UNOFFICIAL Mark Scheme Edexcel MicroEconomics 9EC0-1 Paper 1 20 May 2019

Unofficial, feel free to add, as cant remember everything
SECTION A
-Elasticity of supply 3.9?
-Relatively elastic
-Oil shortage supply shifts left
- monopolistic competition LR AC must touch tangent of AR
- PES of housing market - time, substitutability?
- Division of labour advantage - workers' skill levels
-58/59 million total costs?
-free market operates through price mechanism, market forces, invisible hand
-Karl Marx criticises privately owned resources

SECTION B
5 marker:
Definition for positive and normative statements, give examples of each from extract A and explain why each one is either positive or normative

8 marker two benefits of integration to consumers
Wider choice - ‘variety’
Cheaper products as ‘value bundles’
Potentially firms EoS leading to cheaper prices in log term

10 marker consumer behaviour
Consumer computation (elderly)
Consumer inertia
Habitual behaviour
However information gaps will be provided and the reason may not be consumer behaviour but because there is little incentive to change when you are elderly as you don’t need the alternative.

12 marker reasons for profits of BT
Integration gives EoS and so on
Price making power following rise in market share - ‘price leader’ and ‘other firms follow suit’ - showing degree of tacit collusion taking place (which is an informal collusion when other firms react to the actions of another firm) which shows interdependence between firms. Use C+R diagram showing the SNP’s made at PM point.
Also potentially their brand loyalty
also lowered average costs so could also do a CR diagram with AC shifting down
However (Ev) can use kinked demand curve to show theory behind oligopolies and how if BT raise price it is unlikely that other firms will follow suit but if they lower price they will, meaning their price making power is not a determinant of their profits, and also other methods may determine their profitability such as brand image, and they may be investigated by regulators limiting long term profitability

15 marker intervention
Price cap
Information provision
—> ‘ surrogate for competition ‘
However implications of both on profitability and lack of long term innovation thus damaging consumers

SECTION C
25 marker wage rates
-High skilled vs low skilled e.g. doctors vs nurses
-Inelastic supply of labour e.g. CEOs vs average worker
-Trade unions pushing up wages

Eval
-Pay caps in public sector meaning people get paid less than in private even if more skilled
-Gender pay gap, women get limited promotions keeping them on lower pay
-Trade unions have little impact on pay except in the pubic sector

25 marker Collusion reasons
point 1: Profitability, Dynamic efficiency, shareholders dividends, hard to prove
However regulation is likely to occur e.g. CMA on Tesco

Point 2: Incentive to cheat once the collusive agreement is formed - use game theory to show why firms may engage in collusions with the initial incentive to cheat, and explanation of interdependence etc
However depends on nature of market, products, contestability and other methods may be used to increase profitability

point 3: Reduce barriers to entry, more monopoly power
however x-inefficiency

You've missed the multi choice on demergers?

As i said i know i missed some out what was the question again?

the 12 marker was one reason why there were profits right?

yes

Unofficial, feel free to add, as cant remember everything
SECTION A
-Elasticity of supply 3.9?
-Relatively elastic
-Oil shortage supply shifts left
- monopolistic competition LR AC must touch tangent of AR
- PES of housing market - time, substitutability?
- Division of labour advantage - workers' skill levels
-58/59 million total costs?
-free market operates through price mechanism, market forces, invisible hand
-Karl Marx criticises privately owned resources

SECTION B
5 marker:
Definition for positive and normative statements, give examples of each from extract A and explain why each one is either positive or normative

8 marker two benefits of integration to consumers
Wider choice - ‘variety’
Cheaper products as ‘value bundles’
Potentially firms EoS leading to cheaper prices in log term

10 marker consumer behaviour
Consumer computation (elderly)
Consumer inertia
Habitual behaviour
However information gaps will be provided and the reason may not be consumer behaviour but because there is little incentive to change when you are elderly as you don’t need the alternative.

12 marker reasons for profits of BT
Integration gives EoS and so on
Price making power following rise in market share - ‘price leader’ and ‘other firms follow suit’ - showing degree of tacit collusion taking place (which is an informal collusion when other firms react to the actions of another firm) which shows interdependence between firms. Use C+R diagram showing the SNP’s made at PM point.
Also potentially their brand loyalty
also lowered average costs so could also do a CR diagram with AC shifting down
However (Ev) can use kinked demand curve to show theory behind oligopolies and how if BT raise price it is unlikely that other firms will follow suit but if they lower price they will, meaning their price making power is not a determinant of their profits, and also other methods may determine their profitability such as brand image, and they may be investigated by regulators limiting long term profitability

