AS level Economics Bridging

Task
Summer 2023

Name of the student: ______________________________

Section 1 Economics Basics Terms
Section2 Interpreting diagram
SECTION 1 ECONOMICS TERMS

The activity below is designed to check your knowledge and understanding of some of the key terms.

Each term has an appropriate definition.

Complete the following terms with appropriate definition.

Cost expressed in terms of the next best alternative
Opportunity cost forgone when making a choice

‘ceteris paribus’ Other things remain equal

Good that is non rivalrous and non excludable and
Public good financed through taxation
goods provided by the government that cause positive
Merit good externalities

Effective demand

Income elasticity

Price elasticity
Where demand and supply are equal at a certain price
Equilibrium level
Disequilibrium Where demand and supply are not equal at certain prices
decisions made by households and firms interact to decide
Price Mechanism the allocation of resources

Direct Tax taxes on the income and wealth of individuals and firms

Indirect Tax Taxes on goods and services

Financial assistance given to businesses by the
subsidies government

Deflation sustained fall in the prices of goods and services

The total demand of goods and services that domestic firms
Aggregate demand are willing to supply at given price leve
The total amount of goods and services suppliers are willing to
Aggregate Supply supply at given prices
rises in the price level caused by higher
Cost push inflation costs of production
Demand pull inflation rises in the price level caused by excess demand
the record of a country's economic transactions with
Balance of payment other countries
Balance of terms
The price of a country's currency in terms of another country's currency
Exchange rate

Protectionism

fiscal policy

monetary policy

Economic Development

Economic Growth

Consumer price index

Gross domestic product the total output of a country

SECTION 2 INTERPRETING DIAGRAM

1. Economists make widespread use of diagrams. A diagram can be used to illustrate economic
concepts, to analyse changes in economic conditions and to assess the effects of economic
policies. Indeed, a diagram can be worth a hundred words! Production possibility curves can
be used to show a number of economic concepts including opportunity cost.

Using Figure1.1 state:

1a) The opportunity cost of increasing the output of consumer goods from 60m to 90m consumer
goods.
b) The opportunity cost of producing 80m capital goods.

2. A demand and supply diagram is the best known and probably the most frequently used
diagram in economics. The economists credited with introducing this diagram is Alfred
Marshall (1842-1924) who included examples in his famous textbook Principles of
Economics published in 1890.
In this activity, study the demand and supply diagram, and then answer the questions which
follow:

a) Complete the diagram.

b) Identify what the change in the position of the supply curve is known as.
c) Explain one possible cause of the change in the position of the supply curve.
3. This question is based on applying demand and supply analysis to a labour market.
Ia) Identify the equilibrium wage rate.
b) Explain why the demand curve is downward sloping whilst the supply curve is upward
sloping.

II The diagram shows a firm’s cost curves.Label them appropriately.

4.

a) Describe what economic problem is illustrated by point X.

b) Explain what macroeconomic aim may be achieved by the movement from AB to CD of the
production possibility curve.
 MACRO ECONOMICS
1. An aggregate demand and aggregate supply diagram is useful tool to analyse changes in
the macroeconomy.

a) Explain three of the labels in the diagram.

b) Identify two possible causes of shifts in the AD curve.
c) Describe what effect would an increase in AD be likely to have on inflation and
employment in this case.

2. In analysing the causes and consequences of exchange rate changes, it is very helpful to use
demand and supply diagrams.
a) Identify two possible causes of the change in the value of the pound sterling shown.
b) What effect is the change shown likely to have on the UK’s trade in goods and services
balance?