Price Determination in a Competitive Market | AQA A-Level Economics (7136)
Price Determination in a Competitive Market
- 170 questions
- 10 subtopics
- Paper 1: Markets and market failure, and available on Paper 3
- Paper 1 and Paper 3
Price determination is examined on Papers 1 and 3, and is the core microeconomic model.
It covers what moves demand and supply, the elasticities that measure how far they move, and how the two settle at an equilibrium price.
Sample questions from Price Determination in a Competitive Market
Answer each one closed book first, then open the answer.
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Demand, the demand curve, income and wealth
Explain the relationship between price and quantity demanded, ceteris paribus.
Show the answer
As price rises, quantity demanded falls, and vice versa, ceteris paribus. This is the inverse relationship shown by the demand curve. -
Substitutes, complements and consumer preferences
How do changes in the prices of complementary goods cause the demand curve to shift?
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A rise in the price of a complement reduces demand for the related good (leftward shift); a fall in the price of a complement increases demand (rightward shift). -
Price elasticity of demand and total revenue
Define unit elastic demand in terms of PED.
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Demand is unit elastic when the absolute value of PED equals 1, meaning the percentage change in quantity demanded equals the percentage change in price. -
The determinants of price elasticity of demand
How does whether a good is a necessity or luxury affect its price elasticity of demand?
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Necessities tend to have inelastic demand while luxuries tend to have elastic demand. -
Income and cross elasticity of demand
How might the income elasticity of demand for a particular good change as consumer income levels rise?
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A good may be a luxury at low incomes but become a necessity at higher incomes. -
The determinants of supply
How does the number of firms in a market affect market supply?
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More firms increase market supply; fewer firms reduce market supply. -
Price elasticity of supply
What is the PES value for perfectly elastic supply, and how is this shown on a diagram?
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PES is infinity, represented by a horizontal supply curve. -
Equilibrium, disequilibrium and how a market clears
What is excess demand?
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When the quantity demanded exceeds the quantity supplied at the current price, typically because the price is below equilibrium.
The 10 subtopics
One subtopic is one session. Work down the list.
| Subtopic | What it covers | Questions |
|---|---|---|
| Demand, the demand curve, income and wealth | The demand curve, movements along it and shifts of it, and the effect of income and wealth. | 15 |
| Substitutes, complements and consumer preferences | How the prices of related goods shift demand, and the part played by tastes and social factors. | 17 |
| Price elasticity of demand and total revenue | Calculating PED, the elastic and inelastic ranges, and what each means for a firm's total revenue. | 17 |
| The determinants of price elasticity of demand | Substitutes, share of income, time, necessity and habit, and how to read a calculated value. | 10 |
| Income and cross elasticity of demand | YED and XED, the sign each takes, and what they reveal about normal, inferior, substitute and complementary goods. | 21 |
| The determinants of supply | Production costs, technology, the number of firms, taxes, subsidies and the weather. | 22 |
| Price elasticity of supply | Calculating PES, and the factors that make supply more or less responsive to price. | 25 |
| Equilibrium, disequilibrium and how a market clears | Equilibrium price and quantity, excess demand and excess supply, and how the market corrects itself. | 17 |
| Shifts in demand and supply, and the price mechanism | Predicting the new equilibrium after a shift, and the rationing, signalling and incentive functions of price. | 11 |
| The interrelationship between markets | Joint demand, competitive demand, joint supply and composite demand, and tracing an effect between markets. | 15 |
How the guide is worked
Answering a question from memory stores it far better than reading the answer again. The guide runs that as a fixed procedure on one subtopic at a time, about twenty minutes a session.
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Step 1 · Closed book
Cover the answers. Work through one subtopic and write down what you can. Leave blanks where you have nothing.
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Step 2 · Open book
Go back to the top. Read each printed answer and write it out in full, including the ones you had right.
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Step 3 · Closed book again
Same questions, same order, from memory. The gap between pass one and pass three is the session result.
Read the full method, the return schedule and the research behind it.
Nearby topics
AQA A-Level Economics Active Recall Guide
Every topic, not just this one. 2,344 questions with their answers.