AQA A-level Economics 7136 - Paper 1 (Markets and market failure) - 20th May 2019

Potentially.

Application:
UK train operating services were privatised in early 1990s following a massive decline in passenger numbers, safety issues, quality concerns, low number of services offered and a drag on taxpayer's funds. They privatised because they wanted to make the running of the rail more efficient by reducing fares, increasing routes and passenger numbers, better quality provision and greater investment in the railway. What they did was they franchised, the entire track infrastructure was split into chunks (i.e. franchises) with private train operating companies bidding to win the right to operate services as a franchisee on that particular franchise. The government would choose the winner based on the bid and on the service quality the firm delivered, in this sense the competition lay not physically on the tracks, but in the bidding war. Privatisation via franchising has delivered more passengers and reduced fare rises but overall it's kinda accepted it's not been as successful as they'd have liked. Fares have been capped by the ORR (Office of Rail and Road) to prevent monopoly pricing, delays are common with poor quality during peak times, investment has been limited with profits going to shareholders and certain routes that are in demand aren't offered as not profitable. The taxpayer also has to share the burden of running train services with subsidies of £4bn a year going to train operating companies to keep them afloat. Jeremy Corbyn has made the case for rail nationalisation citing the East Coast Mainline Case as evidence based justification for nationwide nationalised. East Coast Mainline has been run by private firms 3 times since the 90s yet in all cases the franchisee failed to make a profit and required subsidies before eventually handing the franchise back to the state. The most recent case of this was Stagecoach and Virgin last year who relinquished the franchise to the state because of lack of profitability. When in public hands, the franchise was profitable, providing a return to the taxpayer with limited delays and problems that previous owners has seen. Proponents of nationalisation argue that the same results can be seen across the rail network if the policy goes ahead along with greater investment in the railway given that National Rail, who are in charge of track, station, tunnel and signal infrastructure are already in public control.

Jeremy Corbyn also wants to nationalise: 1. water 2. gas/electricity 3. royal mail

Do you guys reckon that labour market failure is gonna come up? Also, do you guys memorize statistics and real world examples for AO2?

I think something to do with trade unions/monopsony might come up but not sure

What about behavioral economics? For example behavioral nudges to correct market failure.

I really need help with revision. Do you guys make essay plans on every single topic, write full essays, or what? I'm so lost

Start doing past papers right now. Mark them and work on your exam technique.

How can you mark them? This is what I don't get, surely if you thought what you were writing was rubbish you wouldn't write it so you'd give yourself 25 marks or close to it when in reality may only be a 15

A THEORETICAL QUESTION:

In econplusdal's video "Utility Theory - Total, Marginal and Average Utility" he draws the diagram for marginal and average utility, which simply resembles the marginal and average revenue curves but with the axes being labelled utils(the unit of utility)/price and quantity. Price as in the real world consumers will keep paying until MU = P. Dal then says that the marginal utility curve is also the demand curve. This is because as price increases, the quantity demanded falls and vice versa and this follows the law of demand. So hence MU = MPB = D. However, I don't understand this point. I get the law of demand obviously and why this conclusion can be made, BUT surely you could say the exact same thing for the average utility curve, why is this not the demand curve? It shows all the same characteristics that Dal used to conclude that the marginal utility curve = demand curve.

Of course I don't mark my own exams. I get my teachers or Undergraduate econ students mark them.

Where do you get undergraduate econ students to mark? Studentroom?

If anyone wondered where I got my application from it's from Econplusdal's application/examples textbook. £40 was too much money but hoping to sell it on.

Anyway, obviously I can't just put it here as it's copyrighted, but what I will do is post the topics and maybe summarise it, or at least say what topic he discusses for people to do their own research on. I may be able to paraphrase certain material.

MICRO:

