Edexcel Economics: Unit 1 Competitive Markets (June 2014) 6EC01 *official thread*

Don't really understand how to answer section B 14 marker questions. Is there a certain approach you can take?

Don't really understand how to answer section B 14 marker questions. Is there a certain approach you can take?

Nice thread, should be useful in the run up to the exam!

Thanks! Hope this thread will help those who are taking this exam. Are you taking it too?

Please do come back to this thread, I will be doing more of these if requested

Structure for any 14 marker: 8 marks allocated for KAA (knowledge, application and analysis); remaining 6 marks for evaluation.

Tip: an externalities question always comes up in unit 1 section B as a 14 marker, so please be prepared to illustrate your answer with a diagram (an externalities diagram), as it will state it in the question usually. However, please note there is usually another 14 marker that comes up as well as the externalities 14 marker. The structure applies for both 14 markers.

I will show you how the marks are allocated for both types of 14 markers down below.


Example of a model question and answer for 14 mark externalities question:

Q: There is likely to be a major house-building programme in South-East England over the next few years. Using examples, evaluate the likely costs of this housebuilding programme. Illustrate your answer with a diagram (14 marks).

KAA (knowledge, application and analysis): worth 8 marks

- Define private costs (cost borne by a producer) and then give an example of a private cost relevant to the question e.g. bricks, cement, wages for labour workers *1 mark*

- Define external cost (cost borne to a third party outside of the transaction) *1 mark* and then give 2 examples of external costs relevant to the question and make sure you state which stakeholder e.g. community, producers, consumers, local residents the cost will impact on:
1) Local wildlife - there will be more fields if more houses are being built, impacts on the animals and their habitats. *1 mark*

2) Noise pollution (never ever just state pollution, describe what type of pollution) from the building works, will impact on local residents. *1 mark*

- Draw an externalities diagram - you will have learnt 2 types, positive and negative. Draw only one that is relevant to the question. In this case, the question is talking about costs therefore do a negative externalities diagram. If there question was about benefits, then do a positive externalities diagram. *4 marks*

Evaluation: think of possible external benefits that the theory has ignored, worth 6 marks so do 3 evaluation points. Again, state which stakeholder has benefitted from external benefits.

- Local community benefitted as more houses are being built, therefore they have a place to live - less crime, less poverty. *2 marks*

- Government's tax revenue increases because people will be paying council tax once the houses are built and have people living in there. *2 marks*

- Once houses are built with people living in there, they are most likely to visit their local shops - local shops benefit because they will be getting more profit if there are more consumers in their area. *2 marks*



- Time scale: in the short run, there will only be noise pollution only for the period of time the builders are working, in the long run there won't be noise pollution from the builders once they have finished building.

- Magnitude: depends on how many house are actually being built, is it only 5 or 50 houses built? If its only a little amount of houses being built, may not be really beneficial.

- Difficult to measure the marginal external cost: e.g. how much noise pollution impacts local community?



____________________________________________________________




Example of a model question and answer for a normal 14 mark question which is not an externalities question:

Q: Discuss the possible economic effects of an increase in university tuition fees on the market for higher education (14 marks).


KAA (knowledge, application and analysis): worth 8 marks therefore make 4 points (2+2+2+2). Discuss possible effects for different stakeholders e.g. students, parents, universities, government etc.

- Students: A decrease in number of young people going to university. *2 marks*

- Universities: Increased funds for staff salaries. *2 marks*

- Students may consider local university so as to reduce accommodation costs / option of studying overseas. *2 marks*

- Government: Reduction of government funding for universities / could reduce budget deficit. *2 marks*


Evaluation: worth 6 marks therefore make 3 evaluation points (2+2+2).

- Students: Students from low income backgrounds get financial support so may not be discouraged from going to university.

- Government: It may take time before government finances improve since time lag before graduates repay loans / some graduates may evade repaying loans / some graduates are out of work so do not repay loans / significant amount of funds raised as many people graduate each year.

