This mini-lesson walks you through the core of AQA Paper 1 — How Markets Work: the economic problem and scarcity, the factors of production and opportunity cost, demand & supply and how they set the equilibrium price, price elasticity of demand, competition and the labour market, plus production, productivity & specialisation.
Work through each screen, answer the questions as you go (some are wordy, some are calculations like elasticity or % change) and collect ⭐ stars. Press Start when you're ready.
The basic economic problem is that resources are scarce (finite) but human wants are unlimited. Because we cannot have everything, we must choose — and every choice has a cost.
Example: if a government spends £1bn on a new hospital, the opportunity cost might be the schools it could have built instead. Opportunity cost is about the one best thing forgone, not everything forgone.
Economists group all resources used to make goods and services into four factors of production. Each earns a reward:
Watch out: in economics, capital means man-made aids to production (machines, factories), not money. Money is used to buy capital but is not itself a factor of production.
In a market, demand is how much consumers will buy at each price; supply is how much producers will sell. Both depend on price:
Shifts vs movements: a price change causes a movement along a curve. A change in another factor (incomes, tastes, costs) shifts the whole curve. A shortage (demand > supply) pushes price up; a surplus pushes it down.
Tap a change, then tap what it mainly shifts. (Price itself only moves you along a curve — it's not here.)
PED measures how much quantity demanded responds to a change in price. It is a key idea for firms deciding whether to change prices.
Price rises 10%, quantity demanded falls 5%.
PED = 5% ÷ 10% = 0.5 → inelastic (raising price raises total revenue).
Competition is rivalry between firms for customers. More competition tends to bring lower prices, better quality and more choice for consumers, and pushes firms to be efficient.
The labour market is where workers supply labour and firms demand it. The wage is the price of labour. Wages tend to be higher where labour is in short supply, highly skilled, or demand for the product is strong.
Link it up: the labour market is just another supply-and-demand diagram — with the wage on the vertical axis instead of price, and quantity of workers on the horizontal axis.
Production is turning inputs (the factors of production) into outputs (goods & services). Productivity is output per worker (or per hour) — how efficiently inputs are used.
Specialisation means workers, firms or countries concentrate on what they do best. The division of labour splits production into separate tasks. This raises productivity and output, but can be repetitive and risky if one stage fails.
Why it matters: higher productivity lets a firm produce more from the same resources, cutting average cost per unit and boosting competitiveness. Specialisation makes trade and exchange (using money) essential.
Tap a description on the left, then its matching term on the right.
Economic problem: scarce resources + unlimited wants → choice → opportunity cost
Factors of production: land (rent) · labour (wages) · capital (interest) · enterprise (profit)
Demand & supply: demand slopes down, supply slopes up; they cross at the equilibrium price
PED: %ΔQd ÷ %ΔP → >1 elastic, <1 inelastic
Competition & labour: more competition → lower prices & more choice; wage = price of labour
Production: productivity = output ÷ workers; specialisation & division of labour raise output
You've covered the core of AQA Paper 1 — How Markets Work. Press Finish to see your score.
You've worked through How Markets Work for AQA GCSE Economics. 🎉
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Next: test yourself in the Evaluate stage Confidence Quiz, then lock it in with Verify.