Poverty: Definitions and Measurement
7.2.2 Causes of Poverty: Structural and Individual Factors
7.2.3 Effects of Poverty on Households and the Macroeconomy
7.3.1 Policy Toolkit: Taxes, Transfers and Services
7.3.2 Economic Consequences: Efficiency, Incentives and Growth
7.3.3 Evaluating Redistribution: Moral and Political Perspectives
8.1.1 Price Functions: Rationing, Incentive and Signalling
8.1.2 Pros and Cons of the Price Mechanism
8.1.3 Incentives and the ‘What, How, for Whom’ Questions
8.1.4 Is the Price Mechanism Impersonal?
8.1.5 Should Markets be Used in Sensitive Areas?
8.2.1 Defining Market Failure and Misallocation
8.2.2 Complete vs Partial Market Failure
8.2.3 How Key Phenomena Lead to Failure
8.2.4 Using Examples to Discuss Causes
8.3.1 Pure Public Goods: Non-Rival and Non-Excludable
8.3.2 Public vs Private Goods: Distinguishing Features
8.3.3 Quasi-Public Goods and Mixed Characteristics
8.3.4 Technology and Excludability (e.g Broadcasting)
8.3.5 The Free-Rider Problem and Provision
8.3.6 Tragedy of the Commons and Environmental Relevance
8.4.1 Defining Externalities: Private vs Social Costs/Benefits
8.4.2 Over-Production and Under-Production Outcomes
8.4.3 Property Rights and Externalities
8.4.4 Diagram Analysis: MSC/MSC and MPB/MSB
8.5.1 Value Judgements in Classifying Merit/Demerit Goods
8.5.2 Externalities in Consumption
8.5.3 Imperfect Information and Misallocation
8.5.4 Diagrams for Merit/Demerit Consumption Externalities
8.5.5 Not all Externality Goods are Merit/Demerit
8.6.1 Imperfect and Asymmetric Information
8.6.2 Monopoly and Monopoly Power
8.6.3 Factor Immobility
8.7.1 UK Competition Policy: General Principles
8.7.2 Costs and Benefits of Competition Policy
8.7.3 Using Real-World Cases for Evaluation
8.7.4 Legal Detail not Required
8.8.1 Public Ownership: Arguments for and Against
8.8.2 Privatisation: Arguments for and Against
8.8.3 Market Regulation: Arguments for and Against
8.8.4 Deregulation: Arguments for and Against
8.8.5 Regulatory Capture: Definition and Risks
8.8.6 Assessing UK Applications and Performance Effects
8.9.1 Why Intervene? Market Failure as Rationale
8.9.2 How Governments Influence Resource Allocation
8.9.3 Policy Instruments to Correct Failure
8.9.4 Government Objectives and the Mixed Economy
8.9.5 Apply Models and Evaluate Markets vs Government
8.9.6 Evaluating Intervention Methods: Merits and Drawbacks
8.10.1 Defining Government Failure and Misallocation
8.10.2 Sources of Failure: Information, Objectives and Costs
8.10.3 Distortions and Unintended Consequences
8.10.4 Welfare Implications and When Not to Intervene
9.1.1 Core Macroeconomic Objectives
9.1.2 Short-Run Conflicts between Objectives
9.1.3 Other Objectives: Budget Balance and Equity
9.1.4 Changing Priorities Over Time
9.2.1 Output Measures: Real GDP and GDP per Capita
9.2.2 Price Indices: CPI and RPI
9.2.3 Labour Market and Productivity Indicators
9.2.4 External Balance: Current Account
9.3.1 Calculating and Interpreting Index Numbers
9.3.2 Using Indices to Track Prices and Other Variables
9.3.3 CPI/RPI Features: Basket and ‘Average Family’
9.4.1 Living Standards Over Time: Use and Limits
9.4.2 Cross-Country Comparisons: Use and Limits
9.4.3 Purchasing Power Parity in Comparisons
10.1.1 Circular Flow, Equality of Measures and Equilibrium
10.1.2 National income as Performance Indicator
10.1.3 Nominal vs Real Income
10.1.4 Injections and Withdrawals
10.1.5 Impact of Changes in Injections/Withdrawals
10.1.6 Scope: No Detailed National Accounts Construction
10.2.1 Movements Along AD/AS vs Price Level Changes
