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

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    (Original post by ks100)
    MPC is the S curve and MSC is the S1 curve. You can show MEC by annotating the triangle between the two curves (however showing this isn't necessary)
    This is for a shift left yh?


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    (Original post by Charlotte______)
    What would you write on an 18 marker about public goods? (I'm assuming the standard essay plan wouldn't work)
    L1: definition of public goods

    L2: example of a public good, use the one in the case study or question. Tell me if it is a merit good and why, and if it produces and positive externalities and examples.

    L3 band 1: Merit good diagram showing underconsumption or positive externalities diagram showing underconsumption and welfare loss. (either but not both, waste of time otherwise. If unsure do the easier D&S diagram)

    L3 band 2: explain how the government providing public goods solves market failure. Use terminology such as 'allocative efficiency increases', 'welfare is improved' and 'the market failure of underconsumption has been solved/reduced'

    L4: criticise the provision of public goods (productively inefficient to be provided by the state, wrong level of provision set due to no price mechanism, lower quality as no competition etc.) OR (only) if the question asked give the benefits/cons of private provision.

    Judgement: state your opinion on whether is should / should not be provided (DON'T sit on the fence). Explain with reasoning that does not involve just repeating your L3/L4, tell me which argument is strong or weak. Use real life examples to illustrate your view etc.
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    Is it okay to do a plan for the 18m in the answer space if you put it in a box and make it obvious where the essay starts?


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    (Original post by clara16)
    Is it okay to do a plan for the 18m in the answer space if you put it in a box and make it obvious where the essay starts?


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    Of course. Some pupils prefer to put it on the last page in the booklet, but it really doesn't matter.
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    (Original post by Charlotte______)
    What would you write on an 18 marker about public goods? (I'm assuming the standard essay plan wouldn't work)
    They would ask you one as it's not in the specification. All it would be on is tradable permits, subsidy, info failure (unlikely as it was June 2013) regulation and tax and their impact on market failure
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    (Original post by EdwardsEconomics)
    Of course. Some pupils prefer to put it on the last page in the booklet, but it really doesn't matter.
    Can you please explain how a market can be allocatively efficient?

    Thank you!
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    (Original post by lionelmessi19)
    Can you please explain how a market can be allocatively efficient?

    Thank you!
    At AS level the definition is "where consumer welfare is maximised". Sometimes we also say that where the market clears (S=D) is also allocatively efficient but this is a poor definition.

    Economics cares about Economic Efficiency, where productive and allocative efficiency is achieved. When economic efficiency has not been achieve we have market failure. In reality the market will always fail (you cannot achieve a theoretical position of productive and allocative efficiency being maximised), but it is the degree to which that is important.

    So when we look at a government policy (tax, subsidy, information provision, regulation and polluter permits) we need to see how that impacts on welfare. We normally try to move our equilibrium to a more allocatively efficient point, hence when we show this point being achieved on a diagram we say we have solved the market failure.

    Example of allocative efficiency rising:

    Demerit goods (that produce unrealised harm to private individuals) are overconsumed and overvalued. When we tax them / ban them / give people the information about how nasty they are, either S or D shifts to the left and Quantity consumed falls, moving closer to the socially optimum level of consumption.

    You would normally discuss this in your level L3 band 1 (where the market failure is) and L3 band 2 (how the market failure is solved).

    Does this help?
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    (Original post by EdwardsEconomics)
    At AS level the definition is "where consumer welfare is maximised". Sometimes we also say that where the market clears (S=D) is also allocatively efficient but this is a poor definition.

    Economics cares about Economic Efficiency, where productive and allocative efficiency is achieved. When economic efficiency has not been achieve we have market failure. In reality the market will always fail (you cannot achieve a theoretical position of productive and allocative efficiency being maximised), but it is the degree to which that is important.

    So when we look at a government policy (tax, subsidy, information provision, regulation and polluter permits) we need to see how that impacts on welfare. We normally try to move our equilibrium to a more allocatively efficient point, hence when we show this point being achieved on a diagram we say we have solved the market failure.

    Example of allocative efficiency rising:

    Demerit goods (that produce unrealised harm to private individuals) are overconsumed and overvalued. When we tax them / ban them / give people the information about how nasty they are, either S or D shifts to the left and Quantity consumed falls, moving closer to the socially optimum level of consumption.

    You would normally discuss this in your level L3 band 1 (where the market failure is) and L3 band 2 (how the market failure is solved).

    Does this help?
    That's perfect.. Thank you!!!
    So can I say that when the market moves closer to the socially optimum level of consumption, the market is allocatively efficient?
    If so,, it means I've understood it!!
    Thanks a lot!!
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    (Original post by EdwardsEconomics)
    At AS level the definition is "where consumer welfare is maximised". Sometimes we also say that where the market clears (S=D) is also allocatively efficient but this is a poor definition.

