AQA Economics 18th May 2012 Unit 1 Exam

Hi, something that mentioned earlier about structuring the 25 markers. You shouldn't do 3 interventions by the government, you should only do 2 with depth and analysis and evaluate them. Then show knowledge of the free market, so the signalling, incentive, or rationing effect and evaluate that. It shows a greater understanding of the microeconomic market, and it says it in the market scheme. Though first time i did it, i didn't mention free market and got a high B.

Hey, is this for a government intervention vs market forces question right?

These are the analysis/evaluation points I have got for market forces so far:

•

Leaving the economy to market forces means to allow the market forces of supply and demand to allocate resources via the signalling, rationing and incentive functions of price.

•

When prices rise, it allows production and investment to increase, whilst dampening demand as consumers ration

•

Also, an increase in price sends a signal for suppliers to increase supply, as there are incentives for attaining higher profits

•

When there is excess demand, prices will rise to remove this excess demand. When there is excess supply, prices fall in order to extend demand.

•

So, market fores can lead to allocative effiency, as the price of a good always returns back to the equilibrium, and the right amount of resources will be allocated.

•

Will also lead to productive effiicieny as there is strong competition around.

•

However, it can lead to market failure when the price of a good fails to include the external costs or benefits faced by society from negative and positive externalities.

•

Also, the presence of a monopoly, asymmetric information, and unequal distribution of income are also market failures, and this occurs as producers are not bothered about what's best for society.

Is that okay? And then for govt intervention, there is obviously the MSC/MSB diagram, and govt failure and opportunity cost issues.

Reply 261

Bourbons&Nutella

Original post by Mystic Creature

Hey, is this for a government intervention vs market forces question right?

These are the analysis/evaluation points I have got for market forces so far:

•

Leaving the economy to market forces means to allow the market forces of supply and demand to allocate resources via the signalling, rationing and incentive functions of price.

•

When prices rise, it allows production and investment to increase, whilst dampening demand as consumers ration

•

Also, an increase in price sends a signal for suppliers to increase supply, as there are incentives for attaining higher profits

•

When there is excess demand, prices will rise to remove this excess demand. When there is excess supply, prices fall in order to extend demand.

•

So, market fores can lead to allocative effiency, as the price of a good always returns back to the equilibrium, and the right amount of resources will be allocated.

•

Will also lead to productive effiicieny as there is strong competition around.

•

However, it can lead to market failure when the price of a good fails to include the external costs or benefits faced by society from negative and positive externalities.

•

Also, the presence of a monopoly, asymmetric information, and unequal distribution of income are also market failures, and this occurs as producers are not bothered about what's best for society.

Is that okay? And then for govt intervention, there is obviously the MSC/MSB diagram, and govt failure and opportunity cost issues.

That looks right to me. What is the actual definition of market forces? I can't seem to find it anywhere and it comes up every year!

Reply 262

Symmo

Aren't market forces just purely on the basis of the 3 different functions of the price mechanism
I.e. how a shift in supply causes the market clearing price (equilibrium) to be a lower price for that unit at the given price level and at a higher quantity demanded
Or possibly you could link it to the invisible hand of the market in conjunction with reference to Adam Smith

Reply 263

Bourbons&Nutella

So the price mechanism is the three functions of prices.. and market forces are just the factors which affect the equilibrium?
And it's all about the fact that in a market economy disequilibrium will make the economy adjust itself and bring about a new equilibrium?

Reply 264

Symmo

Assuming ceteris paribus and that there is a laissez-faire market in operation, yes the new equilibrium will adjust to the way that your graph depicts.
But market forces are not the factors that affect the equilibrium.. it's how the signalling, rationing and incentive functions work to provide the new equilibrium, where they are ineffective or unable to operate, market failure occurs

"Forces of demand and supply representing the aggregate influence of self-interested buyers and sellers on price and quantity of the goods and services offered in a market. In general, excess demand causes prices and quantity of supply to rise, and excess supply causes them to fall."

That bit shows how it is related to the price mechanism ^^

(edited 11 years ago)

Reply 265

Bourbons&Nutella

Thank you so much! I only realised this morning that I had absolutely no idea what this is!

Reply 266

nickss

Good luck guys! Remember to read/answer the question!

