OCR F581 Markets in Action - 11 May 2015 Watch

username1297160
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#441
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(Original post by keynes24)
Overconsumption/overproducing and positive externalities could lead to underconsumption/underproduction
(Original post by *Stefan*)
Both.

There are positive and negative externalities of production and consumption.
Okay thanks
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username1297160
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#442
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Is the effect government intervention has on the the externality graph relevant to the OCR syllabus? For example a subsidy shifts the MPC curve on the positive externality graph to the right. If it isn't on the syllabus will I still gain marks if I use it in my essay?
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keynes24
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#443
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(Original post by lowhigh)
Is the effect government intervention has on the the externality graph relevant to the OCR syllabus? For example a subsidy shifts the MPC curve on the positive externality graph to the right. If it isn't on the syllabus will I still gain marks if I use it in my essay?
Not needed and not expected, it would be an unusual answer not likely to be included in the mark scheme.
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justfly
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#444
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What would be the drawbacks of government intervention and how would the private sector be better?b
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tashielaura
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#445
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Cons of government intervention/pros of private sector

increased government intervention in one area means that there may be an opportunity cost, as spending must be taken from somewhere else in order to intervene.

Private sector encourages competitiveness and therefore prices may decrease, benefitting the consumer.
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Nchomuzinda
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#446
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Government intervention has an opportunity cost the money could be used elsewhere, there's an argument also that private firms know markets better than the government therefore there's an increased risk of government failure. Private sectors have more competition, firms more likely to be productively efficient so they can charge lower prices which benefits the consumer and hence increases consumer surplus. Whether a market should be privatised or not depends upon the nature of the market, the NHS should be nationalised because private firms have the main objective of maximising profits whereas governments aim to maximise consumer welfare.

(Original post by justfly)
What would be the drawbacks of government intervention and how would the private sector be better?b
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Tousif
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#447
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#447
Guys, does this paper have 8 MCQs to begin with?
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keynes24
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#448
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(Original post by Tousif)
Guys, does this paper have 8 MCQs to begin with?
Edexcel , this thread is for OCR
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Tousif
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#449
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(Original post by keynes24)
Edexcel , this thread is for OCR
Oh, thanks! Cause our unit one is referred to as "Market In Action" as well. And our exam date is 11th May too. :/ Any idea where I can find a thread where the exam "WECO1" is being discussed?
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KitsonnostiK
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#450
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(Original post by *Stefan*)
A fall in demand is indicated by a shift of the demand curve to the LEFT. Don't make this error -it can negate your whole answer.

Otherwise, you would take two marks.




In the case of TP, the supply curve is perfectly inelastic, as the number of permits given to firms is fixed. The price is determined by the demand -the higher the demand, the more expensive the permits.

If the government were to increase the permits, the supply curve would shift to the right (and vice versa).
Thanks for the reply! So the diagram is used solely to show how the price of these permits is determined? How would you go about fitting this in an essay, with what relevant analysis?

And am I right in believing you're doing AS and A2 this year? F585 alone is enough for me!


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KitsonnostiK
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(Original post by OrionMusicNet)
I have one at the end of my unit 1 notes:
http://www.mediafire.com/view/4ait8a...vel_Notes.docx
I made notes for unit 2 and it also has a model answer as well at the end, hopefully it helps:
http://www.mediafire.com/view/1blv5a...Finished).docx
Thank you very much I really appreciate this! Big help!


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KitsonnostiK
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(Original post by lowhigh)
Is the effect government intervention has on the the externality graph relevant to the OCR syllabus? For example a subsidy shifts the MPC curve on the positive externality graph to the right. If it isn't on the syllabus will I still gain marks if I use it in my essay?
I am thinking the same as you at the moment. Surely the market will be competent and reward andy outside learning as long as it is relevant?

I do worry however that there are incompetent markers who would see something outside of the spec and simply reject it.


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keynes24
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(Original post by KitsonnostiK)
I am thinking the same as you at the moment. Surely the market will be competent and reward andy outside learning as long as it is relevant?