    Economics cares about Economic Efficiency, where productive and allocative efficiency is achieved. When economic efficiency has not been achieve we have market failure. In reality the market will always fail (you cannot achieve a theoretical position of productive and allocative efficiency being maximised), but it is the degree to which that is important.

    So when we look at a government policy (tax, subsidy, information provision, regulation and polluter permits) we need to see how that impacts on welfare. We normally try to move our equilibrium to a more allocatively efficient point, hence when we show this point being achieved on a diagram we say we have solved the market failure.

    Example of allocative efficiency rising:

    Demerit goods (that produce unrealised harm to private individuals) are overconsumed and overvalued. When we tax them / ban them / give people the information about how nasty they are, either S or D shifts to the left and Quantity consumed falls, moving closer to the socially optimum level of consumption.

    You would normally discuss this in your level L3 band 1 (where the market failure is) and L3 band 2 (how the market failure is solved).

    Does this help?
    Can I ask does Price elasticity of supply gave any relevance to market failure?
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    (Original post by Jasonpt)
    Can I ask does Price elasticity of supply gave any relevance to market failure?

    If you shift the demand curve (i.e. provide information or have a demand side regulation such as health labels on products) then the effectiveness of the shift will depend on PES. If PES is inelastic it takes a very large shift to see any effect and the policy may not be effective, instead a supply side method may be more sensible.

    Vice-versa as well, supply shift effectiveness depends on PED.

    These points should be brought up in L4 after your have explained how your diagram solves the market failure.
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    What would be some comment marks for Consumer surplus/ Producer surplus?
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    (Original post by EdwardsEconomics)
    If you shift the demand curve (i.e. provide information or have a demand side regulation such as health labels on products) then the effectiveness of the shift will depend on PES. If PES is inelastic it takes a very large shift to see any effect and the policy may not be effective, instead a supply side method may be more sensible.

    Vice-versa as well, supply shift effectiveness depends on PED.

    These points should be brought up in L4 after your have explained how your diagram solves the market failure.
    May I ask how to gain 18 marks on the essay question if it based on a good that should be provided by the public or private sector?
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    Hey Everyone,
    So i know it seems really late to ask but what is the best way to Structure 18 Mark Questions? And how many diagrams are generally needed for the questions? Any help would be really appreciated.
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    (Original post by c0llings)
    May I ask how to gain 18 marks on the essay question if it based on a good that should be provided by the public or private sector?
    I have done this earlier in this thread, have a peek and see if that helps.
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    (Original post by DannA5797)
    Hey Everyone,
    So i know it seems really late to ask but what is the best way to Structure 18 Mark Questions? And how many diagrams are generally needed for the questions? Any help would be really appreciated.
    Have a look back in the last few pages, I answer your diagram question in detail already
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    (Original post by lionelmessi19)
    That's perfect.. Thank you!!!
    So can I say that when the market moves closer to the socially optimum level of consumption, the market is allocatively efficient?
    If so,, it means I've understood it!!
    Thanks a lot!!
    The market is more allocatively efficient as it moves closer and is allocatively efficient when it arrives at the socially optimum point.

    Other than that, you got it.
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    can someone explain pollution permits to me please?
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    (Original post by studentwiz)
    What would be some comment marks for Consumer surplus/ Producer surplus?
    In the highly unlikely situation you have a comment question on consumer/producer surplus the change will depend on:

    1. the size of the decrease/increase in price

    2. the PED/PES

    3. ceteris paribus may not hold and other factors may influence D/S (and give an example, e.g. income may fall due to a recession, shifting the D curve.
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    Goodluck guys!~ Its tomorrow at 9:15am !!!
    >.<

    SCAREDDD
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    (Original post by groovyd97)
    can someone explain pollution permits to me please?
    On page 5 I have gone through all the types of government intervention for quick revision. The diagram has inelastic S curves in case you need a memory jog

    Here is a copy/paste of the tradable permits:

    Tradable Permits

    Advantages of Tradable Permits
    + Fairly easy to implement.
    + Allows the market to help solve the problem and gives firms the incentive to reduce negative externalities.
    + From government’s perspective, achieves desired environmental outcome.

    Disadvantages of Tradable Permits
    Expensive to monitor, so opportunity cost.
    Does not compensate victims of pollution.
    Problems of calculating and distributing permits to polluters.

    Evaluation: Opportunity cost means money may be better spent on subsides; permits may be set at a too high level; so depends upon the level and how enforced.


 
 
 
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