Economics Edexcel-Theme 1-Workbook-Answers PDF

Preview

Summary

Pre seminar activity papers for understanding the basics of economics....

Description

WORKBOOK ANSWERS Edexcel AS/A-level Economics A Theme 1 Introduction to markets and market failure This Answers document provides suggestions for some of the possible answers that might be given for the questions asked in the workbook. They are not exhaustive and other answers may be acceptable, but they are intended as a guide to give teachers and students feedback. The student responses (green text) for the longer essay-style questions are intended to give some idea about how the exam questions might be answered. The examiner comments (blue text) have been added to give you some sense of what is rewarded in the exam and which areas can be developed. Again, these are not the only ways to answer such questions but they can be treated as one way of approaching questions of these types. The abbreviation KAA stands for Knowledge, Analysis and Application.

Topic 1 Nature of economics Economics as a social science 1 2 marks for the definition below, or similar: The study of society (1 mark) and the manner in which people behave/influence the world around us (1 mark). 2 2 marks for any relevant definition, such as: 

A theoretical construct representing economic processes (1 mark) by a set of logical relationships between them (1 mark).



A simplified framework (1 mark) designed to illustrate more complex processes (1 mark).

3 2 marks for any of the following points:

Edexcel Economics A Theme 1 Introduction to markets and market failure © Peter Davis Philip Allan for Hodder Education

1

TOPIC 1

Nature of economics



In sciences, like chemistry, experiments are conducted on scientific particles that can be easily tested (1 mark) and react in the same way in the same experimental conditions (1 mark).



In social sciences, like economics, experiments often involve people/the behaviour of individuals (1 mark) and they may not react in the same way when tested/can react in more unpredictable ways (1 mark).



Ceteris paribus means all other things being equal (1 mark).



Application to extract (1 mark), e.g. drop in price, ceteris paribus causes an increase in consumer demand for broadband.



Further explanation (up to 2 marks), e.g. so we are assuming that demand for broadband will increase if price drops, assuming that no other factors influencing broadband demand changed (1 mark), such as the speed of connections (1 mark).

4

Positive and normative economic statements 5 Possible answers include: 

Objective statement (1 mark)



Based on fact (1 mark)



Can be tested as true or false (1 mark)



Involves a scientific approach (1 mark)

6 Possible answers include: 

Subjective statement (1 mark)



Based on a value judgement (1 mark)



Cannot be tested as true or false (1 mark)



A non-scientific approach (1 mark)

7 a 

Normative statement (1 mark)



Includes the phrase ‘should not’ (which implies a value judgement) (1 mark)

b 

Positive statement (1 mark)

Edexcel Economics A © Peter Davis

Theme 1 Introduction to markets and market failure Philip Allan for Hodder Education

2

TOPIC 1



Nature of economics

Can test whether student applications went down by 1% (after tuition fees rose) (1 mark)

The economic problem 8 What? (1 mark)/ How? (1 mark)/ For whom? (1 mark) 9 The value of the next best alternative (1 mark) forgone (or given up) (1 mark). 10 1 mark for any relevant example: a

Wind/solar/tidal energy etc. (1 mark)

b

Oil/coal/gold etc. (1 mark)

11 Possible answers include: 

There are unlimited wants (1 mark) but limited resources (1 mark), i.e. scarcity (1 mark).



Therefore decisions/choices need to be made (about resource allocation) (1 mark).

12 Explanation (4 marks). Possible answers include: 

Define opportunity cost (1 mark), i.e. value of the next best alternative forgone.



By spending on the advertising campaign HMV had less money to spend on other areas of the business (to aid its survival) (1 mark).



Examples (1 mark each, up to 3 marks), e.g. on a new website (1 mark), new products (1 mark) or customer service training for staff (1 mark).

Production possibility frontiers 13 The maximum output/combination of goods and services that can be produced (1 mark) with resources used efficiently (1 mark). 14 a

F (1 mark)

b

E (1 mark)

c

E (1 mark)

d

B or A (1 mark)

15 a b

200 million – 180 million = 20 million consumer goods (2 marks) 11 million – 6 million = 5 million capital goods (2 marks)

16 

Inward shift in the PPF (1 mark) as fewer consumer and capital goods can be produced (1 mark).

