Economics AQA Exam Paper 1 ProblemWatch
I am currently working through economics a-level past papers from the AQA exam board and I have run into some difficulty.
I am looking at the Specimen Paper on the AQA website and one of the questions I am struggling to complete a comprehensive answer to.
The question is: Explain why, in the absence of government intervention, too many journeys are likely to be made by road and too few by rail (15 marks).
I have written a paragraph on how roads are a quasi public good, and how you don't get directly charged for using them like with rail etc.
I have then moved on to write a second paragraph on the negative externalities associated with the consumption of using trains and cars, and how it is greater for cars.
My problem is, how can I link these consumption externalities back to the question?
The mark scheme says.....
Negative externalities associated with rail journeys are likely to be less than for journeys by road, hence road journeys will be under-priced by more than rail journeys, ie there will be a greater divergence between the marginal social cost and the marginal private cost for road journeys than rail journeys.
This seems to point at negative externalities in production now? Why would this be the case and how does this link into the question?
Also, any other ideas for points I could use?
Thanks for any help anyone can provide, it will be much appreciated
I would draw a negative externality of consumption diagram where the marginal social benefits is smaller than the marginal private benefits. Show the increase in quantity and explain why this is the case i.e. private benefits do not consider the external costs on third parties and the environment, such as pollution in this case. Leads to over-consumption as the real costs to the environment are not ignored.
You could also briefly state what government intervention could be e.g. fuel taxes and how that could limit consumption of cars
It is arguably negative externality of consumption as you are experiencing the better journey rather than using the rail, but it could be a negative externality of production if the road journeys are possibly used for the transport of goods or raw materials. If your understanding is clear, the form of negative externality does not matter as the point of over-consumption is the same
I find that with the 15 marker your explanation needs to directly answer the question and its not necessarily about stating your points like in the 25 markers.