Scarcity, Choice and Opportunity cost: Water scarcity in Cape Town, South Africa
Demand shift left: Restaurant dining, student housing, print newspapers
Demand shift right: Non-dairy milk/non-alcoholic drinks, Spanish holidays, UK housing
Supply shift right: Goods and services tax in India 2017, India known for large subsidies on items like fuel, gas and rice
Supply shift left: Vanilla, Britain heat wave summer 2018 for onions carrots wheat, subsidies on solar panels due to end in 2018, sugar tax!!!
Price inelastic demand: Apple iPhone, rail fares, cigarettes, alcohol, fuel and life saving drugs
Price inelastic supply: Heathrow airport, energy in the UK, UK housing
Complements (XED): Printers and printer ink, razors and blades, coffee machines and capsules, cars and accessories
Substitutes (XED): Fast food $1 or £1 menus, Coca-Cola and pepsi, nike and adidas trainers, airlines
Normal Goods (YED): Indian demand for makeup given incomes rising quickly, foreign holidays, airline travel
Inferior Goods (YED): France known for local food establishments with consumers willing to pay more for consuming regional food, but stagnant incomes increased demand for fast food across France, Own brand food, bus travel
Indirect Taxes: Fuel Duty in France, cigarette duty, alcohol duty, sugar tax, carbon tax, VAT
Subsidy: Vaccinations in Hong Kong, electric cars UK and Canada, agriculture EU and USA, Research & Development UK, Museums UK, Fuel gas and rice India
Minimum Price (Price Floor): Cocoa in Ivory Coast, EU common agricultural policy (CAP), Alcohol Scotland
Maximum Price (Price Ceiling): Basic food items in Venezuela, rent control in New York san Francisco and Berlin, Energy price cap UK
Negative externalities: Smoking cigarettes, drinking alcohol, eating unhealthily, road congestion, dropping chewing gum, gambling, red meat, air pollution
Positive externalities: Physical exercise, education, healthcare and vaccinations, public transport, school lunches
De-merit goods: Red meat, gambling, cigarettes, alcohol, sugary drinks, fatty foods, chewing gum, tanning beds
Merit goods: Sun cream, healthcare, education, public transport, healthy food and drink, museums, electric cars, solar panels
Public goods: Flood defences, roads, beaches, street lights, road signs
Common access resources: Deforestation in Kuala Lumpur, seas and over fishing, clean air and pollution
Indirect tax to solve market failure: UK sugar tax, cigarette duty, alcohol duty, fuel duty, carbon tax, road pricing, fat tax in Denmark
Subsidies to solve market failure: Museums in the UK, electric cars UK and Canada, solar panels, public transport (buses and trains), R & D, In work training, adult training
Regulation and market failure: Plastic waste, road space rationing Beijing, anti smoking regulation UK, age limits for alcohol, time limits for serving alcohol in shops, forced calorie content on Menus (USA), forced nutritional info on packaging, traffic light nutritional system, proposed energy drink bans and junk food advertising for children, compulsory vaccinations (Italy), quotas on fishing and CO2 emissions (EU)
State provision and market failure: The NHS, education and UK state schools, free school lunches for vulnerable students in the UK
Tradable pollution permits and market failure: The ETS
Minimum pricing and market failure: Alcohol in Scotland
Maximum pricing and market failure: Rent control
Government failure: Black market for cigarettes and alcohol, large sums of money are paid to farmers to leave land aside, EU's common fisheries policy dead fish thrown back into the water, UK's state provision of healthcare and education means large wait times with non-essential surgeries and treatments purposefully delayed and primary school class sizes becoming excessively large, diesel worse than petrol for the environment UK government finding this out increased taxes on diesel cars and plan to phase them out by 2040 (imperfect information issue)
Law of diminishing marginal returns: Coffee shop chains have two fixed FOP land and capital means over employing staff during busy times, labour productivity falls for each worker hired after a point, same argument applies for pizza shops, restaurants, fruit and veg picking farms, factory based manufacturing
Economies of scale: airline industry, UK supermarkets, big 6 energy companies
Objective of firms - Profit maximisation: Pharmaceutical companies, major technology and electronics companies]
Profit satisficing: Walmart
Revenue maximisation: Twitter, the Times, Bus companies
Sales/Growth Maximisation: Costa coffee, Netflix, spotify, amazon
Survival: fast food market, UK courier, airline and clothing industries
Corporate social responsibilities (CSR): Walt Disney company, starbucks, the body shop, ben and jerry's
Perfect competition: No examples but some come close: market for tuk tuks in india and Thailand, large fruit and vegetable markets an fish markets, foreign exchange markets
Competitive markets: Airline ravel, fast food, supermarkets, takeaway delivery, retail
Loss making industries: high street restaurant chains, high street retails e.g. Toys R Us, New Look, Maplin, Poundland, John Lewis, Debenhams
Monopoly power: Google search, motorway fuel providers, Gazprom, stagecoach, durex UK, Merlin Attractions UK, Tesco UK, DHL Globally
Natural monopoly: Water companies, gas and electricity distribution (national grid), internet distribution (BT openreach), rail track and infrastructure (Network Rail)
First degree price discrimination: Amazon in 2005, Victoria's secret, B & Q 2013
Third degree price discrimination - `Surge' or `Dynamic' pricing: Train companies and airlines, Uber and Lyft
Monopolistic competition: Clothing market, taxis London, restaurants, hairdressers/salons, hotels, music streaming, coffee shops, bars/nightclubs, key cutting and shoe repairs
Oligopoly - Price competition: Supermarket industry, short haul airlines
Oligopoly - Non-price competition: Soft drink industry
Oligopoly - Price fixing cartel (overt collusion): Scania, British Airways and Virgin Atlantic 2007
Oligopoly - Price Leadership (Tacit collusion): Big 6 energy providers, supermarket fuel providers
Contestable markets: Fast food industry, hotel market, supermarket industry, airline travel, taxi market, takeaway delivery
Monopoly regulation: Energy price cap, rail fares RPI Price capping, Heathrow RPI - x price capping, Water companies RPI +/- K Price capping, cross channel ferry crossings, performance targets/quality standards (train companies and airlines, energy companies, internet service providers), merger policy (ASDA and Sainsburys, Celesio AG and Sainsbury's Pharmacy, Ladbrokes and coral, Alstom of france and siemens of germany)
Privatisation: Royal Mail, UK Rail operating services 1994
Deregulation: Airlines EU Open skies, UK buses
Nationalisation: (already posted)

Some of you may find this useful:

http://economicsfactory.com/aqa-pack/4594434001

It's £145