10.2.2 What Shifts AD and SRAS
10.2.3 Long-Run AS Determinants vs Short-Run
10.2.4 Underlying Growth and LRAS Shifts
10.2.5 Using AD/AS to Show Equilibrium
10.2.6 Demand-Side and Supply-Side Shocks
10.2.7 Apply AD/AS to Real Issues
10.2.8 Global Events and the Domestic Economy
10.3.1 What AD Means
10.3.2 Components and Drivers of AD
10.3.3 The Accelerator Principle (No Calculations)
10.3.4 Saving vs Investment and Determinants
10.3.5 Net Exports and AD
10.4.1 AD's Role in Economic Activity
10.4.2 The Multiplier Process Explained
10.4.3 MPC and Calculating the Multiplier
10.4.4 Why MPC Determines Multiplier Size
10.4.5 Exam Tip: Multiplier Calculations
10.5.1 SRAS: Price Level and Costs
10.5.2 Cost Shocks that Shift SRAS
10.6.1 Fundamentals of LRAS
10.6.2 Vertical LRAS and Capacity Output
10.6.3 Institutions and the Banking System
10.6.4 The Keynesian AS Curve
10.1 The Circular Flow of Income10.2 Aggregate Demand and Aggregate Supply Analysis10.3 The Determinants of Aggregate Demand10.4 Aggregate Demand and the Level of Economic Activity10.5 Determinants of Short-Run Aggregate Supply
11.1.1 Short-Run vs Long-Run Growth
11.1.2 Determinants of Growth (SR and LR)
11.1.3 Costs and Benefits of Growth
11.1.4 Impacts on People, Economy and Environment
11.1.5 The Economic Cycle and Indicators
11.1.6 Output Gaps: Positive vs Negative
11.1.7 Causes of Phase Changes in the Cycle
11.1.8 Showing Growth with PPC and AD/AS
11.1.9 Understanding Long-Run Growth (Trend Rate)
11.1.10 Sustainability of Growth
11.1.11 Cyclical Instability: Credit, Bubbles and Speculation
11.2.1 Measuring Unemployment: Claimant Count and LFS
11.2.2 Voluntary vs Involuntary Unemployment
11.2.3 Seasonal, Frictional, Structural and Cyclical
11.2.4 Demand-Side and Supply-Side Determinants
11.2.5 Real Wage Unemployment
11.2.6 The Natural Rate of Unemployment
11.2.7 Consequences of Unemployment
11.2.8 Matching Policies to Causes
11.2.9 Output Gaps, Cyclical Unemployment and LRAS
11.3.1 Inflation, Deflation and Disinflation
11.3.2 Demand-Pull vs Cost-Push
11.3.3 Quantity Theory and MV=PQ
11.3.4 Expectations and the Price Level
11.3.5 Consequences of Inflation
11.3.6 Consequences of Deflation
11.3.7 World Commodity Prices and UK Inflation
11.3.8 External Influences on UK Inflation
11.3.9 Deflation vs Disinflation: The Distinction
11.3.10 Deflationary Policies and AD
11.3.11 Fisher Equation: T vs Q
11.4.1 Output Gaps, Unemployment and Inflation Pressures
11.4.2 The Short-Run Phillips Curve
11.4.3 The Long-Run (L-Shaped) Phillips Curve
11.4.4 Policy Implications of Phillips Curves
11.4.5 Reconciling Conflicts in Short and Long Run
11.4.6 Using Macro Models to Analyse Conflicts
11.4.7 Monetarist/Supply-Side View on Compatibility
12.1.1 Money: Characteristics and Functions
12.1.2 Money Supply: Narrow vs Broad
12.1.3 Money, Capital and Foreign Exchange Markets
12.1.4 Role of Financial Markets in the Economy
12.1.5 Debt vs Equity Finance
12.1.6 Interest Rates and Bond Prices (Inverse)
12.1.7 How Firms Raise Finance
12.1.8 Bonds: Coupon, Maturity and Yield
12.2.1 Commercial vs Investment Banks
12.2.2 Functions of a Commercial Bank
12.2.3 Commercial Bank Balance Sheet Structure
12.2.4 Objectives: Liquidity, Profitability, Security
12.2.5 Conflicts Between Bank Objectives
12.2.6 How Banks Create Credit
12.2.7 Universal Banking and Systemic Risk
12.2.8 Other Financial Institutions (Awareness Only)
12.2.9 Exam Tip: No Credit Multiplier Calc
12.3.1 Functions of a Central Bank
12.3.2 What Monetary Policy Involves
12.3.3 Government-Set Objectives for Monetary Policy
