Friday, May 31, 2013

The Most Likely Questions for Section B (Data Response) of Unit 3: Business Economics and Economics Efficiency (Edexcel)

Forecast questions for Section B (Data Response):

1. Identifying the market structure (4m)
Mention oligopoly/ monopoly (1m). Provide its definition (1m) and find evidence from the Extract/ Figure to support your answer (2m)

2. Identifying the form of integration (4m)
Mention horizontal/ backward vertical/ forward vertical/ conglomerate integration (1m). Provide its definition (1m) and quote evidence from the Extract (2m)

3. Why the price of a good (e.g. chocolate) is higher in one market (e.g. retails) than the other (e.g. online)? (8m)
Students can approach this question from both angles e.g. why the retail price is higher or/and why the online price is lower. Possible KAA answers (4m) will be in-store customers have readiness to pay or else they wouldn’t come in the first place (PED< 1), online customers are less willing to pay due to the ease of price comparisons across different websites (PED>1), online buying maybe a new experience (PED>1) and to undercut other competitors

4. Cost/ revenue diagram where MC and AC or MR and AR moves (8m)
If it involves MR and AR, please make sure that the new curves are drawn parallelly up or down. Likewise if it involves MC and AC, make sure that the new curves are drawn vertically up or down. The new MC = AC intersection must be vertically above or below of one another (2m). Explain the reason for such shift (2m)

5. Benefits of increased competition within the industry (8m)
Some standard KAA answers (4m) are like lower price for consumers and therefore higher consumer surplus, greater choices, better quality goods and good customer service

6. Effectiveness of regulators to reduce the incidence of collusion (8m)
Standard KAA answers (4m) e.g. the ability to force an oligopoly firm to sell off its assets/ subsidiaries outside any merger, able to block a merger from taking place if it will likely result in the formation of monopoly (more than 25% of market share), can imprison managers/ directors who involve in restrictive practices and fine a firm of up to 10% of its annual turnover/ TR. Standard evaluations e.g. investigation process can be very lengthy and can take up to three years and this may disrupt operations, OFT/ Competition Commission’s decision can be overturned in High Court and the power of European Commission supersedes the one possessed by Competition Commission

7. Contestability of a market (12m) (phrasing: some firms are big and others remain small)
The most typical approach to KAA (6m) will be mentioning that the industry is NOT CONTESTABLE. Some standard answers are like purchasing EOS, technical EOS, marketing EOS, managerial EOS, transport EOS, financial EOS, expensive specialist equipments, high advertisement budget, high cost of R&D, patents, difficulty to obtain license from the government, large firms having control over the raw materials (backward vertical)  and distribution network (forward vertical)

8. Pricing and non-pricing strategy (16m) (phrasing: how does competition change the behaviour of firms)
The most common pricing strategies are revenue maximisation, sales maximisation, predatory pricing, limit pricing, BOGOF (buy-one-get-one-free) and price discrimination. In some cases, profit maximisation, cost-plus pricing and price fixing can also be considered e.g. if the question asks how pricing strategies can be employed to increase profits. Non-pricing strategies will be advertisement to project the unique feature of a good, endorsement, good customer service, better design and quality, loyalty card, contests, free trial and others

9. Impact of takeover on economic efficiency (16m)
 Standard KAA answers would be the removal of wasteful competition e.g. excessive/ unnecessary advertisement, rationalisation programme e.g. removal of some workers in overlapping departments, purchasing EOS, managerial EOS, transport EOS, financial EOS, technical EOS, managerial EOS, allocative efficiency, productive efficiency, dynamic efficiency, cost reduction by offshoring, synergies etc

10. Impact of increased government interventions on economic efficiency (16m)
Candidates have to carefully approach such question. Must relate performance targeting e.g. number of customers served in an hour, price capping e.g. RPI-X, fines, competition authorities opening up the market for more foreign competition to productive efficiency, allocative efficiency, dynamic efficiency, social efficiency etc rather than a simple identification of regulations OR efficiencies

Special notes:

1. When a question mentions about the Game Theory, candidates MUST include the diagram in their explanations. If the question does not mention anything about the Game Theory, candidates are able to get full marks WITH OR WITHOUT the Game Theory diagram

2. Each Game Theory diagram carries 2m

3. A further 2m will be awarded if candidates explain about the pricing strategies e.g. predatory pricing, limit pricing, sales maximisation etc by relating it to the matrix

