UNOFFICIAL Mark Scheme Edexcel MicroEconomics 9EC0-1 Paper 1 20 May 2019 Watch

joelwalters0
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Unofficial, feel free to add, as cant remember everything
SECTION A
-Elasticity of supply 3.9?
-Relatively elastic
-Oil shortage supply shifts left
- monopolistic competition LR AC must touch tangent of AR
- PES of housing market - time, substitutability?
- Division of labour advantage - workers' skill levels
-58/59 million total costs?
-free market operates through price mechanism, market forces, invisible hand
-Karl Marx criticises privately owned resources

SECTION B
5 marker:
Definition for positive and normative statements, give examples of each from extract A and explain why each one is either positive or normative

8 marker two benefits of integration to consumers
Wider choice - ‘variety’
Cheaper products as ‘value bundles’
Potentially firms EoS leading to cheaper prices in log term

10 marker consumer behaviour
Consumer computation (elderly)
Consumer inertia
Habitual behaviour
However information gaps will be provided and the reason may not be consumer behaviour but because there is little incentive to change when you are elderly as you don’t need the alternative.

12 marker reasons for profits of BT
Integration gives EoS and so on
Price making power following rise in market share - ‘price leader’ and ‘other firms follow suit’ - showing degree of tacit collusion taking place (which is an informal collusion when other firms react to the actions of another firm) which shows interdependence between firms. Use C R diagram showing the SNP’s made at PM point.
Also potentially their brand loyalty
also lowered average costs so could also do a CR diagram with AC shifting down
However (Ev) can use kinked demand curve to show theory behind oligopolies and how if BT raise price it is unlikely that other firms will follow suit but if they lower price they will, meaning their price making power is not a determinant of their profits, and also other methods may determine their profitability such as brand image, and they may be investigated by regulators limiting long term profitability

15 marker intervention
Price cap
Information provision
—> ‘ surrogate for competition ‘
However implications of both on profitability and lack of long term innovation thus damaging consumers

SECTION C
25 marker wage rates
-High skilled vs low skilled e.g. doctors vs nurses
-Inelastic supply of labour e.g. CEOs vs average worker
-Trade unions pushing up wages

Eval
-Pay caps in public sector meaning people get paid less than in private even if more skilled
-Gender pay gap, women get limited promotions keeping them on lower pay
-Trade unions have little impact on pay except in the pubic sector

25 marker Collusion reasons
point 1: Profitability, Dynamic efficiency, shareholders dividends, hard to prove
However regulation is likely to occur e.g. CMA on Tesco

Point 2: Incentive to cheat once the collusive agreement is formed - use game theory to show why firms may engage in collusions with the initial incentive to cheat, and explanation of interdependence etc
However depends on nature of market, products, contestability and other methods may be used to increase profitability

point 3: increase barriers to entry, more monopoly power
however x-inefficiency
Last edited by joelwalters0; 1 month ago
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PATELk24
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Thank you
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RoseA_01
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does anyone remember the numbers that were used to get 58 million i dont remember if i wrote that or not
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Reecwhitters123
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I got 57 million but I cant remember what the numbers are

(Original post by RoseA_01)
does anyone remember the numbers that were used to get 58 million i dont remember if i wrote that or not
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eddygallacher
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(Original post by RoseA_01)
does anyone remember the numbers that were used to get 58 million i dont remember if i wrote that or not
Profits were like 17 million and revenue was like 75 million but idk the percentage increases
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dsxmpsxn
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for the 25 marker on collusion
my first point was on overt collusion and creating more revenues and therefore profits by both firms pricing at a higher level. i used a payoff matrix for this.
EV: a lack of trust between firms and the threat of being undercut and losing demand - firms less likely to collude
second point was on tacit collusion and the fact that firms are likely to collude by following a price leader because demand above the market price is elastic and below is inelastic - colluding tacitly therefore allows no losses to be made through a fall in demand or a price war.
EV: if it is a contestable market in which a firm can come in with lower prices and undercut all colluding firms, a firm is less likely to collude and may price lower to subvert this threat.

Any thoughts? I thought this was decent but i'm not so sure reading people's answers now. Are my two KAA points too similar? I made sure to distinguish between overt and tacit collusion.
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Yourmiuuu
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Did you talk about game theory? I think most of the marks will be awarded there, but your other points make sense.
(Original post by dsxmpsxn)
for the 25 marker on collusion
my first point was on overt collusion and creating more revenues and therefore profits by both firms pricing at a higher level. i used a payoff matrix for this.
EV: a lack of trust between firms and the threat of being undercut and losing demand - firms less likely to collude
second point was on tacit collusion and the fact that firms are likely to collude by following a price leader because demand above the market price is elastic and below is inelastic - colluding tacitly therefore allows no losses to be made through a fall in demand or a price war.
EV: if it is a contestable market in which a firm can come in with lower prices and undercut all colluding firms, a firm is less likely to collude and may price lower to subvert this threat.