12.3.4 The MPC, Bank Rate and the Inflation Target
12.3.5 What the MPC Considers
12.3.6 Exchange Rates, AD and Policy Objectives
12.3.7 The Transmission Mechanism
12.3.8 Influencing Money Supply Growth
12.3.9 Instruments: QE, Funding for Lending, Guidance
12.3.10 MPC Use of Bank Rate to Hit Target
12.4.1 UK Regulators: BoE, PRA, FPC, FCA
12.4.2 Why Banks Fail: Maturity Mismatch Risk
12.4.3 Liquidity and Capital Ratios
12.4.4 Moral Hazard and Systemic Risk
12.4.5 Purpose of Regulators (Depth Not Required)
12.4.6 Exam Tip: No Ratio Calculations
13.1.1 What Fiscal Policy Involves
13.1.2 Macro and Micro Functions
13.1.3 Using Fiscal Policy to Influence AD
13.1.4 Using Fiscal Policy to Influence AS
13.1.5 Spending, Taxation and Activity Patterns
13.1.6 Public Expenditure: Types and Reasons
13.1.7 Why Governments Levy Taxes
13.1.8 Direct vs Indirect Taxes
13.1.9 Progressive, Proportional and Regressive Taxes
13.1.10 Principles of Taxation (e.g Equity)
13.1.11 UK Taxes: Roles and Merits
13.1.12 Budget Balance and National Debt
13.1.13 Cyclical vs Structural Deficits
13.1.14 Consequences of Deficits/Surpluses
13.1.15 How Big Should National Debt Be?
13.1.16 The role of the OBR
13.1.17 Assessing Spending and Taxation Changes
13.1.18 Evaluating Budget Deficits and Surpluses
13.1.19 Measures to Rebalance the Budget
13.2.1 Policies vs Improvements
13.2.2 How Policies Deliver Improvements
13.2.3 Incentives, Potential Output and Trend Growth
13.2.4 Effects on Unemployment, Prices and External Performance
13.2.5 Reducing the Natural Rate of Unemployment
13.2.6 Free-Market Supply-Side Measures
13.2.7 Interventionist Supply-Side Measures
13.2.8 Micro and Macro Effects
13.2.9 Private-Sector Origins of Supply-Side Change
13.2.10 Policies for Market Failures and Incentives
14.1.1 Causes of Globalisation
14.1.2 Consequences for Developed and Developing Countries
14.1.3 Multinational Corporations and Globalisation
14.2.1 Comparative Advantage: The Model
14.2.2 Comparative vs Absolute Advantage
14.2.3 Specialisation, Trade and Total Output
14.2.4 Other Benefits: Scale and Competition
14.2.5 Costs of International Trade
14.2.6 UK Trade Patterns: Reasons for Change
14.2.7 Protectionism: Tariffs, Quotas, Subsidies
14.2.8 Causes and Consequences of Protectionism
14.2.9 Features of a Customs Union
14.2.10 Single European Market Characteristics
14.2.11 Role of the World Trade Organisation
14.2.12 Numerical Example: Comparative Advantage
14.2.13 Tariffs: Diagram Analysis
14.3.1 Accounts of the Balance of Payments
14.3.2 Components of the Current Account
14.3.3 Deficit and Surplus Meanings
14.3.4 Determinants of the Current Account Balance
14.3.5 Consequences of Investment Flows
14.3.6 Policies to Correct Imbalances
14.3.7 Expenditure-Switching and -Reducing Policies
14.3.8 Effects on Other Macro Objectives
14.3.9 Significance of Deficits and Surpluses
14.3.10 Global Implications of Corrective Action
14.3.11 Knowledge Depth and FDI vs Portfolio
14.4.1 Floating Exchange Rate Determination
14.4.2 Government Intervention in Exchange Rates
14.4.3 Fixed vs Floating: Pros and Cons
14.4.4 Joining a Currency Union (Eurozone Example)
14.5.1 Growth vs Development
14.5.2 Characteristics of Less-Developed Economies
14.5.3 Indicators of Development Including HDI
14.5.4 Factors Affecting Growth and Development
14.5.5 Barriers to Growth and Development
14.5.6 Policies to Promote Growth and Development
14.5.7 Role of Aid and Trade
14.5.8 Links to Other Parts of the Spec
14.5.9 Market-Based vs Interventionist Strategies

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