15 marker intervention
Price cap
Information provision
—> ‘ surrogate for competition ‘
However implications of both on profitability and lack of long term innovation thus damaging consumers

SECTION C
25 marker wage rates
-High skilled vs low skilled e.g. doctors vs nurses
-Inelastic supply of labour e.g. CEOs vs average worker
-Trade unions pushing up wages

Eval
-Pay caps in public sector meaning people get paid less than in private even if more skilled
-Gender pay gap, women get limited promotions keeping them on lower pay
-Trade unions have little impact on pay except in the pubic sector

25 marker Collusion reasons
point 1: Profitability, Dynamic efficiency, shareholders dividends, hard to prove
However regulation is likely to occur e.g. CMA on Tesco

Point 2: Incentive to cheat once the collusive agreement is formed - use game theory to show why firms may engage in collusions with the initial incentive to cheat, and explanation of interdependence etc
However depends on nature of market, products, contestability and other methods may be used to increase profitability

point 3: Reduce barriers to entry, more monopoly power
however x-inefficiency

If I wrote PES as -3.9 will I lose both marks (don’t ask how)

for the 25 marker on collusion
my first point was on overt collusion and creating more revenues and therefore profits by both firms pricing at a higher level. i used a payoff matrix for this.
EV: a lack of trust between firms and the threat of being undercut and losing demand - firms less likely to collude
second point was on tacit collusion and the fact that firms are likely to collude by following a price leader because demand above the market price is elastic and below is inelastic - colluding tacitly therefore allows no losses to be made through a fall in demand or a price war.
EV: if it is a contestable market in which a firm can come in with lower prices and undercut all colluding firms, a firm is less likely to collude and may price lower to subvert this threat.

Any thoughts? I thought this was decent but i'm not so sure reading people's answers now. Are my two KAA points too similar? I made sure to distinguish between overt and tacit collusion.

Unofficial, feel free to add, as cant remember everything
SECTION A
-Elasticity of supply 3.9?
-Relatively elastic
-Oil shortage supply shifts left
- monopolistic competition LR AC must touch tangent of AR
- PES of housing market - time, substitutability?
- Division of labour advantage - workers' skill levels
-58/59 million total costs?
-free market operates through price mechanism, market forces, invisible hand
-Karl Marx criticises privately owned resources

SECTION B
5 marker:
Definition for positive and normative statements, give examples of each from extract A and explain why each one is either positive or normative

8 marker two benefits of integration to consumers
Wider choice - ‘variety’
Cheaper products as ‘value bundles’
Potentially firms EoS leading to cheaper prices in log term

10 marker consumer behaviour
Consumer computation (elderly)
Consumer inertia
Habitual behaviour
However information gaps will be provided and the reason may not be consumer behaviour but because there is little incentive to change when you are elderly as you don’t need the alternative.

12 marker reasons for profits of BT
Integration gives EoS and so on
Price making power following rise in market share - ‘price leader’ and ‘other firms follow suit’ - showing degree of tacit collusion taking place (which is an informal collusion when other firms react to the actions of another firm) which shows interdependence between firms. Use C+R diagram showing the SNP’s made at PM point.
Also potentially their brand loyalty
also lowered average costs so could also do a CR diagram with AC shifting down
However (Ev) can use kinked demand curve to show theory behind oligopolies and how if BT raise price it is unlikely that other firms will follow suit but if they lower price they will, meaning their price making power is not a determinant of their profits, and also other methods may determine their profitability such as brand image, and they may be investigated by regulators limiting long term profitability

15 marker intervention
Price cap
Information provision
—> ‘ surrogate for competition ‘
However implications of both on profitability and lack of long term innovation thus damaging consumers

SECTION C
25 marker wage rates
-High skilled vs low skilled e.g. doctors vs nurses
-Inelastic supply of labour e.g. CEOs vs average worker
-Trade unions pushing up wages

Eval
-Pay caps in public sector meaning people get paid less than in private even if more skilled
-Gender pay gap, women get limited promotions keeping them on lower pay
-Trade unions have little impact on pay except in the pubic sector

25 marker Collusion reasons
point 1: Profitability, Dynamic efficiency, shareholders dividends, hard to prove
However regulation is likely to occur e.g. CMA on Tesco

Point 2: Incentive to cheat once the collusive agreement is formed - use game theory to show why firms may engage in collusions with the initial incentive to cheat, and explanation of interdependence etc
However depends on nature of market, products, contestability and other methods may be used to increase profitability

point 3: Reduce barriers to entry, more monopoly power
however x-inefficiency

Would the kinked demand curve have worked for the 25 marker about collusion showing interdependence?

the 12 marker was one reason why there were profits right?

Whats the most i could get if i did one point for the 15 marker with an evaluation & a diagram ?