4. Time management is crucial. It is the simplest, oldest and yet the most effective strategy that is always not followed. Pricing and non-pricing strategies questions will always appear either as (c) or (d) and time indicated will be 12m and 16m respectively. Let’s just say that it is a 16m question. Popular KAA combination is (2+2+2+2) BUT the problem is candidates always treat it as (4+4+4+4) and instead of spending about 8-10 minutes, they spend 16-20 minutes. This explains why more than 50% of the candidates are unable to complete their paper on time

If time is running out for the last question, provide answers in key points. As for this case, I would write: The four strategies that could be employed are predatory pricing, sales maximisation, greater budget on advertisements and produce better quality products. That’s all for 4 marks. To make it 8 marks, then I would have to say, sell goods at a loss or to the extent of providing it free (1m), reduce the price significantly to boost sales but not to the extent of making losses (AC = AR) (1m), more adverts to promote the unique feature of the product e.g. rich in cocoa content and milkier (1m), increased durability to prevent frequent wasteful replacement (1m)

How long does it take to write out all these 4 points and its short explanations? Probably less than 3 minutes. It is true that the transmission mechanism is incomplete for all of them but what I am trying to say here is that if you are going for more points, then each point would require less elaborations

If you are going for (4+4) then of course a more detailed answer will be required, but just provide 2 will suffice


Monday, May 27, 2013

Highly Possible Questions for Section B (Data Response) of Unit 3: Business Economics and Economics Efficiency

My view remains the same as the previous post. Click on the link below. Many thanks

Saturday, May 18, 2013

Examination Strategies for Section B of Unit 4; The Global Economy (coming soon 20th May 2013)

1.  How does Section B of Unit 4: The Global Economy look like?
As usual, just like Unit 1 and 3, you will have to choose one of the two data response questions. Each of them has a fixed mark distribution. Question (a) 5 marks, (b) 8 marks, (c) 10 marks, (d) 12 marks and finally (e) 15 marks

2.  How to answer each question?
Question (a) is meant to be ‘simple’. Please make sure that you have learnt all the key terms/ definitions. 3 marks will be allocated for the correctly-defined term and 2 marks for two data references. Sometimes the 3 marks will be shared between two definitions. For example, in June 2012, Question 4(a) was asking for the definitions of both absolute and relative poverty. In some cases, you may be asked to explain a phrase. In this case, only one reference is needed and it carries equally 2 marks

Question (b) onwards maybe a little bit more complicated. Anyway I am going to simplify it here. Please provide 2 key points WITH reference and analysis. So technically, 4 marks for each. I hate to say about this, but I realise that there are irregularities here. Sometimes, 2 marks are given for ONE data reference but sometimes 2 marks will require TWO data reference. In such circumstance, giving two is the safest

Question (c) onwards will require evaluations. Here the KAA is 6 marks and evaluation 4 marks. Give 2 key points WITH reference and short analysis for each. Evaluations can be (2+2) or (1+3) marks. Again, i have simplified some irregularities here

Question (d) is 12 marks and so the breakdown will be KAA 7 marks and evaluation 5 marks. Provide 2 key points WITH reference and short analysis for each. Technically, the combination is 3 marks and 4 marks. Evaluations will be (3+2) marks

Question (e) is 15 marks and the breakdown is KAA 9 marks while evaluation is 6 marks. Provide 3 key points WITH data reference and short analysis for each. You may also provide 2 key points actually which in this case will become (4+5) marks. Evaluations will be (3+3), (4+2) or (2+2+2) marks. My advice is, go for the third one. Get yourself an ‘insurance’ here

3.  Can you forecast what the extracts are going to be?
To be very frank, it is rather hard to predict for macroeconomics papers (Unit 2 and 4) than microeconomics (Unit 1 and 3). As all of you aware, macro is rather unique. Every topic seems to be inter-related. For example, unemployment can be combined with an inflation extract; unemployment can also be combined with topics like recession, current account and more. There is no sure-fire way for me to know the exact possible combinations

However, from the past papers experience, they do have a tendency to focus on certain topics. So, for paper 4, please go and strengthen your knowledge on big topics like floating and fixed exchange rate, reasons for current account deficit, is current account deficit harmful and factors that can affect competitiveness.

