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AQA A-level Economics new 7136 - 06, 13 & 19 Jun 2017 [Exam Discussion] Watch

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    (Original post by GTHargs)
    Government failure - admin costs, opportunity costs, regulatory capture, unintended consequences, black market, inefficiency, distort price signals, LR vs SR etc...
    Ah of course, really struggle with Ir vs sr cheers!!
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    Here's a question for you all:

    In the specimen there's a 25 question about "Evaluate the view that 'inequality is good for us all'" or something like that.

    With these sorts of questions, what do I do in terms of diagrams? My usual exam structure is: Definitions, first point (with diagram which I explain), drawback of first point. Second point.... etc etc. What kind of diagrams do I incorporate into this sort of question? It doesn't seem immediately obvious or maybe I'm just missing the obvious lol

    Any help would be appreciated!
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    (Original post by RG110man)
    Here's a question for you all:

    In the specimen there's a 25 question about "Evaluate the view that 'inequality is good for us all'" or something like that.

    With these sorts of questions, what do I do in terms of diagrams? My usual exam structure is: Definitions, first point (with diagram which I explain), drawback of first point. Second point.... etc etc. What kind of diagrams do I incorporate into this sort of question? It doesn't seem immediately obvious or maybe I'm just missing the obvious lol

    Any help would be appreciated!
    start by defining inequality,

    Inequality acts as an incentive to strive for high pay
    You could incorporate a wage diagram showing a more inelastic supply of workers earning higher wages (and compare to a less elastic) because they have more skills, are more motivated to learn, work hard to always get the next highest paid job. This leads to wage inequality where some workers earn more than others, but its not necessarily a bad thing as higher wages may mean higher productivity. You would evaluate this point, how wage inequality raises equity issues etc
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    (Original post by physicsamor)
    start by defining inequality,

    Inequality acts as an incentive to strive for high pay
    You could incorporate a wage diagram showing a more inelastic supply of workers earning higher wages (and compare to a less elastic) because they have more skills, are more motivated to learn, work hard to always get the next highest paid job. This leads to wage inequality where some workers earn more than others, but its not necessarily a bad thing as higher wages may mean higher productivity. You would evaluate this point, how wage inequality raises equity issues etc
    Ahh, I see. So basically with these inequality questions it really becomes an inequality/labour market essay when you start going into wage inequality? I guess that seems like the easiest way to give yourself stuff to talk about? I was feeling a bit intimidated at the prospect of having to write a whole 25 marker with no (or minimal) use of diagrams lol

    Thanks for your help!
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    (Original post by RG110man)
    Ahh, I see. So basically with these inequality questions it really becomes an inequality/labour market essay when you start going into wage inequality? I guess that seems like the easiest way to give yourself stuff to talk about? I was feeling a bit intimidated at the prospect of having to write a whole 25 marker with no (or minimal) use of diagrams lol

    Thanks for your help!
    That's just one of the points I would go for as a point
    You can talk about the effects on unemployment (a cause of inequality) and how this clearly isn't good for us all

    Another easy point to explain why inequality isn't a good thing is because poorer families tend to under consume merit goods, market failure so that leads on to good explanation points, also read the data response to see what else was mentioned I can't remember myself
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    (Original post by physicsamor)
    That's just one of the points I would go for as a point
    You can talk about the effects on unemployment (a cause of inequality) and how this clearly isn't good for us all

    Another easy point to explain why inequality isn't a good thing is because poorer families tend to under consume merit goods, market failure so that leads on to good explanation points, also read the data response to see what else was mentioned I can't remember myself
    Yeah I guess these questions aren't too bad if you think logically and break it down. I always find it harder when the questions are more broad and less focused because I tend to sit there like "OOH INEQUALITY I KNOW THAT" and then never know what to write lol. Whereas if it's just like "Discuss the view that price discrimination is always bad for consumers" it's just an essay on price discrimination which I find far easier to structure.

    I feel way stronger at Macro than Micro though so as long as get through Tuesday I should be okay 😅
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    (Original post by RG110man)
    Yeah I guess these questions aren't too bad if you think logically and break it down. I always find it harder when the questions are more broad and less focused because I tend to sit there like "OOH INEQUALITY I KNOW THAT" and then never know what to write lol. Whereas if it's just like "Discuss the view that price discrimination is always bad for consumers" it's just an essay on price discrimination which I find far easier to structure.

    I feel way stronger at Macro than Micro though so as long as get through Tuesday I should be okay 😅
    nah don't worry I feel the same, I hate poverty questions. Took me some time to try and understand questions like these, even now I'm not 100% Yeah I feel like business side questions are way easy to write and evaluate like price discrimination!

