2018 AS paper Flashcards
define command economy
- centrally planned
- government run
- no or limited private sector
- government allocates most/all resources
PED
PED = %changeQd / %changeP
percentage change
new-old / old * 100
determinant of PED for Daily Mail?: change in population size
not correct because ‘population’ is a non price determinant of demand not PED determinant
determinant of PED for Daily Mail?: decrease in cost of producing the Daily Mail
not correct because ‘cost’ is a non price determinant of supply not PED determinant
determinant of PED for Daily Mail?: expected rise in the price of Daily Mail
not correct because ‘expected rise in the price’ is a non price determinant of demand not PED determinant
determinant of PED for Daily Mail?: availability of rival newspapers
correct - determinant of PED
ceteris paribus
all other things being equal
function of the price mechanism in the market for private dental care?: acting as a signal to dentists when deciding whether to provide private dental treatment
correct
function of the price mechanism in the market for private dental care?: eliminating a shortage of private dentists by allowing the price of private treatment to fall
not correct because a shortage will be eliminated by a rise in price rather than a fall in price
function of the price mechanism in the market for private dental care?: encouraging government intervention to set dental care targets
not correct because setting ‘targets’ is not a clear application of the rationing function using the price mechanism
function of the price mechanism in the market for private dental care?: incentivising private dentists to offer only NHS treatment
not correct because the lower NHS price will act as a disincentive
reasons state provides NHS treatment
- Risk/Imperfect information (1) which may lead to a misallocation of resources (1)
- Inequality (1) provide for those priced out of unaffordable private care (1)
- Positive externalities (1) spillover benefits to third parties i.e. employers/families (1) Diagram may illustrate this (1)
- Growth/economic freedom/welfare safety net (1) ensure the ill can recover and return to workforce (1).
define asymmetric information
- Where one party in a transaction has more or superior information compared to another
- Providers know more than consumers or vice versa
explanation of bus travel being an inferior good
correct definition of inferior good e.g. as incomes rise demand falls OR
YED formula = %changeQd / %changeY
OR as incomes falls more demand for inferior goods
Application
calculating percentage change in income = 1.5/24.2 =+6.2%
1 mark for calculating YED = -3%/+6.2% = -0.48 (accept range -0.48 to -0.5)
Analysis
1 mark for linked development e.g. bus travel is an inferior good as YED is negative
Or explanation of the inverse relationship
define consumer surplus
- Measure of the welfare (utility) that people gain from consuming goods and services
- Difference between the total amount that consumers are willing and able to pay and the total amount that they actually pay.
- Diagram showing area under the demand curve and above the market equilibrium price.
public good
- non-excludable
* non-rivalrous
why price of uranium has ‘fallen to a 13-year low’ in 2016
Knowledge
1 mark for an increase in supply or a decrease in demand. This may be illustrated on a diagram
Application
2 marks for using source data explaining change in supply and demand, e.g.
• Estimated surplus (1) of approximately 7 million kg of uranium (1)
• Kazakhstan’s production has increased significantly/stockpiles (1)
• Confidence in nuclear industry declined/Japan closed some of its nuclear plants (1)
Analysis
Accurate diagram – showing price fall (1) correct shift in demand and supply (1): demand curve left, supply curve right
assess whether supply of uranium is likely to be price elastic or price inelastic (KAA)
- Shows or demonstrates understanding of price elasticity of supply.
- Reasons why uranium is price inelastic.
- Diagram to show price inelastic supply.
- Time. Two years to build a uranium mine in Spain, ten years in ‘development’, difficult to find in right concentrations.
- Factor immobility e.g. uranium mine cannot be switched to other uses
- Regulation. ‘Have to clear extra hurdles’ due to government concerns regarding negative externalities.
PES
- measures the relationship between change in quantity supplied following a change in price
- When PES > 1, then supply is price elastic
- When PES < 1, then supply is price inelastic
- When PES = 0, supply is perfectly inelastic
- When PES = infinity, supply is perfectly elastic following a change in demand
- PES = %change Qs / %change P
assess whether supply of uranium is likely to be price elastic or price inelastic (Ev)
Reasons why uranium is price elastic:
• Time. Ability to store stockpiles of uranium, Figure 1 surplus suggests and ‘stockpiles until 2020’.
• ‘Uranium is a relatively common metal’. Extract A Line 2
• Distinction between short run and long run and its significance for elasticity of supply. By 2018 mine in Uranium producing ‘2.2 million kilos a year’.
reasons many consumers of energy have not switched to suppliers offering lower prices
Knowledge/understanding
• Identification of two separate reasons: inertia, computational problems, information gap, all providers increasing prices over time.
Application
• ‘Irrational consumers pay the price’.
• Energy prices have risen by 158% in the last 15 years.(1)
• Four million households are still on the most expensive energy rates. (1)
Analysis
Linked development of why not switching to a supplier offering lower prices (1)
e.g.
• Inertia (1) despite a decade of rising energy bills (1) as consumers do not have the time or motivation to switch (1).
define renewable and non-renewable energy
Knowledge/understanding
- Renewable energy is a resource made from something which can be renewed itself/infinite supply
- Non-renewable energy is a resource which once exploited cannot be replaced/finite supply
Application
Energy generated by nuclear or coal is non-renewable (1) Solar or wind energy is renewable (1).
microeconomic effects of introducing a max price for energy of producers and consumers (KAA)
• Understanding of maximum price.
The effect of a maximum price on consumers:
• Energy prices more affordable for consumers, end of ‘decade of rising energy bills’, extension in demand for energy or increase in quantity demanded (inefficient use).
The effect of a maximum price on producers:
• Contraction in supply or decrease in quantity
supplied, power stations turned off ‘undermine energy market’, decline in producer surplus or revenue/profit.