I do worry however that there are incompetent markers who would see something outside of the spec and simply reject it.


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why adding a more difficult diagram when it is not needed? the specification also clearly indicates demand and supply diagrams for solving market failures. Any outside of the mark scheme diagram should be rewarded as long as it is relevant and merit marks but I don't really see the point of adding one when it is not needed and when a demand/supply diagram is expected.
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KitsonnostiK
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(Original post by keynes24)
why adding a more difficult diagram when it is not needed? the specification also clearly indicates demand and supply diagrams for solving market failures. Any outside of the mark scheme diagram should be rewarded as long as it is relevant and merit marks but I don't really see the point of adding one when it is not needed and when a demand/supply diagram is expected.
OK. So, I'm resitting this unit and last year learnt nothing about MSB and MSC etc. This year I have, so should I include that in my unit 1 exam? Or stick to simple demand and supply?

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keynes24
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(Original post by KitsonnostiK)
OK. So, I'm resitting this unit and last year learnt nothing about MSB and MSC etc. This year I have, so should I include that in my unit 1 exam? Or stick to simple demand and supply?

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Stick to what the specification for your unit requires, that's what I meant from my previous comments.
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Makashima
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#456
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(Original post by djrp97)
What sort of effect will subsidies and taxes have on D+S curves?
Um for tax, you can tax on producers which increases their cost of production which when you draw the diagram, the price increases and quantity reduces showing less consumption of junk fast food
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TheAgyeiman
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#457
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Could somebody please mark my Question
January 2011
Discuss whether regulation is the most effective way of correcting market failure such as those arising from increasing carbon emissions?

A regulation is a legislation which is backed by law to reduce consumption of a de merit good.

Market failure is when the market fails to achieve economic efficiency.

Regulation may be an effective way of correcting market failure such as those arising from increasing carbon emissions. As the introduction of regulations will increase the costs of production, this will reduce the amount of supply, as regulations have a significant impact as they’re backed by law. A regulation on carbon emissions will reduce the supply which means reduced production and less of the negative externalities will arise from the production of the de merit goods or the service. This will lead to slowing down the rate of countries/islands like the Maldives sinking and will correct the market failure to some extent. The introduction of regulations would raise the marginal private cost reducing the size of the loss of welfare, as the marginal private cost is closer to the marginal social cost. Therefore reducing the amount of negative externalities. This is shown in Figure1.

Figure1

Negative Externalities Diagram

However there are a few limitations to using regulations to correct the market failure that should be considered. Regulations are difficult and expensive to enforce, so the cost to the government of implementing the regulation will be a considerable amount to correct the market failure and there will be an opportunity cost to the government to issue the regulation. As the money the government spend to use on implementing regulations could have been used on a subsidy to encourage more apprentiships or could have been used on pollution permits to help stop the problem of sinking islands such as the Maldives. Regulations also override the market mechanism, as the government are introducing a legislation to limit production. This may lead to unintended consequences such as discouraging competitiveness and then leading to a lack of business interest as there is less incentive to produce as the profit margins have become smaller due to the introduction of the regulation which has raised the costs of production; this is shown in figure 2.

Figure 2: S+D diagram with supply increasing.

The effect of an introduction of a regulation is shown here as the costs of production increase s so s shifts to the left to s1 as production has decreased. This causes business to charge higher prices to maintain profit margins for their product. This is shown from the change from e to e1.This may lead to a rise in the price level and now consumers are affected by the introduction of the regulation.

Ultimately regulation is a good way to solve problems arising from market failure but I do not believe it is the most effective as regulation would increase the costs of production and is a hefty expense to the government. I do not think this will be the best way to correct the market failure arising from increasing carbon emissions. I think a more effective solution to correcting the market failure such as those arising from carbon emissions would be to impose an indirect tax/ pollution permit to businesses creating a lot of pollution. This will be similar to the landfill tax which is currently in the UK which is you have to pay £80 per tonne of waste. Introducing a similar tax/permit would reduce the level of consumption significantly as production would be limited to how much they can produce to limit the negative externalities which arise from these carbon emissions it would also be a cheaper solution then issuing regulations.
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azo
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Evaluative points for information provision? Apart from alternatives, what are some advantages and disadvantages AND what does it depend on?

