(Original post by Shorty1992)
I got full marks in the January Markets in Action paper, but not entirely sure what you're asking, so this may or may not be of any use to you!
Okay, in the 18-mark questions, here's what I generally do (with examples using a question like 'Discuss whether using subsidies is an effective solution to the market failure arising from positive externalities'
, which is the specification paper's last question, but with subsidies instead of taxation and then obviously positive externalities rather than negative):-
1. Definitions of relevant words
: here it would be the definition of a subsidy, market failure and positive externalities.
2. General analysis
: what is the aim of a subsidy? - i.e. something like 'encourages the production of a good which a market underproduces through lowering a firm's costs of production, hence correcting the market failure caused by the underproduction of a good producing positive externalities.' In order to get 11+ marks, you NEED to draw a diagram showing the supply curve shifting to the right with the associated impacts on price and quantity (i.e. price falls, quantity rises).
: I'd now do about 3 (maybe 4) paragraphs, with the first 3 beginning with positives about how subsidies correct market failure, e.g. 1st paragraph: just re-itterate that they encourage the production of a good which a market underproduces. 2nd paragraph: they provide financial incentives to producers to produce. 3rd paragraph: alternative products producing less negative externalities can be subsidised.
In each of those 3 paragraphs, I'd then say 'However...' in order to include evaluative points. Evaluative points include:
- Financial cost & opportunity cost of subsidy to the government.
- Difficult to set it at the right level.
- If demand is price inelastic, the subsidy has little effect on the consumption.
- Time lag between introduction and consumers switching consumption habits.
- The subsidy may not be passed onto consumers in the form of lower prices; the firm may keep it in order to increase profits.
As you can see, there's quite a few evaluative points, and more I'd say than for those 3 paragraphs, so I'd normally do a 4th paragraph saying 'Furthermore...'
: my general conclusion for practically anything that requires an opinion ('Discuss'/ 'Comment on') is 'In conclusion, I believe that _____, however various factors mentioned above would have to be considered, especially _____'.
So for the subsidy question, I'd say 'In conclusion, I believe that subsidies are potentially an effective solution to market failure, however, various factors mentioned above would have to be considered, especially the size of the subsidy which, set at the wrong level, could lead to the subsidy being very ineffective'.
I hope this helps you out a bit! Obviously there's various ways you can approach these 18-mark questions; this is just the way I do it. Some people do all the points about it being effective first, then reasons for it being ineffective, for example.
Any questions, or anything you don't understand that I've written then do just give me a shout as it's very difficult to convey what I'm trying to say at times
Plus, it's been a while since I've done Markets in Action stuff! If you haven't already, looking at the specification paper's mark scheme would be useful - it's on the OCR website x