    I dont know if I like macro I just have no idea how to evaluate and I really don't understand all the financial markets bits
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    (Original post by physicsamor)
    nah don't worry I feel the same, I hate poverty questions. Took me some time to try and understand questions like these, even now I'm not 100% Yeah I feel like business side questions are way easy to write and evaluate like price discrimination!

    I dont know if I like macro I just have no idea how to evaluate and I really don't understand all the financial markets bits
    I feel like anything on theory of the firm/market structures is a fairly straightforward question. Inequality and labour markets are definitely the trickiest bit of micro for me (although a lot of my friends detest market structures lol)

    I'm same with macro. The financial market bit is tricky, but if it really comes to it and they ask anything in-depth on financial markets I'll just not do that question and pray the alternatives are okay haha. I feel like evaluation for macro is fine. I usually just evaluate by linking each argument back to the original question and I feel like they ask less waffly questions in macro than in micro, no?
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    (Original post by GTHargs)
    Thats a government failure however. The premise of market failure, is that if left to market forces, then the market will fail. When you are looking at the benefits of market forces over government intervention, you can evaluate between market and government failure but market forces will never correct a market failure, that is contradictory.
    how would you structure an answer to a question which asks whether the government should use greater market forces or intervene? what would you say about market forces? and for government intervention, would you bring a possibly policy eg subsidy and evaluate that?
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    how would you structure an answer to a question which asks whether the government should use greater market forces or intervene? what would you say about market forces? and for government intervention, would you bring a possibly policy eg subsidy and evaluate that?
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    (Original post by amukaty)
    how would you structure an answer to a question which asks whether the government should use greater market forces or intervene? what would you say about market forces? and for government intervention, would you bring a possibly policy eg subsidy and evaluate that?
    Definitions

    There's almost definitely an externality - show it on a diagram and explain the need for government intervention. Suggest a policy (tax, subsidy, regulation) etc.

    Your main argument against government intervention: Government failure and the difficulty of putting a monetary value on externalities so it's difficult to know at which level a tax/subsidy should be set at.

    (Another good one is to say that the market should correct itself and so just leaving it to market forces may be beneficial - however the market failure is likely to have distorted the market and therefore the rationing, incentive, signalling function of prices may not work effectively and therefore there is a call for government intervention in some form as the market may not correct itself).

    Evaluate.

    Done.
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    (Original post by RG110man)
    I feel like anything on theory of the firm/market structures is a fairly straightforward question. Inequality and labour markets are definitely the trickiest bit of micro for me (although a lot of my friends detest market structures lol)

    I'm same with macro. The financial market bit is tricky, but if it really comes to it and they ask anything in-depth on financial markets I'll just not do that question and pray the alternatives are okay haha. I feel like evaluation for macro is fine. I usually just evaluate by linking each argument back to the original question and I feel like they ask less waffly questions in macro than in micro, no?
    Maybe I should try evaluating like that I think I struggle to write well developed points with macro idk how to be detailed even if the questions are better
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    (Original post by RG110man)
    Definitions

    There's almost definitely an externality - show it on a diagram and explain the need for government intervention. Suggest a policy (tax, subsidy, regulation) etc.

    Your main argument against government intervention: Government failure and the difficulty of putting a monetary value on externalities so it's difficult to know at which level a tax/subsidy should be set at.

    (Another good one is to say that the market should correct itself and so just leaving it to market forces may be beneficial - however the market failure is likely to have distorted the market and therefore the rationing, incentive, signalling function of prices may not work effectively and therefore there is a call for government intervention in some form as the market may not correct itself).

    Evaluate.

    Done.

    thats great thanks but how would the market forces solve things by itself for example in a negative externality?
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    (Original post by amukaty)
    how would you structure an answer to a question which asks whether the government should use greater market forces or intervene? what would you say about market forces? and for government intervention, would you bring a possibly policy eg subsidy and evaluate that?
    It depends on the context, sometimes market failure can be corrected in the long run I.e consumers demand the products, prices rise and this continues until eventually the consumer looks for the next best cheaper alternative if this was petrol the next best alternative might be cheaper greener energy. Other ways is that the threat of contestabilty in a market ensure that market forces cannot exploit consumers in the long run. I.e creative destruction into a market would eliminate inefficient firms and lead to more competive outcome, eliminating the market failure of monopoly power.
    Also consumer behaviour may change in the long run, they might become aware of externalities associated with pollution/consumption and want to be more healthier/greener so they will look to buy those kind of products, forcing firms to change the way of production and being efficient.
    Things like profit motive ensure that firms want to strive to be the most efficient/innovative

