Micro-economic concepts (internal report)
Internal 5 credits Marginal utility Diminishing returns Elasticity Market structures Prices & profitsThe standard names SIX micro-economic concepts, and only these: marginal utility and demand, diminishing returns and supply, elasticity of demand, elasticity of supply, market structures (excluding perfect competition and monopoly — so monopolistic competition and oligopoly), and the role of prices and profits in resource allocation. Achieved explains + models + processes data; Merit does all three in DETAIL; Excellence uses the detailed, modelled, data-supported explanation to JUSTIFY IMPLICATIONS for a consumer, producer and/or government.
1 Reading the notation
The six concepts this standard is limited to, and the explain/detail/justify ladder.📖 Terms the schedule grades you on
3 terms- The six concepts
- Marginal utility & demand; diminishing returns & supply; elasticity of demand; elasticity of supply; market structures (excl. perfect competition/monopoly); prices & profits in resource allocation.
- Illustrate vs support
- Achieved uses a model to ILLUSTRATE the explanation. Merit uses it to SUPPORT a detailed explanation — doing explanatory work, not just accompanying the text.
- Justify implications (Excellence)
- Draw out and defend what a concept means for a named consumer, producer and/or government's decisions.
2 Marginal utility and demand
Diminishing marginal utility is WHY demand slopes down. Exam-style Linking marginal utility to the demand curve Explain why a consumer buys less of a good as its price rises. Each additional unit of the good delivers LESS extra satisfaction than the one before (diminishing marginal utility). A rational consumer buys a unit only if the price is at or below the value of the satisfaction (utility) it delivers. As price rises, fewer units clear that bar, so quantity demanded falls — tracing the same shape as the marginal utility curve. ✓ The demand curve is, in effect, the marginal utility curve translated into price terms — showing this link explicitly is what "support" (Merit) looks like.3 Diminishing returns and supply
Rising marginal cost from diminishing returns is WHY supply slopes up.The derivation chain
- Fixed inputs (a factory, land) stay constant; a variable input (labour) increases.
- Beyond some point, each additional worker adds LESS extra output than the last (diminishing marginal returns).
- Producing each extra unit therefore costs MORE (rising marginal cost).
- A firm supplies more only at a higher price, covering that rising cost — the upward-sloping supply curve.
4 Elasticity of demand and supply
Both measure responsiveness to a price change — apply the determinants to your own organisation.| PED | PES | |
|---|---|---|
| Formula | %ΔQd ÷ %ΔP | %ΔQs ÷ %ΔP |
| Main determinants | Substitutes, necessity/luxury, income share, time | Spare capacity, time |
| Elastic means | Quantity demanded very responsive | Quantity supplied very responsive |
Both become MORE elastic over a longer time horizon — consumers find substitutes, and producers build capacity, given time.
5 Market structures: monopolistic competition and oligopoly
The standard explicitly EXCLUDES perfect competition and monopoly — these two are what remain.| Feature | Monopolistic competition | Oligopoly |
|---|---|---|
| Number of firms | Many | Few, large |
| Product | Differentiated | Often similar; branding matters |
| Entry barriers | Low | High |
| Firm behaviour | Independent pricing, non-price competition | INTERDEPENDENT — each reacts to rivals |
6 The role of prices and profits in resource allocation
The signalling mechanism that moves resources between industries with no central planner.The chain to state explicitly
- A price rise signals relative scarcity or high demand.
- Above-normal profit attracts new firms and resources INTO that industry.
- Increased supply from new entrants tends to bring the price back down.
- Losses drive firms and resources OUT of an industry — the same mechanism in reverse.
Practice
Recall it first, then use it — testing yourself builds the memory, where rereading the notes above only feels easier.
Recall and application shuffled together — you have to work out what each item wants before you can answer it, which is the part the exam actually tests. Both kinds feed the same spacing schedule, so anything you miss comes back sooner.
Say the answer out loud before flipping — that attempt is where the learning happens, even when you get it wrong.
Exam-style only. Instant feedback, shuffled each attempt, best score saved on this device.