Business analysis is a chain of consequences anchored to a cost/revenue diagram. For example:
AO3 Analysis — build the chain
Business analysis is a chain of consequences anchored to a cost/revenue diagram. For example:
Worked example
Model chain — a firm gains market power
Fewer competitors → the firm faces a more inelastic demand curve → it profit-maximises at MC = MR with output restricted → price is set above MC (show on a monopoly diagram) → consumers pay more and allocative efficiency falls → therefore consumer welfare may decline.
AO4 Evaluation — the MICE toolkit
| Letter | Prompt | Unit 3 example |
|---|---|---|
| M — Magnitude | How big is the effect? | How much market power? How large the economies of scale? |
| I — It depends | On what conditions? | On contestability, barriers to entry, and elasticity. |
| C — Counter-argument | What's the other side? | Monopolies fund R&D (dynamic efficiency) and reap economies of scale. |
| E — Economic context | Which market & time frame? | Short vs long run; competitive vs monopsony labour market. |
Exam tip
The single most powerful Unit 3 evaluation point is contestability: a firm with a large market share may still behave competitively if entry is easy. Pair every "monopoly is bad" point with "…unless the market is contestable".
Viewing only
This content is free to read on superexams.com and cannot be printed or downloaded.
Read the full note, free
Create a free account to read this note in full. Every free account gets 2 complete revision notes, no card needed.