Edexcel Economics Theme 1 Essay Plans Flashcards
Examine the possible impact on the production possibility frontier for the UK economy if the Severn Estuary tidal barrage is constructed. Illustrate your answer with an appropriate diagram. (12)
Definition of production possibility frontier (e.g.
maximum output an economy can achieve when all its resources are fully or efficiently employed). Draw PPF showing outward shift.
P1: tidal barrage leads to an increase in capital goods, increased potential output. 30000 new jobs created from new factories. Provides energy source to enable future production of goods and services for many years. H - just 5% of UK energy needs so may not have massive impact.
P2: Tidal barrage may lead to further investment programmes e.g. road and rail links in the region. Tidal barrage may lead to further investment programmes e.g. road and rail links in the region.
Less flooding risks so production not disrupted as in recent years.
H: the overseas funding suggests income stream from the project will go abroad
With reference to Extract A, explain the difference between a positive statement and a normative statement. (5)
positive statement: factual statement / can be tested as true or false.
Data reference: quote
normative statement: value judgement / cannot be tested as true or false.
Refer to a quote of normative statement
With reference to Figure 2, examine two possible factors which may have influenced demand for rail travel since 2008. (10)
P1: the change of population, Increase in population moved to commuter areas/improvement in rail stock e.g. wifi access. Population increased by 30%. However, increased home working.
P2: Increase in substitute price. Close substitute is a car as XED>+1. So more demand. Demand shifts right from Q1 to Q2. However, delays and cancellations may make trains less attractive
With reference to Extract 1 and Figure 1, explain the causes of the increase in the price of food. Use a supply and demand diagram in your answer. (5)
*Increase in demand due to global population growth. Draw supply and demand diagram. Demand shifts right.
Decrease in supply due to increased costs of production / e.g. rising fuel prices. Supply shifts left.
Explain the likely impact on producer surplus of an increase in the demand for housing. Use a diagram to illustrate your answer. (5)
Define producer surplus- the difference between what producers are willing and able to supply a good for and the price they actually receive.
Draw a s d diagram showing increased producer surplus from shift out in demand.
Explain that there is an increase in prices as demand for houses rises
Outline the likely impact on consumer surplus and producer surplus in the tobacco market of a decrease in demand for tobacco. Illustrate your answer with a supply and demand diagram. (5)
Both are likely to fall. Define both surpluses.
With reference to Extract 1, assess the likely benefits of the division of labour in the production of wind turbines. (12)
Definition of the division of labour (production of a good is broken down into different tasks and labour allocated to each task).
P1: Extract 1 refers to designers, engineers, welders, electricians, truck drivers. Increase productivity of labour or increase output per head / may lead to higher earnings for labour. H - Boredom and monotony of particular work / this could reduce productivity or quality of output.
p2: Reduction in costs per unit of output or increase in efficiency / which may increase profits. Diagram showing an increase in supply and reduction in price. H- The benefits of higher productivity may be offset by
higher wages.
Explain why ‘the price elasticity of demand for higher education is about -0.5’ may be of relevance to English universities
Refer to Extract A in your answer.
Define PED. Then, use data e.g.
* reference to fees e.g. £9 250 (1) or PED e.g. -0.5 (1)
PED is inelastic so government and universities know that students are prepared to accept higher fees
With reference to Figure 1 and Extract A, explain why the price of uranium has
‘fallen to a 13-year low’ (Extract A, lines 2 and 3) in 2016. Include a supply and demand diagram in your answer.
Draw an s d diagram showing increase in supply. Estimated surplus (1) of approximately 7 million kg of uranium (1) Supply shifts from s1 to s2 right.
With reference to Figure 1, explain one possible reason for the differences in price elasticity of supply of new housing between countries.
Define PES. Price elasticity of supply of 1 means unitary elasticity; PES> 1 means elastic; PES <1 means inelastic (1). Supply elasticities in the USA or Finland are at or above unity. a country with particularly low elasticities of supply e.g. the Netherlands or the UK
Apart from a shift in the production possibility frontier, examine two likely external benefits of higher education. Illustrate your answer with an appropriate diagram. (12)
Define external benefit - difference between private and social benefits.
P1: Increased profits for firms since:
higher productivity of graduates mean higher revenue.
Also there could be lower training costs for firms if graduates already possess vocational skills. H- The increase in profits for firms may not be so significant since graduates are paid more than non-graduates. It depends on the difference between the extra revenue and extra costs from employing graduates.
Improved government finances since: increase in tax revenue from higher earnings of graduate. Less likelihood of graduates claiming unemployment benefits. H- The improvement in government finances may occur only in the long run since it is still funding a significant proportion of tuition fees for graduates; also, repayment of student loans only occur after graduates are in employment above a certain income level.
Using examples, evaluate the likely private costs and external costs of this house-building programme. Illustrate your answer with a diagram. (12)
Definition of private costs: cost which the price mechanism takes into account.
* Definition of external cost: difference between private cost and social cost)
One example of a private cost e.g labour
Credit crunch (sudden reduction in the general availability of loans ) could mean the target for house building will not be met. potential house buyers face problems raising finance.
One example of external costs would be house building. Size of external costs will depend on various factors, eg planning regulations, quality of new builds, size of new houses, environmental awareness of housing companies.
Explain how ‘asymmetric information’ (Extract B, line 30) can lead to market failure in health provision. (6)
Asym. information is when producers know more than consumers. risk of requiring health care is an unknown
as Doctors know more than patients. This means Under consumption of healthcare (1). Therefore patients’ health conditions deteriorate (1)
‘Public parks are a public good’ (Extract C, line 1). Assess this statement. (10)
public goods are non-excludable and non-rivalrous
Extract C suggests public parks exhibit these features
‘free use’ i.e. do not have to pay to enter. H- Local authorities planning on charging parkrun participants using public parks
Park run users ‘share the park’ with other users indicating one person using the park for a run does not have an impact on another person’s enjoyment so non-rival. H- Parks may be rivalrous in consumption e.g. Hundreds of park run participants may get in the way of other users.
With reference to the information provided and your own knowledge, to what extent might regulations on the sale of cigarettes and high taxes on tobacco result in government failure?
Define government failure ((government intervention leads to a misallocation of resources).
May be govt failure, High tobacco taxes may have encouraged illegal smuggling of tobacco / as 80 per cent of the price of cigarettes comprises tax. May lead to more Unintended consequences: Government regulations or high taxes may have contributed to closure of pubs and shops or a decrease in employment / increase in losses or fall in profits. H - High tobacco taxes may not be significant cause of tobacco smuggling / Spain and Italy have much lower tobacco taxes but higher rates of smuggling.
May not be, Government can reduce asymmetric information or imperfect knowledge / development of this point e.g. public health campaigns so consumers realise the true costs of tobacco smoking / reduce problem of myopia among tobacco smokers. H - High tobacco taxes may increase inequality / since a greater proportion of lower income groups smoke (29%)
than higher income groups (13%).
