End of Semester Test Mark Scheme for IFYEC002 Economics

School

King's International College**We aren't endorsed by this school

Course

ACCOUNTING 202

Subject

Economics

Date

Dec 10, 2024

Pages

Uploaded by CountInternetDolphin47

IFYEC002 Economics V2 1819© 2019 Northern Consortium UK Ltd Page 1 of 9THE NCUK INTERNATIONAL FOUNDATION YEAR IFYEC002 Economics 2018-19 End of Semester 1 Test Mark Scheme Notice to markers. This mark scheme should be used in conjunction with the NCUK Marking Guidelines, available from the secure area (Web File Manager) of the NCUK website (http://www.ncuk.ac.uk). Contact your Principal/ Academic Manager if you do not have login details. NB – Credit should be awarded for any pertinent answers not included in the mark scheme, not exceeding the total mark allowed for the question. The learning outcomes for each question are shown in brackets. If a student has answered more than the required number of questions, credit should only be given for the firstnanswers, in the order that they are written in the student’s answer booklet (nbeing the number of questions required for the examination). Markers should not select answers based on the combination that will give the student the highest mark. If a student has crossed out an answer, it should be disregarded.

IFYEC002 Economics V2 1819© 2019 Northern Consortium UK Ltd Page 2 of 9Section A Questions A1 – A10 Answer grid A1: B A2: C A3: D A4: C A5: A A6: C A7: B A8: D A9: D A10: B Question A11 a) 1 markfor full understanding only. Excess supply: Excess of the quantity supplied of a good or service, at a given price, over its demand at that price. [ 1 ]b) 3 marksfor correct diagram[ 3 ]Excess supply 0 P DQ2Price Quantity Q1S

IFYEC002 Economics V2 1819© 2019 Northern Consortium UK Ltd Page 3 of 9c) 1 markfor identification + 2for development.Possible reasons for rise in prices of black pepper include; Increased demand Supply constraints Rising incomes Change in consumer preferences Rise in price of substitutes Fall in price of complements The supporting explanation must make reference to why prices of black pepper could rise by 2020. Candidates are not expected to have a working knowledge if the market for black pepper, but understand the underlying mechanism for a price rise [ 3 ]d) 1 markfor identification + 2for development.A minimum price might be considered to be an ineffective policy because May be set at wrong level e.g. below equilibrium Could mean higher prices for consumersMay encourage over-supply resulting in disequilibrium or surplus stocksDistorts workings of the free market[ 3 ]

IFYEC002 Economics V2 1819© 2019 Northern Consortium UK Ltd Page 4 of 9Section B Answer 1 question. This section carries 30 marks. Use the following grid as guidance. Section B – Part a) Marks Quality of response0 Candidate demonstrates no understanding of terms or question. 1-4 Candidate shows some understanding of the term or question. Points have been weakly developed and there is likely to be some inaccuracy in their use of economic terminology. 5-7 Candidate demonstrates good understanding of the term or question. They develop most of their points coherently and their answer will be generally fluent and predominantly show an accurate use of economic terminology. 8-10 Candidate displays a sound and accurate understanding of the term or question. Their answer is fluent, logical, concise and precise. The candidate’s use of economic terminology will be consistently accurate and confidently applied. Section B – Part b) Marks Quality of response 0 Candidate demonstrates no understanding of terms or question. 1-7 Candidate makes some valid points, but they have been weakly analysed and are not confident in their use of economic theory or application to the question. The answer is likely to be poorly structured and show poor fluency and a basic level of written communication. Evaluative comment is likely to be minimal or missing. 8-14 Candidate demonstrates good understanding of the question, making valid points which are generally analysed coherently. Written communication will be sound, although the answer maybe unbalanced. The candidate will show a broadly confident use of economic terminology and their answer will address the fundamentals of the question leading to a conclusion or judgement, which may be weakly supported or based on limited evidence. 15-20 Candidate displays a sound and accurate understanding of the question. The answer is well structured and the quality of written communication is accurate and fluid throughout, with a strong and confident use of economic terminology. Arguments are expressed clearly and supported with relevant theory or examples. The best candidates will provide fully supported judgements and evaluative comment that critically analyses the question and may explore issues beyond the immediate nature of the question (where relevant).

