Highly Possible Data Response Questions for Unit 1: Competitive Markets: How They Work and Why They Fail

I am quite delighted once again to re-write/ improvise the examination techniques on data response for Unit 1. As mentioned in earlier posts, of all the four papers in GCE Edexcel Economics, this paper is the most predictable, having the most structured/ fixed answers before-hand and hence should be the easiest to score. Being an educator myself, I always believe that knowing ‘what is coming out’ before hand is utmost important as the saying goes:

“Secret operations are essential in war; upon them the army relies to make its every move”-Sun Tzu Art of War

Here you go:

Commodities (rice, barley, sugar cane, soy, beef and veal, timber, oil, aluminium, bauxite, gold, diamonds, palladium, nickel etc)

1. Demand and supply diagram (6-8 marks)

If the question carries as little as 6m, MOST LIKELY, either the demand or supply curve will shift rather than both. This has become a popular trend in the recent exams. Please take note of this. In case if the information provided by the Extracts is ‘hinting both’ and yet the question is as little as 5m/6m, then you have to use your instinct to decide which ‘information is stronger’? Demand or supply? To illustrate:

(6m)

There was a long period of underinvestment by oil companies

The rapid economic growth of Brazil, Russia, India and China (BRIC) has led to a rise in the consumption of oil

Conclusion: DEMAND increases, SUPPLY constant

In case if the question carries 7m/ 8m, chances are, both curves will shift and usually demand will increase (due to China etc) and supply will fall (due to natural disaster, restriction on exports by major producers etc). Diagram alone is about 3m (1 curve shift) and 4m (both curve shift)

2. Price elasticity of demand (PED) (5m/6m)

The standard procedures are define/ provide formula, explain the nature of the commodity discussed (usually inelastic in demand) with sound reasoning and an evaluation

3. Cross elasticity of demand (XED) (7m/8m)

Standard procedures are define/ formula, mention the relationship (substitute with positive XED), how the price of B affects A and an evaluation

4. Income elasticity of demand (YED) (7m/8m)

Define/ provide formula, define or explain normal good and inferior good if these two keywords appear, mention that a normal good must have YED > 0 by quoting reference and usually one evaluation

5. Price elasticity of supply (PES) (9m)

Define/ formula, mention that short run is inelastic and why, explain why in long run it becomes elastic and may need to provide two evaluations

6. Taxation/ subsidy (12m or 14m)

Define, draw a diagram (up to 4m depending on details shown), explain how it works/ economic effects and evaluations

7. Minimum guaranteed price (MGP) (12m)

Define, diagram (up to 4m), explain how it works/ economic effects and evaluations

8. Buffer stock scheme (12m or 14m)

Define, draw a diagram (up to 4m), explain how it works and evaluations

9. Cost-benefit due to the consumption/ production of commodity (12m or 14m)

Define words like external costs/ benefits/ market failure, provide a cost-benefit diagram (up to 4m), explain the costs or benefits and evaluation

10. Government failure (10m)

Define government failure, explain in what way government failure has taken place and evaluations

As for the Market Failure (education, healthcare, congestion, air pollution, tobacco consumption, overfishing etc) I will segregate them into two parts:

      A  Confirmed Questions

1. Define private benefits (PB)/ external benefits (EB)/ private costs (PC)/ external costs (EC) (2m/ 4m)

2. Provide examples for each PB/ EB/ PC/ EC (2m or 4m with some elaborations)

3. Cost-benefit diagram (up to 4m depending on the details shown)

For review, these are the issues that had appeared in the previous examinations:

1.  Education and tobacco consumption (January 2009)
2. Housing market and rice (June 2009) 
3. Oil prices and congestion (January 2010) 
4. Rising food prices and motor vehicle market (June 2010) 
5. Sugar and national minimum wage (January 2011) 
6. National Health Service and copper (June 2011) 
7. Beef prices and housing market (January 2012)

     B. Possible issues for June 2012

Congestion (typical standard questions)

1. Calculate the percentage of increase in number of cars/ license issued (2m)

2. Reasons for increase in the number of cars (6m for two reasons)

3. XED between private car and public transport (7m)

Define/ formula for XED, relationship and sign, how costs of travelling by rail may affect demand for cars and evaluation

4. YED for car/ bus/ rail (7m)

Define or formula for YED, status and sign, evidence from extract/ calculation and evaluation

5. Methods to reduce congestion (10m/ 12m)

Suggest 2/3 depending on marks e.g. building more roads, motorway tolls, congestion charge, workplace parking tax, car sharing lanes, fuel tax etc and evaluations

6. Is road pricing justified (10m)

Define/ explain road pricing, mention that it is justified and evaluations

Education (typical standard questions)

1. Production possibility frontier (PPF) (7m/8m)

Define PPF, provide a diagram, how more spending on education can expand PPF and evaluations

2. Methods to increase enrolment of students into public universities (10m)

Provide any two solutions e.g. avoid an increase in tuition fees, more flexible payment scheme, no upfront fees, low interest rate on loans taken, scholarship and grants to poor students, not required to pay back unless earn certain amount of incomes upon working etc and evaluations

3. Methods to improve finances for public universities (10m)

More research grants, allow for some market force within public universities so they can raise more finances etc and evaluations

Air pollution (typical standard questions)

1. Calculate percentage of change in number of airliners/ passengers/ number of cars (2m)

2. Reasons for air pollution (6m for any two reasons)

3. Methods to reduce air pollution (10m/ 12m)

Tradable emission permits, green tax etc and evaluations

Overfishing (typical standard questions)

1. Reasons for overfishing (6m for two reasons)

2. Methods to overcome overfishing (10m/ 12m)

Smaller vessels, using fishing nets with larger holes, enforcement of property rights etc and evaluations 

London Olympics 2012 (possible questions)

1. Definition of private benefits/ external benefits/ private costs/ external costs (2/4 m)

2. Example for each of the above (2/4 m)

3. Cost-benefit diagram (3/4 m)


4. YED related to tourism (define YED, explain whether it is normal good or inferior good, make reference and evaluate) (8m)

In data response for Unit 1, USUALLY:

6m (2m - evaluation)

8m (2m /4m - evaluations where 4m = 2+2. It all depends on the instruction. Best to follow my REDD pillar)

10m (4m - evaluations where 4m = 2+2/ 3+1)

12m (5m - evaluations where 5m = 2+3/ 2+2+1)

14m (6m -evaluations where 6m = 2+2+2/ 3+3)