Edexcel Economics A © Peter Davis

Theme 1 Introduction to markets and market failure Philip Allan for Hodder Education

3

TOPIC 1



Nature of economics

Explanation (up to 2 marks): e.g. destruction of factories (1 mark) would reduce capital stock in the economy (1 mark); loss of life would (1 mark) reduce quantity of labour in the economy (1 mark).

17 Analysis (up to 6 marks). Possible answers include: 

Definition of opportunity cost (1 mark), e.g. the value of the next best alternative forgone.



Explanation of opportunity cost:



o

More capital goods mean fewer resources available to produce consumer goods (2 marks).

o

Reduction in current living standards but higher future growth/living standards/consumption (2 marks).

Diagram showing: o

Axes labelled (i.e. consumer and capital goods) (1 mark).

o

Two points shown on the PPF (1 mark).

o

Illustration/labelling of opportunity cost (i.e. loss of consumer goods) (1 mark).

NB Maximum 4/6 marks if no diagram offered.

18 Analysis (up to 6 marks). Possible answers include: 

Definition of production possibility frontier (1 mark), i.e. the maximum combination of goods and services that can be produced in a given time with available resources used efficiently.



Identification that PPF shifting outwards is economic growth (1 mark).



Factors shifting China’s PPF outwards (up to 2 marks each):



o

Increasing (working) population (1 mark), i.e. increase in quantity of labour (1 mark)

o

Increased capital goods/investment (1 mark), i.e. increase in quantity of capital/machines/factories/productivity (1 mark)

o

Importing foreign technology (1 mark), i.e. increase in efficiency/quality of capital/productivity (1 mark)

o

Increased access to raw materials (1 mark), i.e. importing cheap raw materials from Africa (1 mark)

Relevant PPF diagram (up to 3 marks), showing: o

Original PPF (1 mark)

o

Outward shift in PPF (1 mark)

o

Correct labelling (i.e. capital and consumer goods) (1 mark)

Edexcel Economics A © Peter Davis

Theme 1 Introduction to markets and market failure Philip Allan for Hodder Education

4

Nature of economics

TOPIC 1

NB Maximum 4/6 marks if no diagram offered.

Evaluation (2 marks for one point): 

Long-term problems facing China, e.g. falling population/lack of Western technology to import



Future growth depends on ability to innovate or policies to promote education and innovation



High magnitude of Chinese growth (reference to 7.7%)



Significance and prioritisation of reasons (with justification)

Specialisation and the division of labour 19 The process by which individuals/firms/economies concentrate on producing those goods and services (1 mark) in which they have an advantage (1 mark). 20 1 mark per identified point, such as: a 

Medium of exchange



Store of value



Method of deferred payment

b 

Greater efficiency/productivity



Higher output levels



More competitive exports



Higher economic growth/jobs

21 Analysis (3 marks). Possible answers include: 

Definition of staff turnover (1 mark), e.g. total number of staff leaving divided by number of people employed.



Application: staff turnover is 50% in call centres (1 mark).



Reasons for staff leaving/high staff turnover (1 mark each): o

Limited range of tasks performed

o

Repetitive nature of job

o

Boredom/monotony

o

Few breaks/tiring work

Edexcel Economics A © Peter Davis

Theme 1 Introduction to markets and market failure Philip Allan for Hodder Education

5

TOPIC 1

Nature of economics

22 Analysis (up to 4 marks): 

Definition of productivity (1 mark), e.g. output per worker/efficiency of turning inputs into outputs.



Application: customer calls per person (1 mark)/how call centres divide labour (1 mark).



Reasons for higher productivity (up to 2 marks if point well explained): o

Workers could specialise in what they do best (1 mark), e.g. taking calls within their area of expertise (1 mark).

o

Workers should become better at the same task over time (1 mark), e.g. be able to deal with customer complaints quicker (1 mark).

o

Workers do not need to move between jobs (1 mark), e.g. workers can remain taking calls, rather than also doing the accounts (1 mark).

o

Cheaper to train workers to do one task (1 mark), e.g. highly-trained workers should be more efficient/productive (1 mark).

