The Definitive Diagram Masterlist — WEC12

#VERIDIAN V6 Economics | Pearson Edexcel IAL WEC12/01

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#THE RULE THAT COST YOU 4 MARKS

In the January 2025 paper, Q8 was a Draw question worth 4 marks. You left it blank: 0/4.

A partially drawn, partially labelled diagram — even if imperfect — earns partial marks. A blank earns nothing.

From the October 2021 Examiner's Report:

"The most common cause for dropped marks was in the labelling of the axes or the labelling of the equilibria before and after the change." "It is important that candidates accurately label their diagrams, select the correct diagram in their answer and consider multiple shifts."

The rule before every exam: Know all 8 diagrams. Draw each from memory until the labelling is automatic. Never leave a diagram blank.

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#THE 5-STEP DIAGRAM PROTOCOL — EVERY TIME

1. Draw and label BOTH axes first (before any curves)
2. Draw and label original curve(s) with subscript 1
3. Draw the shift — label new curve with subscript 2, add directional arrow
4. Mark original equilibrium: P₁ and Y₁ with dotted lines to both axes
5. Mark new equilibrium: P₂ and Y₂ with dotted lines to both axes

Never draw curves before labelling axes. Never leave equilibria unlabelled.

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#DIAGRAM 1 — AD/SRAS (Standard Demand Shock)

Frequency: VERY HIGH — appears in multiple questions every paper

#When Required

• Any question about expansionary/contractionary demand-side policy
• Questions about changes in C, I, G, X−M
• Questions about the economic cycle, output gaps, recession/boom
• The 6-mark Analyse and 8-mark Examine in Section C
• The 20-mark essay in Section D (optional but mark-earning if correct)

#Compulsory Labels — Missing Any = Missing Marks

#Drawing It — Exactly

P (Y-axis)
│
│        SRAS₁
│       /
P₂ ----/------------ ← new equilibrium
│     /⟋
P₁ --/----           ← original equilibrium
│  /      ↗AD₂
│ /    AD₁
│/_____________ Real GDP (X-axis)
       Y₁   Y₂

Dotted lines from P₁ to Y₁ (original) and P₂ to Y₂ (new). Both equilibria must be visible.

#Two-Shift Rule

If the question implies two simultaneous changes (e.g. an oil price shock affects both SRAS and AD for a net oil importer), draw BOTH shifts. Drawing only one earns 1/4 at best.

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#DIAGRAM 2 — AD/LRAS (Classical Output Gap)

Frequency: HIGH — output gap questions, potential growth, supply-side policy

#When Required

• Questions about output gaps (positive or negative)
• Questions about long-run equilibrium and sustainable output
• Supply-side policy analysis (LRAS shift)
• The distinction between actual and potential growth

#Compulsory Labels

#LRAS vs SRAS — The Most Common Error

LRAS must be vertical. If you draw it upward sloping, you have drawn SRAS. The examiner will not give marks for LRAS when SRAS is drawn.

P (Y-axis)
│               LRAS
│               |
│         SRAS₁ |
│        /      |
P₁ -----/-------+-----  ← equilibrium at Yf
│      /        |
│    AD₁        |
│_______________+_______ Real GDP
               Yf

#Negative Output Gap (Y < Yf)

P (Y-axis)
│                     LRAS
│              SRAS₁  |
│             /       |
P₁ ----------/--------+----
│           /         |
│         AD₁         |
│__________+__________+____ Real GDP
           Y₁         Yf
           ↑          ↑
        actual     potential
         (gap between Y₁ and Yf)

#Positive Output Gap (Y > Yf)

P (Y-axis)
│                LRAS
│               |  SRAS₁
│               | /
P₂ ------------+/--  ← above Yf = inflationary
│              |/
P₁ -----------/+---
│           AD₂|  ← shifted past Yf
│           AD₁|
│_______________+___________ Real GDP
               Yf Y₂

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#DIAGRAM 3 — KEYNESIAN AS MODEL

Frequency: MEDIUM — appears when Keynesian economics explicitly referenced

#When Required

• Questions about Keynesian demand management
• Questions contrasting Keynesian vs classical economics
• The "reverse-L" shape LRAS (as alternative to vertical LRAS)

#Structure

The Keynesian AS curve has three sections:

1. Horizontal section (at low output): excess capacity — price level unchanged as output rises
2. Upward-sloping section (approaching capacity): rising costs as full employment nears
3. Vertical section (at full capacity): perfectly inelastic — only prices rise

P (Y-axis)
│                          AS (Keynesian)
│                        /|
│                       / |
│                      /  |
│                     /   |
│                    /    |
P_flat ─────────────/     |
│                  ←flat→ |
│__________________________+___ Real GDP
                           Yf

#Key Label

• Label Yf at the top of the vertical section
• The horizontal section must be labeled (or implied by) "spare capacity / recession zone"

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#DIAGRAM 4 — SHORT-RUN PHILLIPS CURVE

Frequency: MEDIUM-HIGH — inflation-unemployment trade-off questions

#When Required

• Any question about the relationship between inflation and unemployment
• Questions about demand-pull inflation and its costs
• Questions about macroeconomic policy conflicts (inflation vs unemployment)
• Monetary policy questions that reference the employment impact

#Compulsory Labels

#Drawing It

Inflation
Rate (%)
│
│ ×  (high inflation, low unemployment — expansionary economy)
│
│    ×
│       ×  SRPC
│           ×
│               × (low inflation, high unemployment — recession)
│___________________________ Unemployment Rate (%)
                    NRU

#Examiner Trap

The Phillips Curve is downward sloping in Inflation-Unemployment space. Students sometimes confuse the axes. Y-axis = Inflation, X-axis = Unemployment — not the reverse.

