44 Diagrams for A-level Economics: Microeconomics

This article below contains some key diagrams for A-level microeconomics exams. Suitable for AQA, Edexcel A and other exam boards.

Contents

Microeconomics diagrams PDF

A PDF file of the diagrams is here:

The most important microeconomics diagrams

Here are five important sets of diagrams you should be reviewing ahead of your exams.

Supply and demand

You can use supply and demand to show:

• The effects of changes in costs (shifting supply) on market outcomes. [Supply notes for AQA].
• The effect of changes to income, advertising, tastes and so on on market outcomes. [Demand notes for Edexcel and AQA]
• The role of the price mechanism in the market adjusting to equilibrium. [Price mechanism notes for Edexcel]

Supply and demand diagrams do not need to be simple. For the 25 marker essays, consider levelling up these supply and demand diagrams. This could include:

• Showing the price mechanism following a shift in demand.
• Showing changes in consumer surplus and/or producer surplus.

Economic policy with supply and demand

Supply and demand diagrams can also show the effects of microeconomic policies. This includes:

• Taxes
• Subsidies
• Maximum and minimum prices.
• Tradable pollution permits.
• Regulation.

For these policies, you can also level up these diagrams for your essays. For example:

• Taxes and subsidies: Show the incidence or burden of the tax or subsidy.
• All policies: Show the change in consumer surplus, producer surplus or the effect on social welfare.

Externality diagrams

• Market failures from positive and negative externalities.
• Layer with taxes or subsidies to show how policies can increase social welfare.
• Show how technological change can reduce the extent of externalities.

Monopoly cost and revenue

The monopoly cost-revenue diagram is one of the most flexible diagrams in economics.

Depending on the essay, this diagram can show different things:

• The effect of market power on prices.
• Different business objectives such as profit maximisation and sales maximisation.
• Contestable markets and how they affect the behaviour of incumbent firms.
• The effect of a price cap or privatisation.
• The consequences of cost or revenue changes for individual firms. This could involve showing shifts in cost or revenue curves.

Labour market supply and demand

Labour markets are another key topic for A-Level Economics courses.

Supply and demand diagrams for labour markets can be used to illustrate several points:

• Effects of education policy.
• Effects of other changes in labour supply or labour demand.
• The causes of wage gaps.
• Minimum wages and trade unions and how they may cause unemployment in (competitive) labour markets.

There are other diagrams you should revise, including those in the file above. These five sets of diagrams are the most important.

Related questions

How to use paper 1 diagrams – basics

Use diagrams to make your analysis easier and think of points. If you’re unsure what point to make in a 25 marker, ask yourself: “what diagram could I draw here?”.

The basics of diagrams – use the acronym SCALE:

• S for shift. Show the shift of curve in your diagram if a shift is needed (it often is)
• C for coordinates. Show the coordinates of any key points.
• A for axes – make sure the axes are labelled (price, quantity for example)
• L for label – label all lines or curves e.g. S and S1.
• E for explanation – describe what happens in the diagram in the text and explain why this happens.

Use this to make sure you don’t forget the basics.

How to draw high level diagrams for your economics essays.

For microeconomics, high level diagrams often involves labelling areas.

This could include producer and consumer surplus, revenue for government or firms, welfare loss or gain, the price mechanism and supernormal profit for example.

When writing 25 markers with 2 analysis points only, you need to extend the diagram analysis. To do so, consider these methods:

• For supply / demand, extend by showing the price mechanism or consumer / producer surplus changes.
• For cost / revenue diagrams, can extend by discussing effects on producers (“PIES: profits, investment, employment/efficiency and shutdown) or consumers (quality and consumer surplus).
• For cost and benefit diagrams, can consider further welfare effects. If a tax eliminates a negative externality, maybe the tax revenue can be used to further improve welfare. 
• For labour market diagrams, consider the worker surplus (the surplus on the supply side) and associated effects on poverty and inequality.

These are just examples and there are other ways to do it. This also only applies if you cannot write enough analysis – if you already have enough analysis there is less need to extend further.

Other diagrams you may wish to include

The above list of diagrams is not comprehensive. It covers almost all diagrams but not every diagram.

Other diagrams that are not included above, but that you may wish to revise, include (but are not limited to):

• Marginal, average and total product
• Lorenz curve (AQA micro, Edexcel A macro).
• Short run to long run elasticity change e.g. on agriculture market and PES.
• Price elasticities of demand – perf inelastic, perf elastic, elastic, inelastic unitary. Similarly for PES.
• Types of interrelationships between goods – complements, substitutes, joint demand, joint supply etc.
• PED varying along a linear demand curve
• Information gaps eg perceived vs actual MPB.
• Shutdown points for some exam boards (Edexcel A).
• Contestable market, where the monopoly produces where AR=ATC. / comparing monopoly and perfect competition outcomes.
• Second-degree price discrimination / filling up capacity third degree // peak vs off peak pricing.
• First-degree price discrimination.
• Perfectly competitive labour market.
• Movement along demand or supply.
• Collusion in a cost-revenue diagram.
• Engel curves for some exam boards.
• Note that demand shifts in a supply-demand diagram can be used for adverse selection, moral hazard and behavioural bias / nudge analysis.

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