- Increased role for market forces: development of the idea that market forces have a greater influence in higher education and there is less role for the government / there is a danger of market failure due to under-consumption.

____________________________________________________________


Tips to getting full marks: ALWAYS refer back to the case study, use the data provided to back up your points - they're there for a reason so utilise them!

Hope this helps and answers your question

Thank you, that helps a lot

I want to ask something;
If you write an answer that isn't mentioned in the mark scheme (talking about the 8-14 mark questions) can they still award you with marks providing its relevant/makes sense?

I want to ask something;
If you write an answer that isn't mentioned in the mark scheme (talking about the 8-14 mark questions) can they still award you with marks providing its relevant/makes sense?

Structure for any 14 marker: 8 marks allocated for KAA (knowledge, application and analysis); remaining 6 marks for evaluation.

Tip: an externalities question always comes up in unit 1 section B as a 14 marker, so please be prepared to illustrate your answer with a diagram (an externalities diagram), as it will state it in the question usually. However, please note there is usually another 14 marker that comes up as well as the externalities 14 marker. The structure applies for both 14 markers.

I will show you how the marks are allocated for both types of 14 markers down below.


Example of a model question and answer for 14 mark externalities question:

Q: There is likely to be a major house-building programme in South-East England over the next few years. Using examples, evaluate the likely costs of this housebuilding programme. Illustrate your answer with a diagram (14 marks).

KAA (knowledge, application and analysis): worth 8 marks

- Define private costs (cost borne by a producer) and then give an example of a private cost relevant to the question e.g. bricks, cement, wages for labour workers *1 mark*

- Define external cost (cost borne to a third party outside of the transaction) *1 mark* and then give 2 examples of external costs relevant to the question and make sure you state which stakeholder e.g. community, producers, consumers, local residents the cost will impact on:

1) Local wildlife - there will be less fields if more houses are being built, impacts on the animals and their habitats. *1 mark*

2) Noise pollution (never ever just state pollution, describe what type of pollution) from the building works, will impact on local residents. *1 mark*

- Draw an externalities diagram - you will have learnt 2 types, positive and negative. Draw only one that is relevant to the question. In this case, the question is talking about costs therefore do a negative externalities diagram. If there question was about benefits, then do a positive externalities diagram. *4 marks*

Evaluation: think of possible external benefits that the theory has ignored, worth 6 marks so do 3 evaluation points. Again, state which stakeholder has benefitted from external benefits.

- Local community benefitted as more houses are being built, therefore they have a place to live - less crime, less poverty. *2 marks*

- Government's tax revenue increases because people will be paying council tax once the houses are built and have people living in there. *2 marks*

- Once houses are built with people living in there, they are most likely to visit their local shops - local shops benefit because they will be getting more profit if there are more consumers in their area. *2 marks*



- Time scale: in the short run, there will only be noise pollution only for the period of time the builders are working, in the long run there won't be noise pollution from the builders once they have finished building.

- Magnitude: depends on how many house are actually being built, is it only 5 or 50 houses built? If its only a little amount of houses being built, may not be really beneficial.

- Difficult to measure the marginal external cost: e.g. how much noise pollution impacts local community?



____________________________________________________________




Example of a model question and answer for a normal 14 mark question which is not an externalities question:

Q: Discuss the possible economic effects of an increase in university tuition fees on the market for higher education (14 marks).


KAA (knowledge, application and analysis): worth 8 marks therefore make 4 points (2+2+2+2). Discuss possible effects for different stakeholders e.g. students, parents, universities, government etc.

- Students: A decrease in number of young people going to university. *2 marks*

- Universities: Increased funds for staff salaries. *2 marks*

- Students may consider local university so as to reduce accommodation costs / option of studying overseas. *2 marks*

- Government: Reduction of government funding for universities / could reduce budget deficit. *2 marks*


Evaluation: worth 6 marks therefore make 3 evaluation points (2+2+2).

