OCR F581 Markets in Action - 11 May 2015

Any predictions for what people will think may come up as the case study and 18 marker? i was told tradeable permits might come up and so might PES

Reply 921

aoxa

11

Original post by justfly

please put me out of my misery , im stressed about the TP diagram! My teacher said just draw a vertical supply curve and normal D curve and explain how it works - no need for shifts

There is only a certain amount of permits in supply, therefore supply is perfectly inelastic (vertical) then draw a normal demand curve, and where the two meet is the market price, and where quantity is. Then, over time, the number of permits in supply is reduces, so this causes a left shift is supply (S2) and where this and the demand curve meet is the new price/quantity. As price has increased, this serves as a further incentive for firms to cut emissions.

Reply 922

justfly

2

Original post by aoxa

There is only a certain amount of permits in supply, therefore supply is perfectly inelastic (vertical) then draw a normal demand curve, and where the two meet is the market price, and where quantity is. Then, over time, the number of permits in supply is reduces, so this causes a left shift is supply (S2) and where this and the demand curve meet is the new price/quantity. As price has increased, this serves as a further incentive for firms to cut emissions.

so a diagram of the vertical supply curve shifting to the left?

Reply 923

clara16

8

This is my answer to "Discuss the extent to which regulations alone can be used to correct the market failure associated with the sale of fast food"

Please can i have some feedback? Will be happy to give feedback in return ImageUploadedByStudent Room1431197237.065510.jpg

ImageUploadedByStudent Room1431197237.065510.jpg

ImageUploadedByStudent Room1431197251.613812.jpg

ImageUploadedByStudent Room1431197263.534634.jpg

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Reply 924

aoxa

11

Original post by justfly

so a diagram of the vertical supply curve shifting to the left?

Yes, and then analysis of this; price is originally at ... then supply shifts left, increasing price, reducing quantity demanded... so firms have more incentive to cut emissions as price increases... etc

Reply 925

aoxa

11

Original post by clara16

This is my answer to "Discuss the extent to which regulations alone can be used to correct the market failure associated with the sale of fast food"

Please can i have some feedback? Will be happy to give feedback in return ImageUploadedByStudent Room1431197237.065510.jpg

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I'm not going to read all of that (no offence) but your diagram is wrong - E1 is in totally the wrong place. E1 should be where D and S1 meet - where you have lines for P1 and Q1. E2 is in the right place, with correct labels of P2/Q2, but having E1 where S1 and the line for Q2 meet is plain wrong.

Reply 926

clara16

8

Original post by aoxa

I'm not going to read all of that (no offence) but your diagram is wrong - E1 is in totally the wrong place. E1 should be where D and S1 meet - where you have lines for P1 and Q1. E2 is in the right place, with correct labels of P2/Q2, but having E1 where S1 and the line for Q2 meet is plain wrong.

Thanks for putting that so bluntly.
Obviously not concentrating hard enough. I understand just a silly mistake.

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Reply 927

justfly

2

Original post by clara16

Thanks for putting that so bluntly.
Obviously not concentrating hard enough. I understand just a silly mistake.

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where is your diagram for regulations?!

Reply 928

Slenderman

2

regulations diagram: I assume it's a simple supply shift to the left since the aims of regulations is to limit the production of de merit goods. but I may be wrong.

Reply 929

BigFreakyGinger

2

Original post by Slenderman

regulations diagram: I assume it's a simple supply shift to the left since the aims of regulations is to limit the production of de merit goods. but I may be wrong.

Regulation can shift supply to the left if it is in the form of a quota, quality control, nutritional restrictions etc.

But it can also shift demand to the left if it is in the form of age restrictions (which limits the consumer not the producer)

So it entirely depends on the type of regulation.

Reply 930

Slenderman

2

Omg never thought of that, thanks.

Reply 931

Slenderman

2

Oh and can someone help me with these questions, they scare me and I don't know what to say. i checked the mark schemes but they are so vague -_-

5. Explain why the price of petrol and diesel may not reflect the true costs of their use.

5. (b) Explain why negative externalities arising from an increase in air transport are an example of market failure.

