Syllabus: AQA A-level Economics
Module: Individuals, Firms, Markets and Market Failure
Lesson: 4.1.5 Perfect Competition, Imperfectly Competitive Markets, Monopoly

Introduction

This lesson focuses on Section 4.1.5 of the AQA A-level Economics syllabus​, covering Perfect competition, imperfectly competitive markets, and monopoly. These topics are fundamental to microeconomic understanding and appear consistently across multiple specifications, including Cambridge International and Pearson Edexcel​​. Students are expected not only to master theoretical models but also to critically apply them to real-world markets and assess their relevance. This module builds their capability to analyse market structures, price mechanisms, and business behaviours—all essential for both higher education and employment.

Key Concepts

The AQA syllabus​ outlines several essential areas within this topic:

• Perfect Competition:

  • Characteristics: many buyers and sellers, homogenous products, free entry and exit, perfect information.

  • Outcomes: allocative and productive efficiency in the long run.

• Monopolistic Competition:

  • Large number of firms, differentiated products, some price-setting power.

  • Short-run supernormal profits and long-run normal profits due to ease of entry.

• Oligopoly:

  • Few dominant firms, interdependent decision-making, potential for collusion.

  • Outcomes range from competitive pricing to monopoly-like behaviours.

• Monopoly:

  • A single seller dominates the market.

  • Potential for productive and allocative inefficiency, higher prices, and consumer exploitation.

• Comparison across Market Structures:

  • Static efficiency (allocative, productive) vs dynamic efficiency (innovation over time).

  • Impact on consumer welfare and market outcomes.

Students must be able to use diagrams (such as cost and revenue curves) and apply models to unfamiliar contexts.

Real-World Relevance

Understanding these structures equips students to interpret a range of contemporary examples:

• Perfect competition is rare but agricultural markets (e.g., wheat, maize) can approximate it under ideal conditions.

• Monopolistic competition is seen in industries like restaurants or hairdressing, where branding creates slight differentiation.

• Oligopolies dominate sectors such as the UK supermarket industry (Tesco, Sainsbury’s, Asda, Morrisons) and telecoms (BT, Vodafone, EE).

• Monopolies such as Google in search engines or local water suppliers demonstrate the real impacts of market power on pricing and innovation.

Mini Case Example: The UK broadband market shows oligopolistic behaviour, with a few firms controlling access to networks, leading to questions around pricing strategies and regulatory intervention.

How It’s Assessed

In AQA A-level Economics​, students will face:

• Data Response Questions: Short extracts on a real or hypothetical market followed by structured questions.

• Essay Questions: Typically requiring critical evaluation of market structures, supported by diagrams and examples.

• Command Words to Watch:

  • Analyse: Chains of reasoning.

  • Evaluate: Balanced arguments, supported judgement.

  • Discuss: Detailed exploration, considering multiple viewpoints.

Students should expect multi-step questions requiring both theoretical knowledge and real-world application.

Enterprise Skills Integration

This topic naturally links to enterprise competencies:

• Problem-solving: Analysing how different market structures affect outcomes and proposing interventions.

• Decision-making: Judging strategic business behaviours within different structures.

• Critical thinking: Evaluating the benefits and drawbacks of monopolies or oligopolies for consumers and firms.

• Communication: Structuring clear, logical arguments supported by real examples—a skill transferable to any career path.

Recommended Tool: MarketScope AI from Enterprise Skills can help simulate different market conditions for student analysis​.

Careers Links

Curriculum content supports Gatsby Benchmark 4 and 5​, connecting learning to real-world skills:

• Economist roles: Public sector (CMA, Bank of England), private sector (consulting, finance).

• Market analysts: Working within companies to interpret competitive environments.

• Business strategy consultants: Advising firms on market entry or competition strategies.

• Policy advisors: In government departments regulating competition.

• Entrepreneurship: Understanding competitive positioning and pricing strategies.

Career-connected classroom tasks could include market structure case studies linked to future job roles.

Teaching Notes

• Common Pitfalls:

  • Students often memorise characteristics without applying them to dynamic market examples.

  • Diagrams: Make sure they can draw and label cost and revenue diagrams accurately.

• Teaching Tips:

  • Use live case studies (like the CMA investigating mergers) to ground theory in practice.

  • Encourage students to debate the merits and downsides of monopolies—this builds evaluation skills.

  • Role-play activities: Students act as firms within different market structures to internalise behaviours.

• Extension Activities:

  • Research project: Students analyse a local market (e.g., cafes) and classify it according to economic theory.

  • Link to other areas: Draw connections to labour markets (oligopolistic structures in professional football, for example).