As May 2019 Flashcards
Explain one disadvantage of the division of labour in car production. (3 marks)
K:
* Division of labour - when an individual concentrates on one particular task
App:
* A worker who adds tyres to a car
Ana:
* Increased productivity
Annotate the diagram to show the change in consumer surplus in the market for diesel vehicles, following a change in demand caused by the proposed 2025 ban in some city centres. (2 marks)
Calculate the new total reveue if prices were raised by 3% in 2017 to £7.63, if everything else remained unchanged. You are advised to show your working. (3 marks)
K:
* Total revenue = price * quantity
App:
* % change in quantity: -1.5%
* Actual change: 18.8135
* Total revenue = £143.547
On the diagram below annotate the effet of a rise in VAT on the market for household energy use. (2 marks)
Explain one reason why the income elasticity of demand is significant to the producer of Freddos. (3 marks)
K:
* A change in income on demand
App:
* YED is negative/inelastic
Ana:
* Sales revenues fall as income rises/sales revenue rise when income falls
With reference to Extract A and Figure 2, explain how the health care market in the UK illustrates the economic problem. (5 marks)
K:
* Economic problem - infinite wants and finite resources
App:
Finite wants:
* Consumers of health care have a growing list of medical concerns for treatment/waiting list 4 million
Finite resources:
* Number of doctors/nurses
Figure 2:
* Waiting time has increased from 5.7% to 10.7%
Ana:
* Health resources are scarce so hospitals have to make choices about who to treat
Explain how ‘asymmetric information’ (Extract B, line 30) can lead to market failure in health provision. (6 marks)
K:
* Producers know more than consumers/imperfect information
* Misallocation of resources
App:
* Doctors know more than patients
* Risk of requiring health care is unknown
Ana:
* Under consumption of healthcare so patients’ health care deteriorate
‘Public parks are a public good’ (Extract C, line 1). Assess this statement. (10 marks)
KAA paragraph (para)
KAA:
K:
* Public goods are non-excludable and non-rival
App:
* Extract C suggests public parks show these features
Ana:
* ‘free use’ (i.e. do not pay to enter)
* Park run users ‘share the park’ with other users indicating one person using the park for a run does not impact another person’s enjoyment so non-rival
Ev:
* Local authorities on charging parkrun participants using public parks
* Public parks have exclusive areas (e.g. tennis courts)
* Parks may be rival in consumption (e.g. participants may get in the way of others)
‘Public parks are a public good’ (Extract C, line 1). Assess this statement. (10 marks)
Ev paragraph (para)
Ev:
* Local authorities on charging parkrun participants using public parks
* Public parks have exclusive areas (e.g. tennis courts)
* Parks may be rival in consumption (e.g. participants may get in the way of others)
Calculate the annual revenue raised by charging £12 per GP visit. Assume there will be 450 million GP visits per year and 90% of these will not be charged. You are advised to show your working. (4 marks)
K and App:
* £12 * 450 million (mn) = £5.4 billion (bn)
* £5.4 bn * 90% = £4.86 bn
* £5.4 bn - £4.86 bn = £0.54 bn
* £5.4 bn * 10% = £540 mn
Discuss the likely reason why the prices of treatments in private sector hospitals are increasing. Draw a supply and demand diagram to support your answer. (15 marks)
KAA para
KAA:
* Demand shifting right and/or Supply shifting left
Demand shifting right:
* Ageing population
* Medical technological advances
* NHS as a substitute less attractive, inferior good, waiting times
Supply shifting left:
* High management and administrative costs
* Salaries/wages rising due to dcotor/nurse shortage
* Removal of subsidy/higher tax on private health care treatment
Discuss the likely reason why the prices of treatments in private sector hospitals are increasing. Draw a supply and demand diagram to support your answer. (15 marks)
Ev para
Ev:
* Magnitude (e.g. demand and supply)
* PED (e.g. PED is elastic in the long run)
* PES (e.g. PES is inelastic)
Evaluate possible ways the government could intervene to reduce the excess demand for state-funded health care. (20 marks)
KAA para
KAA:
* Excess demand
* Government intervention
* Factors influencing demand and suppy (PES) removing excess demand
Purpose of intervention:
* Government spending on direct provision increases supply
* Indirect tax on sugar/high fat content food/drinks OR cutting taxes on healthy lifestyle
* Subsidies on healthy food/gym membership
* Maximum and minimum prices on healthy and unhealthy food/drinks
Other interventions:
* State provision of public goods (e.g. parks)
* Provision of information (e.g. 5 a day)
* Regulation (e.g. restricting sugar)
Evaluate possible ways the government could intervene to reduce the excess demand for state-funded health care. (20 marks)
Ev para
Ev:
* Government failure to reduce excess demand
* Consumers face an under provision of food/drink (i.e. marginal social benefits exceed marginal social costs
* Consumer choice restricted (e.g. subsidised healthy meals and regulations on unhealthy meals)
Causes of government failure:
* Distortion of price signals
* Unintended consequences - charging for health means under consumption
* Information gaps