Any thoughts? I thought this was decent but i'm not so sure reading people's answers now. Are my two KAA points too similar? I made sure to distinguish between overt and tacit collusion.
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trey_44
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Its all about the informed judgement, how did you weigh it up?
(Original post by dsxmpsxn)
for the 25 marker on collusion
my first point was on overt collusion and creating more revenues and therefore profits by both firms pricing at a higher level. i used a payoff matrix for this.
EV: a lack of trust between firms and the threat of being undercut and losing demand - firms less likely to collude
second point was on tacit collusion and the fact that firms are likely to collude by following a price leader because demand above the market price is elastic and below is inelastic - colluding tacitly therefore allows no losses to be made through a fall in demand or a price war.
EV: if it is a contestable market in which a firm can come in with lower prices and undercut all colluding firms, a firm is less likely to collude and may price lower to subvert this threat.

Any thoughts? I thought this was decent but i'm not so sure reading people's answers now. Are my two KAA points too similar? I made sure to distinguish between overt and tacit collusion.
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dsxmpsxn
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i talked about the payoff matrix and the different outcomes, and I created one based on the car industry (which was my chosen focus for the question). Didn't explicitly mention game theory tho, deffo couldve done that
(Original post by Yourmiuuu)
Did you talk about game theory? I think most of the marks will be awarded there, but your other points make sense.
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James Bennett 12
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i did question 8 on collusion. my first point was as it says in the original thread and my second point was about collusive tendering to reduce administrative work. and evaluated it with the potential fine and loss of brand image after the exploitation of customers and weighed it up in my judgement.... Any thoughts?
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trey_44
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exactly what i said as well; its one of the better points.
(Original post by James Bennett 12)
i did question 8 on collusion. my first point was as it says in the original thread and my second point was about collusive tendering to reduce administrative work. and evaluated it with the potential fine and loss of brand image after the exploitation of customers and weighed it up in my judgement.... Any thoughts?
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dsxmpsxn
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ran out of time at the end of the final ev. that will lose me some ev marks yes, not doing the judgement. hopefully the rest is still there tho.
(Original post by trey_44)
Its all about the informed judgement, how did you weigh it up?
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trey_44
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ye the rest is defo fine. do u think for the the 12 marker this is fine: I did two reasons and wrote that due to asymmetric information, we do not know whether the impact on costs or impact on AR + MR is significant thus it is a combination of both that exacerbates the change in profits. Does that sound alright?
(Original post by dsxmpsxn)
ran out of time at the end of the final ev. that will lose me some ev marks yes, not doing the judgement. hopefully the rest is still there tho.
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BcnTheGiant3
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Can one point for the collusion question be that market share will increase?
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iroy280201
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For the 12 marker i used a different angle to do with the cost of rental prices of the phone's suppliers falling, which would reduce average costs allowing the firm to pass on lower prices to consumers through better deals which would shift AR and MR up and increase profits (used a graph for this). i then evaluated by saying in the long run supernormal profits are unlikely to continue because of OFGEM investigating them.
What do you guys think?
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James Bennett 12
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sounds ok its very similar to the EOS point
(Original post by iroy280201)
For the 12 marker i used a different angle to do with the cost of rental prices of the phone's suppliers falling, which would reduce average costs allowing the firm to pass on lower prices to consumers through better deals which would shift AR and MR up and increase profits (used a graph for this). i then evaluated by saying in the long run supernormal profits are unlikely to continue because of OFGEM investigating them.
What do you guys think?
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trey_44
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is this fine for the 12 marker anyone: I did two reasons and wrote that due to asymmetric information, we do not know whether the impact on costs or impact on AR + MR is significant thus it is a combination of both that exacerbates the change in profits. D
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Jony1005
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For the 25 marker I did the wage one I did geographical disparities eg London vs a cheap area and then skills differences eg nurse and doctor, then the differences between ceo’s And their workers because of profit Max aims and high bonuses, then about how unskilled workers are more elastic and there are more of them so wages are lower and then the opposite for unskilled workers
Can someone tell me if this is correct please!!!!!!
Last edited by Jony1005; 1 month ago
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Julien78
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(Original post by RoseA_01)
does anyone remember the numbers that were used to get 58 million i dont remember if i wrote that or not
It was like the total revenue was from 2017 75.8 M and the one from 2016 was 72.8 - 14.4 profit in 2016 which was equal to 57.4 for cost in 2016
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saammbaker
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Seems good, I approached it lower profit and other point dynamic efficiency with pretty much same eval as you and just used it off matrix for eval aswell. Conclusion was that overt collusion will not occur and referred to Nash equilibrium and said tacit collusion may occur but depends if market has a price leader which many industries do not. But who knows
(Original post by dsxmpsxn)
for the 25 marker on collusion
my first point was on overt collusion and creating more revenues and therefore profits by both firms pricing at a higher level. i used a payoff matrix for this.
EV: a lack of trust between firms and the threat of being undercut and losing demand - firms less likely to collude
second point was on tacit collusion and the fact that firms are likely to collude by following a price leader because demand above the market price is elastic and below is inelastic - colluding tacitly therefore allows no losses to be made through a fall in demand or a price war.
EV: if it is a contestable market in which a firm can come in with lower prices and undercut all colluding firms, a firm is less likely to collude and may price lower to subvert this threat.

Any thoughts? I thought this was decent but i'm not so sure reading people's answers now. Are my two KAA points too similar? I made sure to distinguish between overt and tacit collusion.
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