A2 Micro Unit 3 Revision Advice
Download as PPTX, PDF8 likes15,934 views
1. Economies of scale can benefit both firms and consumers through lower average costs and prices. 2. Internal economies of scale reduce a firm's long-run average costs through increased production, allowing higher profits. External economies reduce costs for most businesses in a growing industry. 3. Consumers benefit from economies of scale through lower prices and increased consumer surplus as firms pass on some cost savings in more competitive markets.
A2 Micro Unit 3 Revision Advice
- 1. A2 Micro Strong Exam Techniques Stepping stones to great A2 grades Geoff Riley, FRSA Tutor2u
- 2. I love answers that....... Current Use the data well knowledge Please! Use A2 Evaluate the Critical concepts! point made evaluation! Everything in Have great Put things in analysis This is A2 not economics is context diagrams AS! contextual
- 4. Get help from fellow students, teachers and tutor2u on Twitter: #econ3 @tutor2u_econ
- 5. Quick Advice on EdExcel Unit 3
- 6. Quick Advice on EdExcel Unit 3 1. Define term 2. Explain answer 3. Draw or annotate diagram 4. One knock-out (rejection)
- 7. Another structured MC example P38
- 8. Another structured MC example 1. Define term 2. Explain answer 3. Draw or annotate diagram 4. One knock-out (rejection) 1. Revenue maximised when MR = zero Price 2. Unsold flowers can be offered at a price discount to run down stocks. This is a form of second-degree price discrimination P1 MC 3. Likely to be elastic demand, flowers have to be disposed of anyway P2 4. Draw a diagram to illustrate. P1 is profit maximising price, P2 is a revenue maximising price – Q1-Q2 sold at the AR lower price adding to revenue 5. One knock-out, predatory pricing is illegal in UK Q1 Q2 MR Qty P38
- 9. Explain how both a firm and its consumers may be affected by economies of scale P40
- 10. Explain how both a firm and its consumers may be affected by economies of scale P40
- 11. Explain how both a firm and its consumers may be affected by economies of scale Define • Internal EoS your terms • External EoS Internal Economies External Economies P40
- 12. Explain how both a firm and its consumers may be affected by economies of scale Define • Internal EoS your terms • External EoS • Falling long Internal run unit cost • Increasing Economies returns to scale External Economies P40
- 13. Explain how both a firm and its consumers may be affected by economies of scale Define • Internal EoS your terms • External EoS • Falling long Internal run unit cost • Increasing Economies returns to scale • Growth of an industry External • Lowers unit Economies costs for most businesses P40
- 14. Explain how both a firm and its consumers may be affected by economies of scale Analyse No evaluation needed in this question! Impact on • Lower average costs firms • Higher profits (producer surplus) • Real price Impact on levels consumers • Consumer surplus P40
- 15. Explain how both a firm and its consumers may be affected by economies of scale Price Economies of Scale – Benefits for Businesses and Consumers AR = demand LRAC Output (Q) P40
- 16. Explain how both a firm and its consumers may be affected by economies of scale Price Economies of Scale – Benefits for Businesses and Consumers Profit at output Q1 P1 AR = demand C1 LRAC Q1 Output (Q) P40
- 17. Explain how both a firm and its consumers may be affected by economies of scale Price Economies of Scale – Benefits for Businesses and Consumers Profit at output Q1 P1 Profit at output Q2 AR = P2 demand C1 LRAC C2 Q1 Q2 P40
- 18. Explain how both a firm and its consumers may be affected by economies of scale Price Economies of Scale – Benefits for Businesses and Consumers Profit at output Q1 P1 Profit at output Q2 AR = P2 demand Gain in consumer C1 surplus LRAC C2 Q1 Q2 P40
- 19. Explain how both a firm and its consumers may be affected by economies of scale Price Economies of Scale – Benefits for Businesses and Consumers Profit at output Q1 P1 Profit at output Q2 AR = P2 demand Gain in consumer C1 surplus LRAC C2 Economies of scale have the potential to benefit both producers and consumers – higher profits and lower prices Q1 Q2 P40
- 20. Explain how both a firm and its consumers may be affected by economies of scale Price Economies of Scale – Benefits for Businesses and Consumers Profit at output Q1 P1 Profit at output Q2 AR = P2 demand Gain in consumer C1 surplus LRAC C2 LRAC2 External economies of scale here Q1 Q2 P40
- 21. Explain how both a firm and its consumers may be affected by economies of scale Price Economies of Scale – Benefits for Businesses and Consumers Profit at output Q1 P1 Profit at output Q2 AR = P2 demand Gain in consumer C1 surplus LRAC C2 LRAC2 C2 External economies of scale here Q1 Q2 P40
- 23. 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
- 24. Deeper evaluation (4+1 approach) Outline (explain/analyse) and then evaluate 4 separate points with a brief final reasoned evaluative paragraph • Profit motive 1/ Case for private sector • Dynamic efficiency 2/ State • Objectives? ownership option • Outcomes? • Consumers 3/ Impact on stakeholders • Employees • Taxpayers • Competition 4/ Alternatives policy to public sector • Business taxation
- 25. 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.
- 26. 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 paragraph Build an argument, support, then evaluate Evaluation must relate to the point that has already been made Case for Action Rising fuel High prices Supernorma poverty / /allegations l profits complex of collusion prices Create Using competition Windfall Cheapest Tougher State windfall tax in the Tax on tariff as price caps? Ownership to fund wholesale profits default insulation market? Evaluation Evaluation Evaluation 1. Large barriers to entry 1. Abnormal profits used to 1. Fewer tariffs but higher 2. Huge economies of scale fund capital investment average prices 3. Limited contestability is a 2. Long term energy security 2. Windfall tax discourages feature of the market 3. Nationalisation & investment & research inefficiency 3. Government failure when using revenues
- 27. Build the economic case for action Rising fuel High prices / Supernormal poverty / allegations profits complex of collusion prices Create Using competition Cheapest Tougher Windfall Tax State windfall tax in the tariff as price caps? on profits Ownership to fund wholesale default insulation market?