Tuesday, January 8, 2013

Problematic Topics in GCE Edexcel Economics Unit 1 Identified


Students are generally weak in the following topics:

1.  Production possibility frontier (PPF)
  • Unaware that PPF shows so many other things other than opportunity cost, for e.g. living standards, growth and recession, workers are not easily transferred from one use to another and there is no opportunity cost to move from inside PPF towards the boundary
2.  Consumer and producer surplus
  • Unable to differentiate instruction e.g. consumer surplus increase to the area vs. consumer surplus increase by/ gain of consumer surplus is
  • Confusing both the areas between consumer and producer surplus due to pure memorising without understanding
3.  Price elasticity of demand (PED)
  • Unaware that definition can be in the form of formula
  • Unaware that elasticity means sensitivity
  • Thinking that elasticity is gradient
  • Formula is written upside-down
4. Cross elasticity of demand (XED)
  • Confuse substitute as having negative sign and complements as positive sign as a result of memorising without pure understanding
5. Price elasticity of supply (PES)
  • Unable to draw the diagram accurately. Bear in mind, Inelastic PES must be drawn from the horizontal axis while elastic PES from the vertical axis. It is due to the mathematical property
  • Unable to provide a satisfactory explanation for the meaning of inelastic supply or elastic supply
 6.  Taxation
  • Unable to tell the difference between direct and indirect tax
  • Unable to distinguish between specific tax and ad-valorem tax. Bear in mind that specific tax means tax for every unit is fixed irrespective of price while ad-valorem is a % upon the value. The greater the value, the greater will be the divergence/ pivotal shifts
  • Unable to identify and shade the areas of incidence of tax correctly
7.  Subsidy
  • Unable to identify and shade the areas of subsidy
8.  Public goods and free riders
  • Provide too lengthy definition for public good in MCQs
  • Always forget to define free riders
  • Fail to appreciate why public goods are part of market failure
9.  Cost-benefit diagram
  • Does not realise that market failure takes place at Qe where a good is either underprovided/ under consumed (merit goods/ positive externalities) or overprovided/ over consumed (demerit goods/ negative externalities)
  • Does not realise that when we talk about external benefits, we assume that external costs are absent. That is why we label MPC = MSC because MEC = 0 (no divergence). Similarly, when we discuss about external costs, we assume that external benefits are none and so MPB = MSB where MEB = 0 (no divergence)
  • Welfare gain area can also be labeled as welfare loss
10.  Minimum guaranteed price (MGP)


  • Does not understand why a ‘minimum line’ is above equilibrium instead of below. Simple. Bear in mind that in a free market with no government intervention, sometimes a market price can really fall to a low level. To the producers, that price may not be reflective of all the hard work that they have put in and this explains the logic that they should have received more. So, the minimum price they now receive must be above the equilibrium/ market price
11.  Buffer stock diagram

  • There are so many versions of buffer stock diagram and students often face asymmetric information as in which to use. To your best interest, use 
Hope that helps!! You still have about 12 hours to fix this !! Cheers. I am signing off now

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