Edexcel A Level Economics A
Edexcel A Level Economics A 3.1 Business Growth Exam Questions
Free Edexcel A Level Economics A exam questions on 3.1 Business Growth, with mark schemes. Covers sizes and types of firms, organic and inorganic growth, and demergers.
3.1 Business Growth exam questions
1 question pack of real past exam questions with its mark scheme. Answer every question without notes, then mark your answers line by line against the mark scheme.
StemUp mark scheme flashcards
Edexcel A Level Economics A 9EC0 Flashcards (Anki & Quizlet)
Every answer is written in mark scheme wording, so you learn exactly what examiners give marks for. Use them on Anki or Quizlet, then test yourself with the questions on this page.
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About Edexcel A Level Economics A 3.1 Business Growth
3.1 opens Theme 3 by asking why firms grow and how. Exam questions often give you a merger to analyse, so learn the types of integration and their likely effects.
What you need to know
- Sizes and types of firms Reasons why some firms stay small and others grow. Know the principal-agent problem and the difference between public and private sector, and profit and not-for-profit organisations.
- Organic growth Growth by expanding output internally. Know its advantages, such as lower risk, and disadvantages, such as slower growth.
- Inorganic growth Mergers and takeovers. Forward and backward vertical integration, horizontal integration and conglomerate integration, each with advantages and disadvantages.
- Constraints on growth Size of the market, access to finance and owner objectives.
- Demergers Reasons for demergers, such as lack of synergies or diseconomies of scale, and their impact on businesses, workers and consumers.
Common mistakes in 3.1 Business Growth
- Mixing up forward and backward vertical integration.
- Describing a conglomerate merger as being in the same industry.
- Assuming mergers always benefit consumers through economies of scale; they can also lead to higher prices from market power.
- Forgetting the principal-agent problem when discussing why firms pursue growth.
Try three 3.1 Business Growth exam-style questions
1. Define horizontal integration. (2 marks)
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When two firms join together (1) that are at the same stage of production in the same industry (1).
2. Explain one reason why a firm might choose to remain small. (2 marks)
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The owner may want to keep control and avoid the risks of growth (1), or the market may be small or niche so growth is not possible (1).
3. Explain one advantage of backward vertical integration for a manufacturer. (3 marks)
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The manufacturer takes over a supplier (1), securing supplies of raw materials and controlling their quality (1), and removing the supplier's profit margin so costs may fall (1).
3.1 Business Growth FAQs
What does Edexcel A Level Economics 3.1 cover?
Sizes and types of firms, business growth (organic and inorganic, including types of integration), constraints on growth and demergers.
What is the principal-agent problem?
When the managers (agents) running a firm pursue their own objectives rather than those of the owners (principals).
Which paper is Theme 3 examined in?
Paper 1, Markets and business behaviour, together with Theme 1, and the synoptic Paper 3.
Revise this topic with flashcards: Edexcel A Level Economics A 9EC0 Flashcards, with mark scheme answers for Anki and Quizlet.