Reply 267

hello13

How did you guys find it?
I thought it was solid messed tht up bad time

Reply 268

alex7892

OP

2

Hi guys did anyone do context 2? If so what did you write for the 25 marker on the for and against on the nhs being free or charged for?

Reply 269

JamesNeedHelp2

5

Original post by hello13

How did you guys find it?
I thought it was solid messed tht up bad time

What was the 25 marker question? Thanks

Reply 270

JamesNeedHelp2

5

Original post by alex7892

Hi guys did anyone do context 2? If so what did you write for the 25 marker on the for and against on the nhs being free or charged for?

Do you know what the two 25 marker question were? Thanks

Reply 271

alex7892

OP

2

Don't know about the other option but is this an okay definition of scarce resources: they are finite in supply and can't remember what else I wrote but does that sound okay?
Also what would you guys say to my question about should the nhs be free or charged? What would you say? Would you say it's a merit good and draw a merit good diagram explain the consequences of a unhealthy population if charged for with negetives to th economy such as reduced productivity and that would cause government failure? What else would you say thanks really stressing!!! Multiple choice were easy!!

Reply 272

JamesNeedHelp2

5

Original post by alex7892

Don't know about the other option but is this an okay definition of scarce resources: they are finite in supply and can't remember what else I wrote but does that sound okay?
Also what would you guys say to my question about should the nhs be free or charged? What would you say? Would you say it's a merit good and draw a merit good diagram explain the consequences of a unhealthy population if charged for with negetives to th economy such as reduced productivity and that would cause government failure? What else would you say thanks really stressing!!! Multiple choice were easy!!

For the 25 marker you could define a merit good/positive externalities
.
Maybe talk about Equality and how its important for people of lower income to be able to enjoy free healthcare i.e a merit good.

Reply 273

penderdan

i did the 2nd 25 marks question.
for: other methods wouldnt work ie taxation wouldnt work as PeD is inelastic, also look at the opportunity cost

Against: other methods could increase supply: ie subsidies, other methods would reduce demand ie minimum price laws(should have probably put it on the other side), also talked about black markets

this is only what i put-anythoughts?

Reply 274

bethany_gibbons

I found that exam really hard :frown:

The 12 marker on the first section was so narrow, not much to talk about other than it's inelastic?!

Reply 275

alex7892

OP

2

Original post by penderdan

i did the 2nd 25 marks question.
for: other methods wouldnt work ie taxation wouldnt work as PeD is inelastic, also look at the opportunity cost

Against: other methods could increase supply: ie subsidies, other methods would reduce demand ie minimum price laws(should have probably put it on the other side), also talked about black markets

this is only what i put-anythoughts?

WAs this for the question on prices for the nhs? I didn't write anything about subsidies or taxes didn't see how that would fit in? Just wrote about the price being unable to be determined because what is too much and too little... Both would resort in failure etc... Do you think thays okay? I'm so nervous!!

Reply 276

browney18

Hey,

I did the 1st one. I didn't really have that much to write in the 12 marker. The 25 marker I tried to split into 4 sections

Intro - talk about too much mining (negative externalities)

1st point - No, don't intervene

2nd - Yes do intervene

Conclusion - conclude with possible methods of intervention

Reply 277

dayofs

For mining I misread the second question, thought of it as how could government intervene to increase the prices of rare-earth material. I am doomed :frown:

.

Last question, started off with
intro: market forces.
why should not intervene.
why should intervene. ( dont have time to write how to intervene).
Conclusion

(edited 11 years ago)

Reply 278

hello13

Original post by penderdan

i did the 2nd 25 marks question.
for: other methods wouldnt work ie taxation wouldnt work as PeD is inelastic, also look at the opportunity cost

Against: other methods could increase supply: ie subsidies, other methods would reduce demand ie minimum price laws(should have probably put it on the other side), also talked about black markets

this is only what i put-anythoughts?

I didn't write anything about PeD but wrote bout opportunity cost, equity, how charging for the service could lead to profit which provide incentives and therefore competition but I think overall I messed the question up
For the 12 marker I drew the diagram wrong

Reply 279

jadada1234

I did context 2 as well. I felt as though I haven't written enough for the 12 marker; I wrote that demand increased (shifted to the right) as a result of an ageing population

For the 25 marker; healthcare is a merit good and getting people to pay for the NHS would mean a further underconsumption of the service right?

AQA Economics 18th May 2012 Unit 1 Exam

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