- Students: Students from low income backgrounds get financial support so may not be discouraged from going to university. *2 marks*

- Government: It may take time before government finances improve since time lag before graduates repay loans / some graduates may evade repaying loans / some graduates are out of work so do not repay loans / significant amount of funds raised as many people graduate each year. *2 marks*

- Increased role for market forces: development of the idea that market forces have a greater influence in higher education and there is less role for the government / there is a danger of market failure due to under-consumption. *2 marks*

____________________________________________________________


Tips to getting full marks: ALWAYS refer back to the case study, use the data provided to back up your points - they're there for a reason so utilise them!

Hope this helps and answers your question

Thank you! This is so useful

I don't really understand the minimum wage diagram... Would really appreciate it if you could explain the diagram, as well as possibly sharing some evaluation points?
Thanks.


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Thanks for the feedback! Please don't hesitate to ask questions regarding this exam (aids my revision too)

What is the national minimum wage and why do we have it?

The National Minimum Wage refers to the legal minimum hourly rate of pay an employer pays its workers. Rates differ from country to country and it also depends on the age of the worker e.g. the current UK rate for ages 21 and over, (as of 2013) is £6.31.

The minimum wage is a floor wage which protects workers in low-paid occupations such as shop assistants, cleaners and laundries. It is a form of government intervention.



Explanation of the National Minimum Wage diagram:

So what is the effect of a national minimum wage?! If it is set above the market equilibrium wage (the wage rate that produces neither an excess of demand of workers or excess of supply of workers) in a labour market then it could cause unemployment, which is shown by the diagram and an explanation provided below:




From looking at the diagram, we know that W1Q2 is the market equilibrium wage (where demand and supply meet), and has increased to the national minimum wage rate which is Wmin. So how exactly does the NMW cause unemployment if it is set above the market equilibrium wage?

Diagram shows that demand for labour has decreased from 0Q2 to 0Q3 (follow the dotted lines to help you). Diagram also shows that supply of labour extended from 0Q2 to 0Q1, meaning there is excess supply of labour which is Q3Q1 (x axis shows employment of labour).
So, if the demand for workers has decreased and there is an excess supply of workers, it evidently means that the minimum wage has caused unemployment, which is what the NMW diagram is all about!


Advantages of increasing NMW:

- A reduction in exploitation of labour and poverty.

- A reduction in wage inequality between men and women. Women tend to be disproportionately represented in low-paid occupations and so benefit most from an increase in NMW.

- Incentive to take on low-paid work means there is a reduction in voluntary unemployment.

- Labour productivity increases because workers are more satisfied with their jobs. Firms may also increase training of workers in order to increase productivity and so justify paying the higher wage.

- To keep up with an increase in the cost of living due to inflation.


Disadvantages of increasing the NMW (evaluation):

- Can be increases in unemployment because firms may find that it is too expensive to employ workers (more costs for the firm). Therefore, workers may be replaced with capital (machinery) e.g. self checkout tills in supermarkets.

- An increase in inflationary pressure as firms pass on the extra wage costs to consumers in the form of higher prices for their products.

- It is an ineffective way of reducing poverty since many poor people don't work e.g. the unemployed, sick and elderly. Similarly, many people who benefit from the NMW may not be from poor households e.g. students and second wage earners.

- An increase in red tape or bureaucracy for firms leading to higher costs and less flexibility in the labour market - representation of government failure?

- Elasticity: A wage-inelastic demand for labour will lead to only a few job losses. It means workers are hard to replace in the production process e.g. cleaners. Whereas a wage-elastic demand for labour will lead to a large proportion of job losses because workers are easier to replace in the production process e.g. supermarket cashiers replaced by self checkout tills.

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For the Edexcel specification, you need to know the definition of NMW, why it is used, how it influences the supply of labour, advantages and disadvantages of increasing the NMW. That's all you need to know!

BRAVO! That's explained it to me so much better man! You certainly know your stuff my friend I wish you the best.


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