Microeconomics is a core part of A-Level Economics. Revise the key concepts and common mistakes below, then lock them in with the free games.
Key concepts
Perfect CompetitionMany small firms, identical product, free entry.
Monopolistic CompetitionMany firms, differentiated products.
OligopolyFew large firms dominating the market.
MonopolySingle dominant supplier.
Barriers to EntryObstacles that protect incumbents.
Allocative EfficiencyPrice equals marginal cost - no waste.
PEDPrice elasticity of demand = percent change Q / percent change P.
PESPrice elasticity of supply.
YEDIncome elasticity of demand.
XEDCross-price elasticity between two goods.
Consumer SurplusArea between price and demand curve.
Producer SurplusArea between price and supply curve.
DemandQuantity buyers want at each price, ceteris paribus.
SupplyQuantity sellers offer at each price, ceteris paribus.
Common mistakes to avoid
Questions where students often pick the tempting wrong answer — make sure you know the right one:
Are monopolies always bad for consumers?✗ Monopolies are illegal and always harmful. ✓ Standard theory says monopolies restrict output and raise prices, but possible benefits include economies of scale, R&D investment and dynamic efficiency.
What is the difference between a shift in demand and a movement along the demand curve?✗ A change in price shifts the demand curve. ✓ A movement along the curve is caused by a change in price; a shift of the whole curve is caused by changes in other factors (income, tastes, substitute prices).
What does price elasticity of demand measure?✗ PED measures how flexible or stretchy a product is. ✓ The responsiveness of quantity demanded to a change in price — the percentage change in quantity divided by the percentage change in price.
What is consumer surplus?✗ Consumer surplus is leftover stock that consumers haven't bought yet. ✓ The difference between what consumers are willing to pay and what they actually pay — represented by the area below the demand curve and above the price line.
What does Income Elasticity of Demand (YED) tell us?✗ A negative YED means the demand calculation went wrong. ✓ The sign tells us the good type: positive YED = normal good (rises with income); negative YED = inferior good (falls with income). YED > 1 indicates a luxury; YED between 0 and 1 a necessity.
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