Friday, December 30, 2011

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

These are the most typical questions that have VERY HIGH possibility (I'm not saying definitely, so yeah, is wiser for you to study everything and focus in these few) to be tested in next week's exam

1. Demand and supply diagram (7/8 marks)

Provide a DD/SS diagram showing correct shift in demand or/ and supply curve, equilibrium price and quantity. Please label the equilibrium as well. From the past experience, usually demand increases and supply falls leading to higher price, BUT that was due to robust growth in the global economy especially in China and India. Also, the supply usually fails to catch up with the demand. For this time around, demand curve will most likely FALL due to weaker demand for houses and commodities. I am unable to predict the direction of supply curve. Next, most probably you will have to insert some reference e.g. figures from the extract. Finally, provide reasons for the shift

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

Define PED. Mention that the good e.g. oil, rice, copper etc considered in inelastic in demand (usually) and provide a reason e.g. necessity. Most likely you will have to provide an evaluation and also reference from the extract

3. Cross elasticity of demand (XED) (6/7 marks)

Define XED. Explain that both goods are substitutes/ complements (usually substitute) and their sign. Explain how the relationship works. You may be asked to provide reference. High possibility for one evaluation

4. Income elasticity of demand (YED) (6/7 marks)

Define YED. Identify the status of the good e.g. normal/ inferior and also the +/- sign. Explain how do you identify that the good under consideration is normal or inferior. Again, this type of question may require reference and one evaluation

5. Price elasticity of supply (PES) (9/10 marks

Define PES. Mention that in short run the good e.g. oil/ houses etc are inelastic in supply inclusive of one reason. Then, proceed by mentioning that the good is elastic in supply in the long run with a reason. Reference may be needed and this type of question may require two evaluations from my past experience

6. Buffer stock

Provide definition for buffer stock. 100% there will a diagram required with brief supporting explanation of how buffer stock schemes work. Evaluations are extremely easy. There are three stereotype ones like expensive to maintain, high chances of failure based on experience with copper, rubber and rice and some goods especially food cannot be stored for long etc

This is extremely helpful:

7. Private benefits and external benefits (PB and EB)/ private costs and external costs (PC and EC) (12marks)

Define both and provide examples. You are most likely asked to provide a cost-benefit diagram with a brief supporting explanation. Evaluations are definite. Expect two or three evaluations

8. Issues related to congestion (10/12 marks or maybe more if they ask in different parts)

You may be asked to provide few solutions to the existing traffic standstill and evaluate. Reference may be required. Go the link below. It is from Richard Pettinger, one of the most brilliant Economics bloggers I come across

9. Issues related to air pollution (10/12 marks or maybe more if they ask in different parts)

Same structure. You may be asked to provide few solutions to reduce air pollution or perhaps they are already available in the extracts and you have to choose. Two or three evaluations are expected. Go

10. Issues surrounding housing market

This may include DD/SS for houses, rented houses vs. bought-for-own-stay as substitute, how does it affect geographical immobility of labour e.g. lack of teachers and nurses in London due to expensive accommodation and people refuse to move there since increment is small. For more guidance: (Extremely good. Go for Unit 1)

11. Government failure (10 marks)

Define government failure. Based on the extract, provide few examples of government failure. Evaluate them

Hope this is helpful. I will blog about techniques on how to deal with some of the questions effectively in the next posting. Stay tune ;)

12. Taxation/ subsidy (12 marks)

Provide definition for taxation/ subsidy. Diagram is definitely a must, followed by a brief explanation on how the tax/ subsidy work to solve the issues involved e.g. higher tax onto cigarettes leads to higher price and lesser consumption etc. Candidates are expected to provide two or three evaluations. Probably, there is data reference


Anonymous said...

Out of interest, how do you know that these topics are likely?

Anonymous said...

thank you so much. Really really helpful.