Friday’s Unit 1 (AS) Micro Paper

AS Micro Unit 1May 2011

Grade Boundaries for AS Micro

• Data is from the Jan 2011 paper (raw mark out of a total of 75)

• For the paper as a whole – these were the grade boundaries

• A: 54 • B: 47 • C: 40 • D: 34 • E: 28

•Obey key instruction words such as define, compare, significant, explain and evaluate.•Start a new paragraph on each occasion that a new argument or line of reasoning is introduced into the answer

Market Prices

Market Failure

Policy Options

Govt Failure

Welfare issues

Data Question (8 marks)• Start each point of comparison or identification with a

separate paragraph• Always give unit of measurement (e.g. $billion or % of GDP)• Avoid simple “data trawling” • Take note of the question - e.g. “take note of the word

significant”• Look for trends / volatility / convergence / divergence /

correlation• Always put data into your answer • Always make at least one calculation

Explanation questions (12 marks)• E.g. With the help of a demand and supply diagram,

explain how a tax on the plastic bags distributed by shops and supermarkets might affect the use of plastic bags

1. Quality of diagrams matters a lot (labelling, clarity, accuracy – size – at least 1/3rd of a side of A4)

2. Draw from prompts in the data when explaining3. Double diagrams often work well4. Remember the importance of elasticity of demand and

supply in shaping the analysis5. Explanation requires building a “chain of reasoning”

Evaluation Question (25 marks)• Max mark of 15/25 if there is no evaluation• Analysis comes first! “good evaluation first requires sound

economic analysis of the issue or problem posed by the question.”• Examiners are keen to reward good awareness of recent or

current economic events• Make good use of the extracts (including the data) to score marks

for application• Go back to the charts / tables in the 25 mark question – they are

there for a reason!• “Candidates do need to use the data explicitly when responding to

the context questions”

OK ... What to revise – what really matters in the next 24 hrs?

• Be really prepared with knowledge of key definitions• The power of market forces (crucial) – i.e. the role of signals and

incentives in driving resource allocation• Elasticity of demand and supply and price volatility in markets –

and the consequences of this• State provision versus the market

– Health care– Public goods issues

• Benefits and costs of monopoly power / competitive forces• Economic welfare and efficiency (including externalities)• Supply and demand side interventions and their impact• Government failure (crucial) – in the short and long run

Government failure

1. Decisions made in pure political self interest2. Poor value for money from public sector

investment3. Government policy myopia4. Regulatory capture5. Disincentives arising from specific policies6. Information failures in government policies7. The “law of unintended consequences”8. The costs of regulation may outweigh the benefits

Unintended consequences• Higher capital gains tax – reduces new house building - worsens

housing shortages /affordability• Bank bail-outs – raises the problem of moral hazard• Bio-fuel subsidy – causes food price inflation and hits the poorest in

society• Smoking ban – increases demand for and use of energy inefficient

patio-heaters• Windfall tax on North Sea oil and gas companies led to a huge fall

in investment and exploration – just years before oil prices surged• Tariffs on steel – hits domestic car and construction firms• Targets for treating patients – leads to reduction in the quality of

care e.g. Staffordshire General scandal

W Wider context – consider the bigger picture and use it to weight your arguments

E Efficiency – Does this achieve a more/less efficient allocation of resources?

E Equality – Do some parties benefit more/less than others

S Scope – How many people are affected by the point? Is it wide reaching or narrow?

T Time – How long will it last, SR or LR or both?

E Effectiveness – does it solve the issue that it was intended to solve?

P Prioritisation – which of your points is the strongest and why. Be specific about the context of the question

S Scale or Magnitude – where people are affected how strong is the impact?

Above all ...... • Be strict on timing• Develop one argument per

paragraph + evaluate• Use lots of supporting examples• Make sure handwriting and

diagrams are legible• Use more paper rather than less• Always finish with a reasoned

final paragraph – but don’t repeat points already made

• Give the examiner plenty of current context