Edexcel International A Level Economics Introductory Concepts Exam Questions

About Edexcel International A Level Economics Introductory Concepts

Introductory concepts opens Unit 1 of Edexcel International A Level Economics and sets up the language you will use throughout the course. You learn how economists study behaviour, what the basic economic problem of scarcity means, and how production possibility frontiers show choice and opportunity cost. You also look at specialisation and the division of labour, why money is needed, and how different economic systems allocate resources. These ideas reappear in every unit: opportunity cost in policy evaluation, PPFs in economic growth and specialisation in international trade. Examiners test definitions, PPF diagrams and the distinction between positive and normative statements.

What you need to know

• Economics as a social science Economists use models built on assumptions, such as ceteris paribus, but cannot run controlled experiments in the way natural scientists can.
• Positive and normative statements Positive statements are objective and can be tested against evidence. Normative statements contain value judgements, often signalled by words like 'should' or 'fair'.
• The economic problem Wants are unlimited but resources are scarce, so choices must be made. Opportunity cost is the value of the next best alternative forgone. The factors of production are land, labour, capital and enterprise.
• Production possibility frontiers A PPF shows the maximum combinations of two goods an economy can produce with its resources. Points inside show unemployed resources, points on the curve are productively efficient, and an outward shift shows economic growth.
• Specialisation and money Specialisation and division of labour raise productivity but increase dependence and repetitive work. Money acts as a medium of exchange, measure of value, store of value and method of deferred payment.
• Economic systems Free market, command and mixed economies differ in how resources are allocated. Know the arguments of thinkers such as Adam Smith, Karl Marx and Friedrich Hayek.

Common mistakes in Introductory Concepts

• Defining opportunity cost as the cost of something in money. It is the next best alternative given up.
• Classing a statement as positive because it sounds factual. A positive statement can be tested, even if it turns out to be false; a normative one depends on opinion.
• Showing growth by moving a point along the PPF. Moving along the PPF shows reallocation; growth is an outward shift of the whole curve, or a move from inside to on the curve for actual growth.
• Explaining why a PPF is curved without mentioning resources. It is concave because resources are not equally suited to producing both goods, so opportunity cost rises.
• Listing functions of money without explanation. Briefly explain each, for example a medium of exchange removes the need for a double coincidence of wants.

Try three Introductory Concepts exam-style questions