Evaluation (2 marks for one point). Possible points include: 

Repetitive job/boredom may reduce rate of work and lower productivity.



Productivity may remain low for other reasons: o

Training is not effective

o

Workers unable to improve over time

o

Workers may not be specialising in their job due to it being their specialism (i.e. it may be the only job they can get currently)



High productivity may not be the aim of the call centre (i.e. a speedy call may be good for productivity but not help the customer).



Difficulty measuring productivity in the service sector (i.e. is it number of calls completed per person or number of successful calls?)

Free market, mixed and command economies 23 Where (scarce) resources are allocated (1 mark) totally by the government (1 mark). 24 a

Free market economy

b

Free market economy

c

Command economy

25 Any possible role (1 mark) with explanation (2 marks). Possible answers include: Edexcel Economics A © Peter Davis

Theme 1 Introduction to markets and market failure Philip Allan for Hodder Education

6

TOPIC 1

Nature of economics



To solve market failure (1 mark): e.g. negative externalities (of pollution) (1 mark) by the imposition of a (petrol) tax (1 mark); e.g. public goods (1 mark) by providing defence/street lights (1 mark).



To promote equality (1 mark): e.g. by providing benefits (1 mark) to increase income of low-income households (1 mark); e.g. by lowering tax on the poor (1 mark) to increase income of low-income households (1 mark).

26 Two benefits identified (1 mark + 1 mark) with explanation (1 mark + 1 mark): 

Increased competition/efficiency (1 mark), e.g. as firms will earn higher profits from lower costs/aid survival (1 mark)



Increased innovation (1 mark), e.g. as firms that innovate could earn more profits/more likely to survive (1 mark)



Greater choice for consumers (1 mark), e.g. as firms may offer more products to increase profits/survive (1 mark)



Greater incentives to work (1 mark), e.g. due to lower levels of taxation or fewer benefits from not working (1 mark)



Possible higher growth rates (1 mark), e.g. due to higher efficiency/innovation shifting the PPF (1 mark)

Exam-style questions (multiple choice and short answer) 1 a

D (1 mark)

b Knowledge (1 mark): definition of specialisation, e.g. focusing on the production where there is an advantage. Application (1 mark): application to Nigeria, e.g. fluctuating price for oil, changes in demand for oil. Explanation (1 mark): explanation of a problem, e.g. risk of over-specialisation and lack of diversification; risk of falls in export revenues/GDP/employment.

Sp e c i a l i s a t i oni st h ep r o c e s sb ywh i c he c o n o mi ca g e n t sf oc u so na r e a sof p r o d u c t i o nwh e r et h e yha v ea na d v a n t a g e(1 mark). Th i sc a nb eapr o b l e ma st h e y f ore x a mp l ei nNi g e r i ai ft h e r e f a c eg r e a t e rr i s ko fe x p or tr e v e n u e sf a l l i n g(1 mark), wa sas i g n i fic a n td r o pi nt h eoi lpr i c e , wh i c ht e n d st oflu c t u a t ewi l d l yo v e rt i me(1 mark). Here the student scores 3/3 marks as she clearly defines specialisation and then applies it to Nigeria.

2 a Knowledge (1 mark): definition of opportunity cost, i.e. value of next best alternative forgone. Application (1 mark): calculation of opportunity cost, i.e. 20 capital goods.

Op po r t u ni t yc o s ti st h ev a l ueo ft h en e x tb e s ta l t e r n a t i v ef o r g o n e(1 mark).He r et h e o p po r t u n i t yc o s ti s2 0c a pi t a lg o od s( i . e . 8 0–6 0)(1 mark). Edexcel Economics A © Peter Davis

Theme 1 Introduction to markets and market failure Philip Allan for Hodder Education

7

TOPIC 1

Nature of economics

This gains 2 marks for a clear definition and application to the PPF shown with the calculation.

b

C (1 mark)

c

Knowledge (1 mark): annotation of any point outside the current PPF.

The student has clearly marked the new point outside the PPF for 1 mark.

