F581/ F582 Economics June 2013

I defined inflation rate instead of inflation. I did the same analysis as you.

For my evaluative I said -depends on other AD components, depends on size of appreciation, depends whether exports are price elastic/inelastic (Iknow this is micro but you have been allowed to use it on previous mark schemes) and put it depends on what other currencies are doing (which is totally wrong) so hopefully the first 3 evaluative points will get me through.

What's wrong with saying it depends on other currencies? Surely if the countries main trading partners exchange rates increase in line with the country's exchange rate then net exports won't decrease. Or am I completely misunderstood?

Nope I'm highly sure relative strengths of currencies is a valid evaluative point. I made it and I know several others who did, I wouldn't worry if I were you!

discuss whether competitive markets always lead to allocative efficiency - from specification

Anyone know how I would answer these types of questions about allocative efficiency e.g the L3 and L4 points?

To be honest i'd see this come up in A2 more than AS, however since it is within the specification you could use moderate A2 knowledge to boost marks (if you do A2 :/ ).

Allocative Efficiency - Maximising consumer satisfaction


Competitive markets (oligopolies/ perfectly competitive market etc..), essentially what they do is compete with each other through lowering their prices in order to thrive and survive within the market and hence not make a loss which could lead to possible bankruptcy, this exists in markets with very CLOSE SUBSTITUTES for example lets say two companies/firms selling an apple which are the same, these are homogeneous goods (same goods), this indeed may not increase revenue to the extent due to the nature of the market, this would somewhat result in prices falling. With all that being said a good point to mention is "firms may cut their own prices to steal market share from their rivals" this point shows how prices are kept low.

Now moving on to achieving the aim of allocative efficiency as above iv'e mentioned that competitive markets results in prices being low, this is somewhat a characteristic of allocative efficiency, HOWEVER it does not always mean that the quality of the product produced will be at its highest standard, the firms main objective is to maxismise profits and therefore their actions will not be in the best interests of consumers. It also depends upon the type of product sold, as if it is a demerit good then it would cause negative externalities which is definitely not going to increase allocative efficiency, but cause market failure.

This is just a basis of an answer to give you an idea of how allocative efficiency could possibly occur within competitive markets, if someone could elaborate on some more evaluative points that would be great.

I highly doubt this would come up as an 18 marker for AS, especially unit 1...so i wouldn't worry about it too much, i hope that helps .

Ah that's a relief. I drew diagram shifting AD to the left, and spoke about a fall in net exports and then a multiplier effect, reduced unemployment, further reducing AD and inflation. But then i got mixed up and spoke about costs of imported raw materials increasing rather than falling. Do you think I'll still have enough L3 to get into the L4 evaluative marks?

I think taxation is most likely to come up because it hasnt come up since June 2010

If this question comes up, you've just saved my life!! I would not have had a clue, thanks!


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No problem, it is quite a tricky one especially for AS standard haha .

Can anyone help me on reaching L4 in 18 markers? I found it really easy in f582 but I'm not really sure what to put in f581.

Also what is the problem with banning something such as chewing gum?

From what i gather

You have to EVALUATE the strenghts and weaknesses of the proposed market failure. In yoru conclusion also, try to suggest a potentially better policy and EVALUATE why it would be better but also the potential drawbacks of it

i think

Okay so if the question was about introducing a tax then I could say, for example, it's hard to estimate the cost of a negative externality?

Anyone have a guess as to which elasticity they'll use tomorrow?

Last time PED was used was June 10 so I'm putting my money on that one.