Edexcel Economics Unit 3 A2 Micro Paper: Explain… | tutor2u Economics
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Edexcel Economics Unit 3 A2 Micro Paper: Explain and Evaluate a Change in Company Profits - Applying a Real-World Scenario

As an Edexcel economics student, you'll be very familiar with a common question in the Unit 3 A2 micro paper data response section where you're asked to explain and evaluate a change in company profits (making use of a diagram too).

This story on Domino's provides you with an excellent bit of real world application for this question.

Domino's Pizza has announced a huge increase in its profits:

Read Domino's pizza boosted by mobile app


There are two clear reasons that explain Domino's increased profit:

An increase in demand driven by online sales

An increase in demand from online sales shifts the demand and marginal revenue curves to the right.

As a result, the profit maximising level of output where MC=MR has now moved and leads to a larger profit area (ceterus paribus).

A fall in cost of cheese and dough

In addition though, we are told that variable costs (the costs which change with output) fall as the price of cheese and dough fall.

You will now need to recognise that this leads to both AC and MC shifting downwards.

The result is an increase in the firm's profit area.


You would then be expected to evaluate the significance of this increased profit for Domino's:

  • Do you have enough info?
  • Is the data reliable?
  • Is it just a short-lived increase in profits?

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