Thanks
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keynes24
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(Original post by TheAgyeiman)
Could somebody please mark my Question
January 2011
Discuss whether regulation is the most effective way of correcting market failure such as those arising from increasing carbon emissions?

A regulation is a legislation which is backed by law to reduce consumption of a de merit good.

Market failure is when the market fails to achieve economic efficiency.

Regulation may be an effective way of correcting market failure such as those arising from increasing carbon emissions. As the introduction of regulations will increase the costs of production, this will reduce the amount of supply, as regulations have a significant impact as they’re backed by law. A regulation on carbon emissions will reduce the supply which means reduced production and less of the negative externalities will arise from the production of the de merit goods or the service. This will lead to slowing down the rate of countries/islands like the Maldives sinking and will correct the market failure to some extent. The introduction of regulations would raise the marginal private cost reducing the size of the loss of welfare, as the marginal private cost is closer to the marginal social cost. Therefore reducing the amount of negative externalities. This is shown in Figure1.

Figure1

Negative Externalities Diagram

However there are a few limitations to using regulations to correct the market failure that should be considered. Regulations are difficult and expensive to enforce, so the cost to the government of implementing the regulation will be a considerable amount to correct the market failure and there will be an opportunity cost to the government to issue the regulation. As the money the government spend to use on implementing regulations could have been used on a subsidy to encourage more apprentiships or could have been used on pollution permits to help stop the problem of sinking islands such as the Maldives. Regulations also override the market mechanism, as the government are introducing a legislation to limit production. This may lead to unintended consequences such as discouraging competitiveness and then leading to a lack of business interest as there is less incentive to produce as the profit margins have become smaller due to the introduction of the regulation which has raised the costs of production; this is shown in figure 2.

Figure 2: S+D diagram with supply increasing.

The effect of an introduction of a regulation is shown here as the costs of production increase s so s shifts to the left to s1 as production has decreased. This causes business to charge higher prices to maintain profit margins for their product. This is shown from the change from e to e1.This may lead to a rise in the price level and now consumers are affected by the introduction of the regulation.

Ultimately regulation is a good way to solve problems arising from market failure but I do not believe it is the most effective as regulation would increase the costs of production and is a hefty expense to the government. I do not think this will be the best way to correct the market failure arising from increasing carbon emissions. I think a more effective solution to correcting the market failure such as those arising from carbon emissions would be to impose an indirect tax/ pollution permit to businesses creating a lot of pollution. This will be similar to the landfill tax which is currently in the UK which is you have to pay £80 per tonne of waste. Introducing a similar tax/permit would reduce the level of consumption significantly as production would be limited to how much they can produce to limit the negative externalities which arise from these carbon emissions it would also be a cheaper solution then issuing regulations.
It should be a demand/supply diagram. You need to refer to prices and quantity changing then how it affects market failure (reduce overconsumption and reach allocative efficiency). If you don't mention those you cannot reach L4.
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_Fergo
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#460
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(Original post by KitsonnostiK)
Thanks for the reply! So the diagram is used solely to show how the price of these permits is determined? How would you go about fitting this in an essay, with what relevant analysis?

And am I right in believing you're doing AS and A2 this year? F585 alone is enough for me!


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Well, mostly yes, but there may be the extremely rare case that they ask for a perfectly inelastic curve in the exercises before.

I'd first define all the terms involved (L1).
I'd then explain how TPs work -ie, they are a market-based means of correcting market failure. Their supply is strictly controlled to bring pollution to a socially acceptable level. They allow the polluter to sell unused or partially used permits/Those who pollute above what their permits allow are prosecuted etc (L2 slightly rendering into L3)

And then use the diagram to explain how they work (L3 band 1).

And yes -tough times :P
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