Edexcel Economics Unit 3 A2 Micro Paper: Explain… | tutor2u Economics
Exam technique advice

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

Explain

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.

Evaluate

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?

For more exam tips and and great reference resources subscribe to our Economics daily digest

You can also follow us on Twitter @tutor2uEcon

Subscribe to email updates from the tutor2u Economics

Join 1000s of fellow Economics teachers and students all getting the tutor2u Economics team's latest resources and support delivered fresh in their inbox every morning.

You can also follow @tutor2uEconomics on Twitter, subscribe to our YouTube channel, or join our popular Facebook Groups.

Job board

Temporary Teacher of Mathematics

Frensham Heights School, Nr Farnham, Surrey

Teaching Vacancies

Recruitment

Advertise your vacancies with tutor2u

Much cheaper & more effective than TES or the Guardian. Reach the audience you really want to apply for your teaching vacancy by posting directly to our website and related social media audiences.

Find our more ›

Advertise your teaching jobs with tutor2u

A New Home for tutor2u Resources

We've just flicked the switch on moving all our digital resources to instant digital download - via our new subject stores.

For every subject you can now access each digital resource as soon as it is ordered. This will always be the latest edition of each resource too (and we'll update you automatically if there is an upgraded version to use).

Simply add the required resources to your cart, checkout using the usual options and your resources will be available to access immediately via your mytutor2u account.