Edexcel A-Level Economics Notes | 3.3

1 min read
  • Total revenue: price x quantity
  • You can find it on the demand and supply graph. The area until equilibrium.
  • Average revenue: total revenue/ quantity = price
  • Marginal revenue: additional revenue from the next item sold
  • When demand is price inelastic, you can raise prices and total revenue will not decrease.
  • When demand is price elastic, firms can raise prices but total revenue will fall.
  • Total cost: total fixed cost +total variable cost
  • Total fixed cost: costs that do not vary with output e.g. rent
  • Total variable cost: costs that do vary with output e.g. ingredients
  • Average (total) cost: total cost divided by output
  • Average fixed cost: fixed cost divided by output
  • Average variable cost: variable cost divided by output
  • Marginal cost: the extra cost of producing one extra unit.
  • Diminishing marginal productivity: when you hire more workers, each worker slows down because they are sharing the same fixed factors e.g. 5 chefs in the same kitchen.
  • Short-run: when there is at least one fixed factor of production.
  • Long-run: when all factors are variable.
  • Average cost curve: U-shaped
  • Marginal cost curve: tick shaped
  • Average revenue: downward sloping (demand curve)
  • Marginal revenue: twice as steep as the AR curve.
  • Economies of scale: when long-run average costs fall as output increases.
    • Really Fun Mums Try Making Pies
    • Risk (new recipe)
    • Financial (access to finance)
    • Marketing (every little helps)
    • Technical (self checkouts)
    • Managerial (easier to delegate work)
    • Purchasing (bulk-buying)
  • Diseconomies of scale: when long run average costs rise as output increases.
    • coordination (difficult to manage the staff)
    • control (difficult to identify weak spot)
    • communication (workers feel alienated)
Economies and Diseconomies of Scale
  • Minimum efficient scale: the minimum level when a firm can first start to exploit maximum economies of scale.
  • Internal economies of scale: affect one firm.
  • External economies of scale: affect the entire industry.
    • transport
    • education and training
    • infrastructure
  • Profit maximisation: MC = MR
  • Short-run shutdown points: when AC>AR
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Edexcel A-Level Economics Notes | 2.6

* The four main macroeconomic objectives are economic growth, low unemployment, stable inflation rate, and a balance of payments on the current account. * Other objectives: balanced budget, less environmental damage and less income inequality.
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Edexcel A-Level Economics Notes | 2.5

* Economic growth: an increase in real GDP. * Actual growth: an increase in real GDP. * Potential growth: an increase in capacity (right shift in LRAS or the PPF). * Export-led growth leads to (X-M) increasing,
3 min read

Edexcel A-Level Economics Notes | 3.5

* Labour market: a place where employers and employees meet to exchange labour for wage. * Demand for labour: the number of workers that firms are willing and able to hire at each wage rate.