OCR F581 Markets in Action - 11 May 2015

If 18 marker is on Trade-able pollution permits can you incorporate a negative externalities diagram into it, and if so would it be the negative production one or consumption? thanks

Production one and use it to show the size of externality which is internalised by the permit


Posted from TSR Mobile

Sorry if it's been posted before, but does anybody have a link to the F581 January 2014 question paper?

Can someone please tell me the diagram for merit/demerit goods? Is it just pos/neg externality arising from consumption diagrams?
Thanks

Production one and use it to show the size of externality which is internalised by the permit


Posted from TSR Mobile

you don't need to do a negative externality diagram, not expected from candidates if the question refers to tradable pollution permits

Another Question. Can allocative efficiency, defined as when 'consumer satisfaction is maximised', be applied to negative externalities considering they effect third parties and not the 'consumer' directly and so in reducing a Neg.Ext. the private costs to the consumer are not applicable. ??? (another terribly constructed question... I hope someone understands what I am on about!)

Surely it would help gain L3 marks as the whole point of a pollution permit is to internalise an externality?


Posted from TSR Mobile

There are no more january papers. lol but you can find a link to the june 2014 paper in the google docs which has been made

There are different diagrams depending on what solution you're using to correct the externality

Has it ever been an essay topic before? If so can you link the markscheme/ tell me the year?

The diagram showcasing a demerit/merit good.
And what's the diagram if it's corrected by information provision ?
Thanks

Well there is no diagram specifically for a (de)merit good, but if a question came up on the exam for it, as (de)merit goods cause externalities, we've been taught to do a negative externality diagram for a demerit, and positive externality diagram for a merit good.

For provision of information, it's a basic price/quantity on the axises, and normal demand (D1)/supply and the equilibrium. For a demerit good, this causes a left shift in demand (D2), as quantity demanded has fallen. For a merit good, it causes a right shift in demand (D2), as quantity demanded has risen as a result of information provision.

Hope this helped

it is not needed, the expected diagram is D/S. Whether you do more is another thing. Explaining that negative externalities would be internalise or lowering overconsumption and reaching allocative efficiency would help you reach L3 Band 2. Check the latest mark scheme to get my point.