5. Comment on why there is likely to be information failure amongst consumers of processed red meat products.

Reply 932

BigFreakyGinger

2

Original post by Slenderman

Oh and can someone help me with these questions, they scare me and I don't know what to say. i checked the mark schemes but they are so vague -_-

5. Explain why the price of petrol and diesel may not reflect the true costs of their use.

5. (b) Explain why negative externalities arising from an increase in air transport are an example of market failure.

5. Comment on why there is likely to be information failure amongst consumers of processed red meat products.

I hate those questions haha! But here's how I would answer the first one:

1. The price of petrol may not cover the entire cost of it's consumption because it does not include the external costs to third parties such as the pollution caused through it's consumption which may cause lung cancer and be a problem for the NHS. The negative externalities are therefore not reflected in its price which leads to overconsumption causing a market failure as the consumer does not pay the true cost.

(I am probably missing marks somewhere for that one!) but you get the idea?) simply explain why its a market failure and always use the words: over/under consumption/production whilst relating it to the external costs/benefits...

hope that helped...

Which papers were they from?

(edited 8 years ago)

Reply 933

Slenderman

2

Urm.. the 2009-2010 ones. i can't give the exact dates atm but thanks for your answer. Reading now.

Reply 934

justfly

2

HELPPP!! Would these points for why demand is increasing and why supply is increasing be good enough to get 3 marks for each 1? (just relate it to any context you want lol)

Demand:
incomes rising - good becomes more affordable, if the good is a normal good then when incomes rise so does the demand for the good according to YED[3]

price of substitutes increase therefore consumers switch to cheaper alternative, so the demand for that good increases and it's become more affordable, so demand increases [3]

Supply:

If there was a fall in the cost of raw materials it would lead to a lower cost of production, as a result a firm has a greater incentive to supply as it can make more profit therefore supply increases [3]

Reply 935

Slenderman

2

On the January 2012 paper (Chewing gum) there's this question that's bugging me.

4. (a) Explain two reasons why a manufacturer might increase its production of chewing gum.

So my first idea would be because therapeutic chewing gum has been developed for people to use instead of cigarettes which will decrease their consumption of cigarettes creating less negative externalities. You also got the reduction of passive smoking, income spent more reasonably, etc.

Another could be that chewing gum in general is very profitable and from the case study it tells you that a lot of revenue is made from it. So increasing the production of it will make them more revenue in the long term.

But in the mark scheme it talks about subsidies, indirect taxation and references to allocative efficiency.

Surely that's HOW to increase the production not why?? :CONFUSED:

Reply 936

jegro

Just a heads up.. the 18 mark question isn't on indirect taxation
consumer surplus is to come up
Specialisation is not coming up
YED is not coming up
Opportunity cost will not be mentioned

The paper is very easy this year

Reply 937

Yousf

13

For tradeable permits draw 2 diagrams one with the inelastic supply curve explaning how it works, and another diagram, with a normal supply and demand diagram with supply shifting to the left, explaning how it would fix the problem, i thinks this is what we do?

Reply 938

Yousf

13

Original post by Slenderman

regulations diagram: I assume it's a simple supply shift to the left since the aims of regulations is to limit the production of de merit goods. but I may be wrong.

Usually merit goods and or negative externalities

Reply 939

luk3miller

2

Original post by Slenderman

On the January 2012 paper (Chewing gum) there's this question that's bugging me.

4. (a) Explain two reasons why a manufacturer might increase its production of chewing gum.

So my first idea would be because therapeutic chewing gum has been developed for people to use instead of cigarettes which will decrease their consumption of cigarettes creating less negative externalities. You also got the reduction of passive smoking, income spent more reasonably, etc.

Another could be that chewing gum in general is very profitable and from the case study it tells you that a lot of revenue is made from it. So increasing the production of it will make them more revenue in the long term.

But in the mark scheme it talks about subsidies, indirect taxation and references to allocative efficiency.

Surely that's HOW to increase the production not why?? :CONFUSED:

The mark scheme asks for two reasons and an elaboration of how each increases production. Therefore, you must choose two determinants of supply. The mark scheme includes: reduction in costs of production, a subsidy (also decreases costs of production), reduction in tax (reduces costs of production) etc. I can't see any mention of allocative efficiency.

OCR F581 Markets in Action - 11 May 2015

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