3 a

A (1 mark)

b Knowledge (1 mark) (identification of function), analysis (1 mark) (development of answer). Possible answers include: 

Medium of exchange (1 mark), e.g. money allows economic agents to exchange goods without the need for barter (1 mark).



Store of value (1 mark), e.g. individuals can choose to forgo consumption in the current time period and save to increase their spending power in the future (1 mark).



Method of deferred payment (1 mark), e.g. allows payment for goods and services consumed today in a future time period (1 mark).

On ef u nc t i o no fmo ne yi same d i u mo fe x c h a n g e(1 mark). Th i sa l l o wsc o n s ume r s t ob u yg oo d sa n ds e r v i c e swi t h ou tt hen e e df orba r t e r , a smo n e yi sa c c e p t e da s p a yme n t(1 mark). The student gains full marks for a clear function identified and explained.

c Knowledge (1 mark) (identification of cause of PPF shift), analysis (1 mark) (development of answer). Possible answers include: 

Education (1 mark), e.g. improved human capital/quality of labour/productivity (1 mark)



Investment (1 mark), e.g. increased quantity of capital goods/improved productivity (1 mark)

Edexcel Economics A © Peter Davis

Theme 1 Introduction to markets and market failure Philip Allan for Hodder Education

8

TOPIC 1

Nature of economics



Improved productivity (1 mark), e.g. more efficient use of current factors of production (1 mark)



Larger workforce (1 mark), e.g. greater quantity of labour (1 mark)



Better technology (1 mark), e.g. higher-quality capital goods/higher productivity (1 mark)



Discovery of raw materials (1 mark), e.g. greater land/resources to produce goods and services (1 mark)

On ec a us eo fa no ut wa r ds h i f ti nt h ePPFi sb e t t e rt e c h no l o gy(1 mark).Thi sme a n s t ha tp r o du c t i o nc a nb e c o memo r ee ffic i e n td u et oh i g h e r q u a l i t yc a p i t a lg oo d s b e i n gu s e d ,h e n c eb oo s t i n gp o t e n t i a lo u t p ut(1 mark). This student easily gains the 2 marks available for a shift factor identified and then some linked explanation to develop the answer.

4 a

Knowledge (2 marks):



Definition of opportunity cost (1 mark)



Link to basic economic problem (1 mark), i.e. scarce resources lead to choices needing to be made, each with an opportunity cost

Application (1 mark) (example of opportunity cost for Sabrina), analysis (1 mark). Possible answers include: 

Being able to get a job (1 mark), e.g. by going to university Sabrina must give up the income she could have earned by starting employment after sixth form (1 mark).



Increasing her savings (1 mark), e.g. by spending money on living at university/fees, Sabrina has less money available to save for her future (1 mark).



Spending on leisure items (1 mark), e.g. by spending money on living at university/fees, Sabrina has less money available to spend on cinema trips/on a new car etc. (1 mark).

Ano p po r t u ni t yc o s ti st h ev a l u eo ft h en e x tb e s ta l t e r n a t i v ef o r g o n e(1 mark). Sa b r i n af a c e sa no pp o r t un i t yc o s ta sh e rr e s o ur c e sa r es c a r c ea n ds oa n yc h oi c es he ma k e ss hemu s tg i v eu pt h ene x tbe s to p t i o n(1 mark). Fore x a mp l e ,Sa b r i n ac o u l dh a v eb e e na b l et og e taj o bi n s t e a do fg oi n gt o n dt h e r e f o r ee a r ne di nc o mei n s t e a do fg o i n gt ou ni v e r s i t ya n d u n i v e r s i t y(1 mark) a p a yi n gu pt o£ 9 , 00 0ay e a ronf e e s(1 mark). The student here gains all 4 marks. He has defined what opportunity cost means and linked this to the basic economic problem to explain why it exists. The explanation is backed up with a clear example in the context of Sabrina going to university and is developed with an additional sentence.

b

D (1 mark)

Edexcel Economics A © Peter Davis

Theme 1 Introduction to markets and market failure Philip Allan for Hodder Education

9

TOPIC 1

Nature of economics

Exam-style questions (data response) 5 a

KAA = 5 marks

Knowledge (1 mark): Definition of production possibility frontier (1 mark), i.e. the maximum combin...