    Goverments can make "nudge" policies aimed at switching firm/consumer behaviour this isnt necessarily forcing them to change unlike taxing them it sort of encourages market forces to deal with market failure by changing their behaviour

    These are a few ideas for market forces



    But yeah you would argue that this may be long run/may still need to eliminate externalities so leaving it to the market is not viable and then go to explain and evaluate
    because essentially if the market didn't recognise the externalities in the first place, they are still not likely to truly understand the problem which is why we need the government.
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    (Original post by physicsamor)
    Maybe I should try evaluating like that I think I struggle to write well developed points with macro idk how to be detailed even if the questions are better
    I mean the classic that AQA have been obsessed with for years is asking about the extent to which monetary policy can achieve economic stability. I'd do:

    (This is quite a basic skeleton plan just to show how I evaluate)

    Definitions
    Point 1 (Inflation targeting) - explain it blah blah blah
    Evaluate: Inflation targeting has been fairly effective as following it's introduction inflation has, for the most part, remained at a manageable rate other than following an economic shock.

    Point 2 (Interest rates) - explain blah blah blah
    However: May not work - people may be deleveraging blah blah blah
    Evaluate: They are used as a tool for maintaining price stability. Price stability in turn ensures economic growth remains positive and steady (show all this stuff on a diagram, obviously)

    If you need a point 3 you can always go into either Exchange rates or Quantitative Easing. I usually try to avoid Exchange rates purely because I think there are easier ways of getting the marks.

    Then at the end I usually write something about how although it is fairly effective in maintaining economic stability, methods such as QE by the bank of England should not be relied upon and instead the government should look to actively seek to boost AD amongst consumers and investment.

    Then just reevaluate all the stuff and come to a solid evaluation on how effective you think monetary policy is. I usually get about 20/25 if I follow that structure
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    (Original post by amukaty)
    thats great thanks but how would the market forces solve things by itself for example in a negative externality?
    Well it wouldn't because people are ignoring third party effects of consumption and production so won't respond. But it's still good to make the point just so that you can counteract it by saying the market failure means the price mechanism won't work properly and all that stuff. A lot is to do with whether the market failure is great enough to risk government failure which may lead to bigger problems.
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    (Original post by RG110man)
    I mean the classic that AQA have been obsessed with for years is asking about the extent to which monetary policy can achieve economic stability. I'd do:

    (This is quite a basic skeleton plan just to show how I evaluate)

    Definitions
    Point 1 (Inflation targeting) - explain it blah blah blah
    Evaluate: Inflation targeting has been fairly effective as following it's introduction inflation has, for the most part, remained at a manageable rate other than following an economic shock.

    Point 2 (Interest rates) - explain blah blah blah
    However: May not work - people may be deleveraging blah blah blah
    Evaluate: They are used as a tool for maintaining price stability. Price stability in turn ensures economic growth remains positive and steady (show all this stuff on a diagram, obviously)

    If you need a point 3 you can always go into either Exchange rates or Quantitative Easing. I usually try to avoid Exchange rates purely because I think there are easier ways of getting the marks.

    Then at the end I usually write something about how although it is fairly effective in maintaining economic stability, methods such as QE by the bank of England should not be relied upon and instead the government should look to actively seek to boost AD amongst consumers and investment.

    Then just reevaluate all the stuff and come to a solid evaluation on how effective you think monetary policy is. I usually get about 20/25 if I follow that structure
    Omg bless!! This is my least favourite question, because I never know what to write in it but that makes so much sense.

    I still don't really understand qe but it's something I probably really need to go over xD
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    (Original post by physicsamor)
    Omg bless!! This is my least favourite question, because I never know what to write in it but that makes so much sense.

    I still don't really understand qe but it's something I probably really need to go over xD
    QE is just an unconventional use of monetary policy, when instruments like the interest rate don't become so effective, like what happened in Japan. So the Bank of England just create money electronically and purchase government and privately owned assets, which injects money into the economy, increasing the money supply etc.

    Hope this helps
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    also for monetary policy make sure you write about the other unconventional forms such as forward guidance and funding for lending scheme.
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    Hi guys, I have a question... I have just been learning about competition policy and I was just wondering when would you bring competition policy in a exam question? For instance, could you add it in a market failure question or a monopoly question?? Sorry if its a stupid question haha! Really worried about the econ exams :\ !
 
 
 
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