a2 micro unit 3 revision advice
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A2 MicroStrong Exam Techniques
Stepping stones to great A2 grades
Geoff Riley, FRSATutor2u
I love answers that.......Use the data
well
Evaluate the point made
Have great analysis
diagrams
Put things in context
Use A2 concepts!
Current knowledge
Critical evaluation!
This is A2 not AS!
Everything in economics is contextual
Please!
http://www.scoop.it/t/unit-3-micro-business-economics
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#econ3@tutor2u_econ
Quick Advice on EdExcel Unit 3
Quick Advice on EdExcel Unit 3
1. Define term2. Explain answer3. Draw or annotate diagram4. One knock-out (rejection)
Another structured MC example
P38
Another structured MC example1. Define term2. Explain answer3. Draw or annotate diagram4. One knock-out (rejection)
1. Revenue maximised when MR = zero2. Unsold flowers can be offered at a price
discount to run down stocks. This is a form of second-degree price discrimination
3. Likely to be elastic demand, flowers have to be disposed of anyway
4. Draw a diagram to illustrate. P1 is profit maximising price, P2 is a revenue maximising price – Q1-Q2 sold at the lower price adding to revenue
5. One knock-out, predatory pricing is illegal in UK
Price
Qty
MC
AR
MR
P1
Q1 Q2
P2
P38
Explain how both a firm and its consumers may be affected by economies of scale
P40
Explain how both a firm and its consumers may be affected by economies of scale
P40
Explain how both a firm and its consumers may be affected by economies of scale
Define your
terms
• Internal EoS• External EoS
Internal Economie
s
External Economie
s P40
Explain how both a firm and its consumers may be affected by economies of scale
Define your
terms
• Internal EoS• External EoS
Internal Economie
s
• Falling long run unit cost
• Increasing returns to scale
External Economie
s P40
Explain how both a firm and its consumers may be affected by economies of scale
Define your
terms
• Internal EoS• External EoS
Internal Economie
s
• Falling long run unit cost
• Increasing returns to scale
External Economie
s
• Growth of an industry
• Lowers unit costs for most businesses P40
Explain how both a firm and its consumers may be affected by economies of scale
Analyse
Impact on firms
• Lower average costs• Higher profits (producer surplus)
Impact on consumer
s
• Real price levels
• Consumer surplus
No evaluation needed in this question!
P40
Explain how both a firm and its consumers may be affected by economies of scale
Price
Output (Q)
Economies of Scale – Benefits for Businesses and Consumers
LRAC
AR = demand
P40
Explain how both a firm and its consumers may be affected by economies of scale
Price
Output (Q)
Economies of Scale – Benefits for Businesses and Consumers
LRAC
AR = demand
P1
C1
Profit at output Q1
Q1 P40
Explain how both a firm and its consumers may be affected by economies of scale
Price Economies of Scale – Benefits for Businesses and Consumers
LRAC
AR = demand
P1
C1
P2
C2
Q1 Q2
Profit at output Q1
Profit at output Q2
P40
Explain how both a firm and its consumers may be affected by economies of scale
Price Economies of Scale – Benefits for Businesses and Consumers
LRAC
AR = demand
P1
C1
P2
C2
Q1 Q2
Profit at output Q1
Profit at output Q2
Gain in consumer surplus
P40
Explain how both a firm and its consumers may be affected by economies of scale
Price Economies of Scale – Benefits for Businesses and Consumers
LRAC
AR = demand
P1
C1
P2
C2
Q1 Q2
Profit at output Q1
Profit at output Q2
Gain in consumer surplus
Economies of scale have the potential to benefit both producers and consumers – higher profits and lower prices
P40
Explain how both a firm and its consumers may be affected by economies of scale
Price Economies of Scale – Benefits for Businesses and Consumers
LRAC
AR = demand
P1
C1
P2
C2
Q1 Q2
Profit at output Q1
Profit at output Q2
Gain in consumer surplus
LRAC2
External economies of scale here
P40
Explain how both a firm and its consumers may be affected by economies of scale
Price Economies of Scale – Benefits for Businesses and Consumers
LRAC
AR = demand
P1
C1
P2
C2
Q1 Q2
Profit at output Q1
Profit at output Q2
Gain in consumer surplus
LRAC2
External economies of scale here
P40
C2
Discuss whether utilities such as train operating companies, water, and telecoms businesses are better left in the private sector or whether all, or
some, should be taken back into public ownership
Deeper evaluation (4+1 approach)Outline (explain/analyse) and then evaluate 4 separate points with a brief final reasoned evaluative paragraph
1/ Case for private sector
• Profit motive• Dynamic
efficiency
2/ State ownership
option
• Objectives?• Outcomes?
3/ Impact on stakeholders
• Consumers• Employees• Taxpayers
4/ Alternatives to public
sector
• Competition policy
• Business taxation
Evaluate the case for stronger action by governments to protect consumers from the monopoly power of firms involved in supplying gas and electricity to UK homes and businesses
Please note the error in the workbook
Significant rise in average energy bills in the UK – this is a major policy issue – directly affects millions of consumers and businesses.
Case for Action
High prices /allegations of collusion
Tougher price caps?
Create competition in the wholesale market?
Supernormal profits
Windfall Tax on profits
State Ownership
Rising fuel poverty / complex prices
Cheapest tariff as default
Using windfall tax to fund insulation
Evaluate the case for stronger action by governments to protect consumers from the monopoly power of firms involved in supplying gas and electricity to UK homes and businesses
One main point per paragraphBuild an argument, support, then evaluateEvaluation must relate to the point that has already been made
Evaluation1. Large barriers to entry2. Huge economies of scale3. Limited contestability is a
feature of the market
Evaluation1. Abnormal profits used to
fund capital investment2. Long term energy security3. Nationalisation &
inefficiency
Evaluation1. Fewer tariffs but higher
average prices2. Windfall tax discourages
investment & research3. Government failure when
using revenues
Build the economic case for action
High prices / allegations of collusion
Tougher price caps?
Create competition in the wholesale market?
Supernormal profits
Windfall Tax on profits
State Ownership
Rising fuel poverty / complex prices
Cheapest tariff as default
Using windfall tax to fund insulation