AQA Economics 25 mark questions
1.Methods of dealing with over-consumption/under-consumption of merit/demerit goods: 1. Information Provision
Left shift in demand long term fashion and trends
Outreach may not be extensive enough
May not impact, e.g., demerit, inferior goods, necessary when people are poor/habit-forming goods,
more inelastic demand.
2.Subsidies/taxation
DIAGRAM OF INELASTIC GOOD
Inelastic, probably just more willing, pass on, minimal impact on producer and demand, disproportionately
affect lower income
Discuss elasticity
2. 'Discuss efficiency of monopoly markets' (25): Point 1: Dynamic Efficiency/economies of scale :) for firm and consumer
DIAGRAM OF LONG-TERM FALL IN LRAC CURVE
Will monopolies lead to lower average prices as long-run average costs decrease from economies of scale?
A competitive market is only one point that is productively efficient (static). Monopoly efficiency in the long
term
Point 2: R + D :) for firm and the consumer,
more income from higher prices
More research and development, more information, better quality goods, innovation and investment
Point 3: X inefficiency - :( for firm and consumer
lack of willingness of firms with monopoly power to control their costs of production vs competitive firms, which
constantly look to cut Operates at higher costs
However... Quality, Corner Cutting
Point 4: Productive and Allocative Inefficiency - :( for consumer
CURVE HIGHER PL THEN DEMAND, less Q, more P
Productive-minimum abg total cost, min inputs for max outputs, a lack of competition, and little incentives to lower costs
for consumers
Allocative firms do not have to produce the 'best' combination of goods and services, little choice
3. Should local authorities provide local libraries? (25): 1. Public Libraries as merit good,
private and external benefits
MERIT GOOD DIAGRAM, UNDERCONSUMED IN FREE MARKET, MSB>MPB
Corrects market failure, equity of income, and labour immobility
, AQA Economics 25 mark questions
2.Labour mobility/supply and productiveness of labour internet,
courses, online skills, occupational immobility, workspace,
increasing productivity
3.Opportunity Costs, government budget , declining industry -
transfer to community groups, volunteers, charging
fundraising
4.Impact of fall in commodity prices on the performance of the UK
economy: 1.
For UK producers
RIGHT SHIFT SRAS/LRAS
Falling P of inputs, lower costs of production
Either INVEST extra profit, increasing LRAS of firm
Or... charge a more competitive price increasing AD for product Produce
more output at same price
2.For UK consumers
RIGHT SHIFT AD
Benefit from either increased investment, more output at lower price
Economic welfare increases
Goods Cheaper
AD higher, economic growth
3.For UK suppliers
EXCESS DEMAND DIAGRAM
Price of exports fallen
More difficult to supply at same Q
Less Q, increase Prices anyway due to demand-pull inflation
Pushed out of market
Excess demand
4.For the UK government
Economic Growth
Employment
Improved Budget Balance?
More spending more VAT revenue
1.Methods of dealing with over-consumption/under-consumption of merit/demerit goods: 1. Information Provision
Left shift in demand long term fashion and trends
Outreach may not be extensive enough
May not impact, e.g., demerit, inferior goods, necessary when people are poor/habit-forming goods,
more inelastic demand.
2.Subsidies/taxation
DIAGRAM OF INELASTIC GOOD
Inelastic, probably just more willing, pass on, minimal impact on producer and demand, disproportionately
affect lower income
Discuss elasticity
2. 'Discuss efficiency of monopoly markets' (25): Point 1: Dynamic Efficiency/economies of scale :) for firm and consumer
DIAGRAM OF LONG-TERM FALL IN LRAC CURVE
Will monopolies lead to lower average prices as long-run average costs decrease from economies of scale?
A competitive market is only one point that is productively efficient (static). Monopoly efficiency in the long
term
Point 2: R + D :) for firm and the consumer,
more income from higher prices
More research and development, more information, better quality goods, innovation and investment
Point 3: X inefficiency - :( for firm and consumer
lack of willingness of firms with monopoly power to control their costs of production vs competitive firms, which
constantly look to cut Operates at higher costs
However... Quality, Corner Cutting
Point 4: Productive and Allocative Inefficiency - :( for consumer
CURVE HIGHER PL THEN DEMAND, less Q, more P
Productive-minimum abg total cost, min inputs for max outputs, a lack of competition, and little incentives to lower costs
for consumers
Allocative firms do not have to produce the 'best' combination of goods and services, little choice
3. Should local authorities provide local libraries? (25): 1. Public Libraries as merit good,
private and external benefits
MERIT GOOD DIAGRAM, UNDERCONSUMED IN FREE MARKET, MSB>MPB
Corrects market failure, equity of income, and labour immobility
, AQA Economics 25 mark questions
2.Labour mobility/supply and productiveness of labour internet,
courses, online skills, occupational immobility, workspace,
increasing productivity
3.Opportunity Costs, government budget , declining industry -
transfer to community groups, volunteers, charging
fundraising
4.Impact of fall in commodity prices on the performance of the UK
economy: 1.
For UK producers
RIGHT SHIFT SRAS/LRAS
Falling P of inputs, lower costs of production
Either INVEST extra profit, increasing LRAS of firm
Or... charge a more competitive price increasing AD for product Produce
more output at same price
2.For UK consumers
RIGHT SHIFT AD
Benefit from either increased investment, more output at lower price
Economic welfare increases
Goods Cheaper
AD higher, economic growth
3.For UK suppliers
EXCESS DEMAND DIAGRAM
Price of exports fallen
More difficult to supply at same Q
Less Q, increase Prices anyway due to demand-pull inflation
Pushed out of market
Excess demand
4.For the UK government
Economic Growth
Employment
Improved Budget Balance?
More spending more VAT revenue