The other popular question will be the notorious combination of budget deficit and national debt. Please go and familiarise issues like reasons for increasing budget deficit in the past few years, impacts of higher national debt, impacts if national debt is immediately reduced, why eurozone will have great difficulty to exit the recession and other related topics.

 Another popular topic will be on developing economies. They usually link developing economies with inequality and topics like FDI, debt cancellation, financial aid/ loans, infrastructure aid, focus on primary/ secondary sector and EOI. So, go and prepare on issues like the pros and cons of FDI, pros and cons of debt cancellation, how does financial/ infrastructure aid promotes growth and development, problems with over-dependency on primary sector and the good and bad of export-oriented growth

4.  How much time should be allocated?
Nothing less than 55 minutes. Be careful as most candidates would have used up most of the time on Section A

Friday, May 10, 2013

Examination Strategies for Unit 4: Global Economy (Section A)

1. What are the hottest topics that we should prepare for Section A (20 marks and 30 marks essays)?
Take out a piece of paper and brainstorm for all the possible points as well as evaluations for the topics listed below. Some harder topics may require extra efforts e.g. consulting your lecturer or internet research. Nonetheless, if you strictly follow this list, I promise that your revision time can be cut short by as much 50%. Achieve more by doing less since you already knew areas that are heavily tested

(A) World trade
a.  Reasons for globalisation
b.  Costs and benefits of globalisation
c.  Economic effects of the increase in numbers and size of trading blocs
d.  Reasons for protectionism
e.  Economic effects of protectionism
f.   Reasons for widening current account deficit
g.  Is large current account deficit a cause of concern?
h.  Measures to reduce current account deficit
i.  Factors that can affect the international competitiveness of UK goods and services
j.  Policies to increase the international competitiveness of UK goods and services
k. Economic effects of an increase/ decrease in the price of non-renewable resources

(B) Growth and development and poverty
1.  Strategies to promote growth and development
2.  Reasons for the rise in absolute poverty in Sub Saharan African economies
3.  Reasons for widening income inequality in any country of your choice
4.  Problems with over dependency on primary sectors/ FDIs/ international aid

(C) Public finances and eurozone economies
1.  Costs and benefits of adopting the single currency
2.  Reasons for slower economic recovery: eurozone economies vs. non-eurozone economies (UK, Sweden etc)
3.  Reasons for the high budget deficit and national debt in a country of your choice
4.  Economic effects of high budget deficit/ national debt
5.  Economic effects if drastic measures are undertaken to reduce the budget deficit/ national debt

2. How much time is recommended for Section A?
Although the suggested time by Edexcel is 1 hour, most candidates take longer than that. Ideally, it shouldn’t be more than 1 hour 10 minutes. If yet to finish, move on. Section B is equally important too. They carry another 50% weightage for the entire paper

3. How many points and evaluations we need to give?
As for question (a) (20 marks), you are required to give 3 points and 2 evaluations while for question (b) (30 marks), you have to provide 4 points with 3 evaluations

4. How long is each paragraph?
Let’s do the math. We have in total of 12 paragraphs (5 and 7) and we are told that Section A requires 1 hour and so technically, each paragraph is about 5 minutes. Very good candidates can write up to 100 words while average candidates typically 70-80 words. In fact how long or how short is not much of an issue itself. The most important question is how sufficient? Is the transmission mechanism complete? Is your explanation clear? Do you insert diagram to make your answer presentable? How well you use economics jargon (Golden Rule, Sustainable Investment Rule, paradox of thrift etc) in your writing?

5. Do we provide an evaluative point soon after each analysis?
This is a matter of preference. There is no right or wrong. You can provide an evaluation after each analysis or write out all the analysis followed by all evaluations towards the end. However, there is a good and bad for these two writing styles. If you provide an evaluation soon after each analysis, chances are the flows of your essay will look so much better but it may take you quite a while to think of a proper evaluation. There is a possibility that you may use up too much time and hence unable to finish the essay. Candidates who took way longer than 1 hour usually use such approach

On the other hand, candidates who write evaluations towards the end after all the analysis may not have written an essay with good flows but they stand a higher chance to score higher. They are also more likely to be able to complete the essays within an hour. Also, it is worth to note that KAA marks are easier to pick up and this second candidate would have earned all while the first candidate is still struggling with first/ second evaluation before moving on next analysis

I will blog about Section B as well the list of definitions for Econs 4. Stay tune.