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**********OFFICIAL OCR ECONOMICS F581 13th MAY 2014 THREAD************ Watch

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    Comment on the extent to which the Chinese Government should aim to reduce the negative externalities arising from production.

    Someone please walk through the marks of the second to last question so I can know if I got it right. (Chinese Government question)

    I started with a definition of a negative externality and said in an ideal world the Chinese government would reduce the externality but said it depended on the opinion of the government of how important the production was for the economy. If important then the government would not tax as it would make the production less globally competitive. I also said they might compromise on reducing the externality and keeping competitiveness by introducing a taxation that would increase marginal private cost but not eradicate the externality.

    Thoughts on this/What did everybody else write???
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    How many marks out of 6 do you guys think you'd get if only shifting the demand curve


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    (Original post by Isymega)
    Comment on the extent to which the Chinese Government should aim to reduce the negative externalities arising from production.

    Someone please walk through the marks of the second to last question so I can know if I got it right. (Chinese Government question)

    I started with a definition of a negative externality and said in an ideal world the Chinese government would reduce the externality but said it depended on the opinion of the government of how important the production was for the economy. If important then the government would not tax as it would make the production less globally competitive. I also said they might compromise on reducing the externality and keeping competitiveness by introducing a taxation that would increase marginal private cost but not eradicate the externality.

    Thoughts on this/What did everybody else write???
    I referenced the case study and talked about pollution tax, and how it internalises the externality. I commented on how if PED was price inelastic, this would be ineffective in reducing production/pollution, and the burden of tax would be imposed on consumers more than producers - and a tax may not be effective in such a case. I also mentioned the socially optimum level of pollution may not be no pollution, and pollution levels may already be at socially optimal levels, or close to it, so not a huge amount of tax is needed.

    Don't think talking about global competitiveness was the way to go, as that is more of macro-economic concept rather than micro.

    (Original post by studentwiz)
    How many marks out of 6 do you guys think you'd get if only shifting the demand curve


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    I'd say max 3/6? I'm assuming it would be 3 marks for demand, and 3 marks for supply
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    (Original post by studentwiz)
    How many marks out of 6 do you guys think you'd get if only shifting the demand curve


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    1 or 2/6. it's usually 4 marks for the diagram and 2 marks for correct explanation, so the 4 marks would probably be allocated like so:

    original equilibrium position(1)
    shift in demand curve(1)
    shift in supply curve(1)
    new equilibrium position(1)

    and for explanation you could get the 2 marks by saying either

    quantity demanded has increased(1)
    quantity supplied has increased(1)
    price has remained same/slight increase/slight decrease (1)

    so probably 2/6.
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    for the 6 marker to comment did you have to mention how the chinese government would reduce the negative externalities arising from pollution? i just mentioned why the chinese government would want to reduce them, and then made a relevant comment, that it depends on the size of the negative externality and then expanded on that. I probably should have added another comment that said.
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    Is this argument valid for the 1& marker? If the indirect tax is placed on the producers of the demerit good the it was cause the production of that good to decrease due to the increased cost of production, as a result the supply available to consumers would decrease an consequently reduce the negative externalities arising for its consumption e.g taxing the production of ciggarettes.
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    It's funny how almost my whole class said it was easy. Now, some are saying that they did a PPC in the first diagram, some wrote some BS in Question 6 and on the 18 marker.
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    A similar question came up on one of the 2009 papers where you had to shift both curves. If only one was shifted the maximum you could get was 2 for the diagram BUT relevant analysis (P has increased, Q has increased) will get you 2 more marks most likely. So you'd probably get up to 4/6.
    It wasn't a comment on question I don't think, so there probably weren't any marks for evaluating, such as "the effect on price will depend on the extent of the shift in demand compared to that of the shift in supply" although there's an outside chance it might be credited.
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    Could you say any of the factors of production for that 2 marker?
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    (Original post by hello101010)
    Could you say any of the factors of production for that 2 marker?
    any 2 out of Land,Labour,Capital and Entrepeneurship.
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    (Original post by Isymega)
    Comment on the extent to which the Chinese Government should aim to reduce the negative externalities arising from production.