#LRPC (Long-Run Phillips Curve)

Vertical at the natural rate of unemployment (NRU / NAIRU). Useful for evaluating the long-run claim that the trade-off breaks down as inflation expectations adjust.

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#DIAGRAM 5 — CIRCULAR FLOW OF INCOME

Frequency: MEDIUM — national income, multiplier questions

#When Required

• Questions about injections and withdrawals
• The multiplier process
• National income equilibrium
• Questions referencing the circular flow

#Compulsory Elements

HOUSEHOLDS ←————————— income ←————————————
              |                                    |
              | consumer expenditure               | wages/rent/profit
              ↓                                    |
           FIRMS ————————————————————————————————→
              ↑                     ↓
              |              WITHDRAWALS: S, T, M
              |              INJECTIONS: I, G, X

Labels required:

• "Households" and "Firms" in their boxes
• Arrow directions (money flow and real flow)
• Injections: I (investment), G (government spending), X (exports)
• Withdrawals: S (savings), T (taxes), M (imports)

#Key Point for Analysis

An injection increases the size of the circular flow; a withdrawal reduces it. The multiplier operates through the circular flow: an injection circulates through successive rounds of spending until the entire amount has leaked out as withdrawals.

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#DIAGRAM 6 — CONSUMPTION FUNCTION

Frequency: LOW-MEDIUM — MPC, savings ratio, consumption questions

#When Required

• Questions specifically about the consumption function
• MPC-related calculations or analysis
• Savings ratio and its relationship to consumption

#Labels

Consumption
(C)
│         /  (slope = MPC)
│        /
│       /
│      /
│     /
C₀ ──/   ← autonomous consumption (intercept when Y=0)
│   /
│__/__________________________ Disposable Income (Y)

Required labels:

• Y-axis: "Consumption (C)"
• X-axis: "Disposable Income (Y)" or "National Income (Y)"
• Intercept: "C₀" or "autonomous consumption"
• Slope gradient note: "MPC = ΔC/ΔY" (optional but mark-earning)
• 45° reference line (shows where C = Y — breakeven point)

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#DIAGRAM 7 — AD/AS WITH MULTIPLIER

Frequency: LOW — specific multiplier effect questions

#When Required

• Questions that specifically ask about the multiplier process
• Questions asking to illustrate how an injection leads to a larger final change in income

#Drawing It

Show three AD positions:

• AD₁ = original
• AD₂ = after initial injection
• AD₃ = after full multiplier effect

P (Y-axis)
│        SRAS
│       /
│      /
│     / ---AD₃ (after multiplier)
│    /  --AD₂ (after injection)
│   / AD₁ (original)
│  /
│ /
│/__________________________ Real GDP
  Y₁    Y₂    Y₃
  ↑      ↑      ↑
original after  after
         inject multi

The gap between Y₁ and Y₂ = size of initial injection. The gap between Y₁ and Y₃ = multiplied final income change.

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#DIAGRAM 8 — J-CURVE

Frequency: LOW-MEDIUM — current account and exchange rate questions

#When Required

• Questions about currency depreciation and the current account
• Questions about the Marshall-Lerner condition
• Any question where depreciation is proposed as a remedy for a current account deficit

#Labels

Current Account
Balance (+/-)
│
│                    ___________  ← improved current account (long run)
│                   /
│ Original ────────/
│ balance         /
│               \/  ← short-run worsening (J-curve trough)
│
│_______________________________→ Time
        ↑
   Depreciation
   occurs here

Required labels:

• Y-axis: "Current Account Balance" with + above and − below the zero line
• X-axis: "Time"
• Point of depreciation (vertical marker on X-axis)
• Original balance level
• The trough (short-run worsening)
• The long-run improvement level (above original)

#The Key Explanation

Short-run: import costs rise faster than export volumes increase (contracts pre-set) → deficit worsens. Long-run: export volumes rise and import volumes fall as price signals take effect → current account improves. Condition: Marshall-Lerner must hold in the long run (PEDₓ + PED_m > 1).

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#DIAGRAM USE IN SECTION D ESSAYS

From Oct 2021 Examiner's Report:

"Some candidates drew appropriate and accurate diagrams and incorporated them with sound analysis. This facilitated them in consistently achieving within the top levels."

The rule: Draw a diagram in Section D only if you can label it completely in under 90 seconds.

• A correct, fully labelled AD/AS diagram integrated into analysis: earns 1 AO3 mark, can push borderline L3→L4.
• A mislabelled or partially drawn diagram: earns 0 marks and wastes 90 seconds.
• If uncertain: write the chain instead. A complete 5-stage written chain always outscores a mislabelled diagram.

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#DIAGRAM EXAM DAY CHECKLIST

Before moving on from any diagram:

• Both axes fully labelled (exact labels, not abbreviations that could be confused)
• All curves labelled with subscripts (AD₁, not just AD)
• Shift direction shown with an arrow
• New curve labelled with subscript 2
• Original equilibrium: P₁ and Y₁ (or equivalent) with dotted lines to both axes
• New equilibrium: P₂ and Y₂ with dotted lines to both axes
• If two shifts required: both drawn
• Diagram is not left blank — even a partial attempt earns partial marks

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#QUICK REFERENCE — WHICH DIAGRAM FOR WHICH QUESTION?

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VERIDIAN V6 Economics | WEC12 Diagram Masterlist | Pearson Edexcel IAL Unit 2