IFYEC002 Economics V2 1819© 2019 Northern Consortium UK Ltd Page 5 of 9Section B This section carries 30 marks Question B1 a) Explain carefully how cost-benefit analysis might be used to more accurately assess an economic decision. [10]Candidates would be expected to provide a sound definition of cost benefit analysis and demonstrate a solid understanding of the technique and how it might be used to guide economic decisions. The most relevant lines of explanation are likely to cover: - Understanding that the technique attempts to evaluate the social costs and social benefits of an economic decision Social costs and benefits are likely to be different from private costs and benefits The process of identifying all the different costs and benefits of a decision The process of placing a monetary value on all costs and benefits The process of judging these across time/into the future Its frequency of use by governments to judge investment projects b) In November 2018, the Public Service Commission of Maryland, USA found economic returns of over $7 billion over the next 10 years if it continues to install solar panels as part of energy provision in Maryland. Evaluate the effectiveness of cost-benefit analysis techniques for assessing whether Maryland should continue to invest in solar panel installation. [20]Candidates would be expected to structure their answer so that it leads to a judgement on the overall of effectiveness of cost benefit analysis. The answer should be geared towards solar panels issues in particular and points should be developed with this in mind, although precise knowledge of solar panels and the energy market in Maryland is not required. Most students will be able to identify different costs and benefits of such a scheme, but the most able students will be able to identify weaknesses in the process and note that the decision may be made on other factors, such as the relative influence of different stakeholder groups/political factors Costs of solar panels may include Short term disruption during build phase Environmental impact / aesthetic Weather dependency / uncertainty of energy production Opportunity cost of land Opportunity cost of government funds Benefits of solar panels may include Benefits to climate change Reduced negative externalities Job creation

IFYEC002 Economics V2 1819© 2019 Northern Consortium UK Ltd Page 6 of 9Multiplier/accelerator effects More sustainable economic growth Less environmental degradation Limitations of CBA include Difficulty in identifying all benefits and costs or projects Difficulty in placing monetary values (e.g. value of loss of environment) Difficulty in assessing costs and benefits over time Problems of assumptions

IFYEC002 Economics V2 1819© 2019 Northern Consortium UK Ltd Page 7 of 9Question B2 a) With the use of relevant examples, explain the features of a public good AND provide precise explanations of merit and de-merit goods. [10]Candidates should demonstrate with clear examples each concept. The following points may be awarded Public goods – concepts of non-rivalry and non-excludability should be identified. Tend to be provided by government. May not exist in pure form (award reference to quasi-public goods). Examples might include – national defence, street lighting, public parks Merit goods – create positive externalities, social benefits>social costs, social benefits> social benefits, tend to be under-valued by consumer, under produced and under consumed, tend to be provided by the government. Examples might include, education, gym membership/exercise, healthy food De-merit goods – create negative externalities, social costs>social benefits, social costs>private costs, tend to be over-valued by consumer, over produced and over consumed, tend to be regulated/controlled by government. Examples might include, cigarettes, fast food, gambling b) In the UK, according to the Gambling Commission, there are 430,000 people with a gambling addiction. Problems can include high levels of personal debt, anxiety and depression. Evaluate the different economic policies that could be used to reduce the consumption of gambling in the UK. [20]Candidates should explore different policies and make a judgement on which policy/combination of policies might be effective. Good candidates will carefully analyse each policy and link to economic theory. Candidates should recognise that gambling is a de-merit good. Evaluation will come from providing a clear judgement and a recognition that different policies have weaknesses and that the best policies may take many years to be effective or that it may not be desirable for the state to intervene in this manner. Relevant policies might include Investment in education / awareness programmes Taxation on gambling Gambling restrictions Gambling bans Restrictions on advertising Maximum prices / caps on amounts individuals can gamble BUT Cost of policy enforcement Time lags in effectiveness Arguments around interference in free market and efficiency Gambling may have a low price elasticity of demand

IFYEC002 Economics V2 1819© 2019 Northern Consortium UK Ltd Page 8 of 9Question B3 a) With the use of a diagram, explain the long-run equilibrium position of a firm in a monopoly AND identify its core characteristics as a market structure. [10]The following diagram would be expected with clear explanations given Core characteristics of monopoly should be identified and explained. The following might be expected to be included; Sole supplier Price makers High barriers to entry Abnormal profits Are productively and allocatively inefficient Higher prices / lower output than under competitive conditions b) Friedrich von Hayek once said that the government should “create conditions in which competition will be as effective as possible, to prevent fraud and deception and to break up monopolies." Evaluate the view that consumers will always be negatively impacted by excessive monopoly power. [20]Candidates should break this down into two clear parts. They should assess the view that monopolies may harm the consumer and also consider that they may provide some benefits in some instances Monopolies can be harmful because Higher prices Lower output Restricted choice Less incentive to innovate Productive and allocative inefficiency Q MR P LRAC 0 AR Costs / Revenue Output MC

IFYEC002 Economics V2 1819© 2019 Northern Consortium UK Ltd Page 9 of 9Creation of barriers to entry Price discrimination and appropriation of consumer surplus However, they are not always because Profits may be put into R&D Natural monopoly argument Services could be provided to consumers that they otherwise would not have access to May not be a problem if effectively regulated Evaluation should come from judgement on the phrase “always be negatively impacted” Normative decision on how harmful they are Depends on industry Depends on barriers to entry e.g. lowering them may be more costly than allowing monopoly to operate Regulatory costs