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Can someone mark my AQA 25 mark essay for AS please

Using the data and your economic knowledge evaluate the case for and against government subsidising rail fare. (25 marks)
A subsidy is a part payment for a good /service or in some cases such as education and healthcare it is provided free mainly by the government to reduce the price of a good/service. In this case, the argument lies between the free market and government intervention. Leaving things to the free market can leave consumers very vulnerable as the “rise of fairs by 6%,” could put of many train users.
Rail services today can be very important to workers and travellers as some view travelling by rail as a substitute good as policies such as congestion charge put of travellers by travelling from an alternative such as a car. Alternatively we can argue that there may be other alternatives such as travelling by taxi or cycle. However it is not feasible for someone to travel by taxi as the prices charged can be more than double by going by car and train and cycling will not be very likely if someone lives more than two hours away from their workplace. Therefore we can argue that subsidizing rail fare is very important as it affects many people going to work and travelling and it could lead to other effects such as unemployment. Unemployment may occur due to the high rise in prices as when prices rise it indicates that cost of living has gone higher therefore theoretically, a worker may see that his/her pay has gone worse and may give up their job and due to the double dip recession it may be hard for them to find a job. However by saying this, in economics we assume that people are rational and they are aware that unemployment may occur due to their opportunity cost of giving up their job in a recession .

A major policy which could be considered is a subsidy which reduces price from p1 to p2. These results in an increase in output of quantity demanded from q1 to q2 which shifts supply from s1 to s2. However the extent to which the subsidy benefits the consumer is dependent on the Price Elasticity of Demand. The more inelastic the PED is the more successful the policy is for consumers. Some may argue that rail fares are elastic as there are other substitute goods which can be used such as: travelling by taxi, car and bicycle. However the extract mentions that there are “overcrowding” in London tubes therefore by subsidizing rail fares it means that the demand may increase more heavily and the overcrowding may worsen therefore to some extend it can be said to be inelastic as well. However inferior goods suggest that if your income increases your demand for something will decrease. Therefore this suggests that it also depends on your wealth. If you are rich then definitely the PED of rail tickets is more likely to be elastic however, if you are poorer the PED is more likely to be inelastic. One common question we can ask is if our incomes increased it does not mean that we will go and buy a lot more train tickets. The fact that we have increased in income may mean that we can afford other alternatives such as a car or a taxi. Therefore this suggests that the subsidy is not really effective for the rich as even if you reduce the subsidize by a substantial amount the wealthy such as those earning six figure salaries are still likely to drive their expensive cars and luxuries. This is supported by the fact that giffen goods increase in demand even if price has gone up as well therefore it is upward sloping.
However could this cause more action from the poorer or society. The poorer people are likely to be able to afford the rates of rail at a more affordable price. The need for government subsidy is important as it needs to solve the inequality of distribution which exists in society today and that is the gap between the rich and the poor. Without government intervention the free market will fail to make goods and services more affordable for the poor of society therefore intervention is needed which is also supported by economists like Keynes. However by saying this, government intervention can lead to a net welfare loss which is government failure. This can occur due to inadequate information or the government misjudging the situation. Especially in a time of trouble in the UK where there is a double dip recession the government cannot afford to inflict more problems and troubles without resolving the situation which economists like Milton Freidman also believe. On the other hand, it would be simply unfair to society by letting the fares being too high for the poor which could become too costly for them.

We also need to consider the opportunity cost. As we know countries like Greece and Spain are in deep trouble and especially Greece who have required bailout by the Eurozone two times. Britain has billions of debts and by subsidising rail fare it could cost millions and increase the burden of the debt that we owe. Another scenario which is more likely is Britain cutting spending in another sector. For example, due to the subsidy this could mean that Britain might cut spending on education or healthcare. Consequently this may be a problem as education and healthcare are vital in Britain especially education where fully trained and qualified students generate positive externalities to their employees. This causes a problem because unemployment is a major problem in Britain and one way which is needed to combat it is by providing a better future work force which can be done by investing in better facilities for education. However some may argue that we could use an opportunity cost for a less important factor such as cutting military spending. This will also cause a problem because during times where Britain may be required to go to the war the spending may prevent them from getting adequate and sufficient back up. Also to an extend it can also cause unemployment as many jobs in the army may be made redundant.
Therefore we can argue that it appears that money is very hard to deep into and it seems that there are no real outcomes to where to get the subsidy from. Also the fact that in the long run the subsidy may be more successful is something which politicians just do not approve of because their main aim is to be re-elected in the next election they would try and favour policies which are more short term than long term. In addition to this, a successful subsidy is very hard to measure. How can you measure the amount of subsidy which would be needed to gain higher consumption from consumers? You just do not know but indications such as the PED being inelastic for the poor and elastic for the rich gives you a rough but not accurate idea. Finally by subsidising are you de-incentivising consumers to look for healthy alternatives such as going by bicycle or walking. Also an increase in the number of people will cause an increase in the number of trains to be more used this produces for CO2 emissions for the environments and this could generate a negative externality as the cost to society will be high such as asthma, bronchitis, breathing problems etc. Therefore we could argue that we should incentivise the subsidy on bicycles and use the train subsidy as an opportunity cost. To sum up, it is important to remember that subsidies cost millions for governments so there may be two major problems for it such as government not approving of it and the subsidy not being very successful and inflicting more debt on the government. However the fact that the free market price will be high for consumers I believe it is necessary for the government to intervene to ensure a more fair and stable price is set for all.

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