Introducing the Market | Edexcel A-Level Economics B (9EB0)
Introducing the Market
- 195 questions
- 14 subtopics
- Theme 1: markets, consumers and firms
- Paper 1 and Paper 3
Introducing the Market is examined in Paper 1, Markets and how they work, and in Paper 3, The economic environment and business.
It covers consumer objectives and the demand curve, movements along and shifts of the demand curve, producer objectives and the supply curve, movements along and shifts of the supply curve, equilibrium price and quantity, excess demand, excess supply and market forces, shifts in demand and supply in real markets, limitations of the supply and demand model, functions of the price mechanism, mass markets, niche markets and market growth, market research and consumer insight, market segmentation, market mapping and competitive advantage and adding value, pricing decisions and dynamic markets.
Sample questions from Introducing the Market
Answer each one closed book first, then open the answer.
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Consumer objectives and the demand curve
State the law of demand.
Show the answer
Other things being equal, as the price of a good rises the quantity demanded falls. -
Movements along and shifts of the demand curve
How does a rise in real incomes affect the demand curve for foreign holidays?
Show the answer
Demand shifts to the right, because holidays are a normal good that households buy more of as they become better off. -
Movements along and shifts of the supply curve
Define an indirect tax.
Show the answer
An indirect tax is a tax on spending that is collected by the seller and paid to the government, such as VAT or excise duty. -
Equilibrium price and quantity
What is consumer surplus?
Show the answer
Consumer surplus is the difference between what consumers would have been willing to pay and what they actually pay, shown as the area below the demand curve and above the price. -
Shifts in demand and supply in real markets
Why do house prices respond more than quantity when demand for housing rises?
Show the answer
The supply of housing is very inelastic in the short run, so an increase in demand is absorbed mainly by a higher price. -
Limitations of the supply and demand model
How can speculation drive a price away from the level the model predicts?
Show the answer
Buyers purchasing in the expectation of resale add demand unrelated to use of the good, so the price can rise well above what underlying demand justifies. -
Mass markets, niche markets and market growth
Give two advantages of serving a niche market.
Show the answer
Customers will pay a premium for a product tailored to them, and large firms may not consider the segment worth entering. -
Market research and consumer insight
What is sampling bias?
Show the answer
Sampling bias occurs when the group surveyed is not representative of the target population, so the results systematically misrepresent it.
The 14 subtopics
One subtopic is one session. Work down the list.
| Subtopic | What it covers | Questions |
|---|---|---|
| Consumer objectives and the demand curve | Demand and effective demand, the consumer's objective and utility, the law of demand and the shape of the demand curve, the income and substitution effects, diminishing marginal utility, the axes of a demand diagram, market demand, goods whose demand rises with price, and irrational consumers. | 14 |
| Movements along and shifts of the demand curve | Movements along against shifts of the demand curve, extensions and contractions of demand, substitutes and complements, normal and inferior goods, and how real incomes, advertising, an ageing population and a health scare shift demand, but a good's own price never does. | 15 |
| Producer objectives and the supply curve | Supply and the law of supply, why the supply curve slopes upwards through profit per unit and rising marginal cost, the producer's objectives, market supply, supply over a period of time, perfectly inelastic supply, short-run against long-run responsiveness, loss-making products, and resource allocation. | 14 |
| Movements along and shifts of the supply curve | Movements along against shifts of the supply curve, extensions of supply, and how wages, technology, specific and ad valorem indirect taxes, subsidies, new entrants, external shocks, oil prices and expected future prices shift supply, while a good's own price does not. | 15 |
| Equilibrium price and quantity | Market equilibrium and the market-clearing price, calculating shortages and surpluses, equilibrium as a position of rest, how shifts in demand and supply move price and quantity, the quantity traded, consumer and producer surplus, and why equilibrium can leave consumers unable to buy. | 14 |
| Excess demand, excess supply and market forces | Excess demand and excess supply and how market forces remove them, unsold stock and sell-out concerts as signals, the invisible hand, maximum and minimum prices, rationing a shortage without price, how fast markets clear, late-day price cuts, and pricing above equilibrium. | 14 |
| Shifts in demand and supply in real markets | Recall questions applying demand and supply to real cases — harvests, weather, subsidies, mortgage rates, cheap imports and the minimum wage — and to shifts that work against each other. | 13 |
| Limitations of the supply and demand model | The assumption of other things being equal, predicting the size of price changes, irrational consumers, slow price adjustment, markets dominated by one firm, imperfect information, Veblen goods, externalities, speculation, price controls, two-dimensional simplification, and why the model is still worth using. | 12 |
| Functions of the price mechanism | The rationing, signalling and incentive functions of price, the allocation of resources, how firms respond to rising and falling demand, the growth of home delivery, allocation without central direction, price against queueing, fairness, prices in the labour market, misleading signals, and prices held below market level. | 15 |
| Mass markets, niche markets and market growth | Mass and niche markets, their advantages, disadvantages and risks, pricing in each, why mass-market firms follow the market price, moving from a niche into a mass market, market growth and calculating it, why markets grow, and sales growth against market share. | 13 |
| Market research and consumer insight | Primary and secondary market research and their methods and sources, quantitative against qualitative data, the cost and limitations of each, sample size, sampling bias and question wording, overstated demand, using sales records, and research before entering a niche market. | 15 |
| Market segmentation | Market segmentation and its bases, demographic, geographic and behavioural segmentation, its benefits and pricing, segmenting too finely, measurable and reachable segments, niche marketing, segmentation across a car model range, and how it helps a small firm against a mass-market rival. | 12 |
| Market mapping and competitive advantage | Market maps, gaps and why a gap is not always an opportunity, common axes, market positioning and anticipating competition, competitive advantage and its two routes, cost leadership, why an advantage must be hard to copy, product differentiation and its effect on demand, service, and unique selling points. | 15 |
| Adding value, pricing decisions and dynamic markets | Adding value through service, branding and after-sales support, cost-plus pricing and calculating a mark-up, penetration pricing and price skimming, pricing freedom with little differentiation, short-run output and spare capacity, and stable against dynamic markets and the strategy each needs. | 14 |
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
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