    Someone please walk through the marks of the second to last question so I can know if I got it right. (Chinese Government question)

    I started with a definition of a negative externality and said in an ideal world the Chinese government would reduce the externality but said it depended on the opinion of the government of how important the production was for the economy. If important then the government would not tax as it would make the production less globally competitive.

    Thoughts on this/What did everybody else write???
    This is good but I think its a bit of a waste of time, and more suitable for Unit 2 my teacher would say.
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    (Original post by EliasTheOne)
    Is this argument valid for the 1& marker? If the indirect tax is placed on the producers of the demerit good the it was cause the production of that good to decrease due to the increased cost of production, as a result the supply available to consumers would decrease an consequently reduce the negative externalities arising for its consumption e.g taxing the production of ciggarettes.
    This is just my take, its yes but within this context it was about pollution. So to me, it was mainly about capping/reducing production of the goods that were creating pollution
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    (Original post by tomble123)
    For the 18 marker, this is what I did.

    1. Defined everything in the question.
    2. Did a diagram showing that effects of an indirect tax (supply shifts to the left) I then analysed with reference to the diagram. Q and P is the point where market failure occurs.....blah blah then the indirect tax would decrease quantity supplied and increase the price...blah blah this internalises the cost.
    3. I went onto a detailed discussion on how the indirect tax might be ineffective. Standard evaluative points, such as size of tax.....harmful to industry.....China is a heavily industrialised country...blah blah so the negative stuff.
    4. I then went on to discuss some other alternatives to indirect taxation. I started with a subsidy...I mentioned that it would be more effective for the government to subsidies greener energy....so there is a viable alternative to the producers to use. I made a point mentioning that China has trillions of dollars in reserves...and could easily afford to subsidy different energy sources, which would have less neg externalities blah blah.....I then made my MAIN alternative on tradable permits. Did a diagram on how demand should increase for them...explained how they works....and how they put a direct limit on pollution levels.
    5. I then made a judgement/conclusion stating that tradable permits were the MOST EFFECTIVE solution to solving the market failure that is occurring.
    Thats pretty perfect to me, this is how my teacher showed us to structure the essay.

    1. Intro, all definitions from Market failure to the question e.g. Indirect taxation. How pollution cause market failure etc

    2.Then you do a B(because) L(leads too) T(therefore) ((BLT)) of how indirect taxation corrects market failure with all relevant side notes. Saying things like leads to a decrease in supply(S-S1) etc.

    Graph around here

    3.Then you do the limitations of above

    4.Then repeat process with an alternative policy with definition of policy and BLT

    Graph around here

    5.Limitations of alternative

    6.Conclusion

    What do you put in your conclusion? I just realised in my indirect taxation limitations, I didn't explain how additional costs(from tax) are effectively passed on too consumers rendering it useless. argh
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    What do we think the grade boundaries will be?
    a-48
    b-42
    c-36
    d-30
    e-24
    ?
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    For anyone who needs help, check out this channel

    https://www.youtube.com/user/EconplusDal
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    (Original post by Vino_M)
    This is just my take, its yes but within this context it was about pollution. So to me, it was mainly about capping/reducing production of the goods that were creating pollution
    so demerit goods then.
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    (Original post by studentwiz)
    How many marks out of 6 do you guys think you'd get if only shifting the demand curve


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    Dw mate you could still get 5 . The marks are not always evenly distributed, you could get 4 for your diagram and 2 for your explanation or 3 and 3, you would only lose a maximum of 1 mark for only shifting only 1 curve
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    (Original post by Bude8)
    For anyone who needs help, check out this channel

    https://www.youtube.com/user/EconplusDal
    love this, thank you
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    So how do we revise for Unit 2 now? We have till next week Wednesday
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    Any predictions for the 18 marker please?
 
 
 
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