Markets and Market Failure · 7136/1
AQA A-level Paper 1, June 2022
All 14 written questions from AQA A-level Paper 1 (June 2022), Markets and Market Failure. Case studies: Flexible labour markets and trade unions and The UK supermarket sector. Each question shows its marks and topic, with an examiner insight on 10, and opens the question paper and mark scheme at the right page.
Context 1
Flexible labour markets and trade unions
Extracts: The gig economy · New unions representing gig economy workers
Q1
Using the data in Extract A (Figure 1), calculate the number of workers doing weekly platform work in 2019 for each worker doing monthly platform work in 2019.
Give your answer to two decimal places.
Give your answer to two decimal places.
TopicThe labour marketLabour demand & supply
Q2
Explain how the data in Extract A (Figure 2) show that the incentive for workers to become self-employed increased between 2009/10 and 2018/19.
TopicThe labour marketLabour demand & supply
Q3
Extract C (lines 4–5) states that, as a result of trade union action, ‘The hospital trust increased their £8.21 minimum wage to the London Living Wage of £10.75.’
With the help of a diagram, analyse how a trade union might achieve higher pay for its members.
With the help of a diagram, analyse how a trade union might achieve higher pay for its members.
TopicThe labour marketTrade unions & monopsony
Examiner insight
- What to cover
- A union can bargain for a wage above the market rate. In a competitive market this raises pay but can reduce employment. Where the employer is a monopsony, a union wage can raise both pay and employment.
- Diagram
- Union wage in a competitive labour market and in a monopsony labour market.
- Watch out
- The monopsony diagram shows why a higher wage need not cost jobs. It is the key analytical mark.
Q4
Extract B (lines 16–18) states that, ‘Gig economy defenders claim that today’s flexible labour markets offer modern workers the opportunity to move freely between jobs and this gives them more choice over their working hours.’
Assess the view that government intervention in the UK labour market is necessary to protect the interests of people who are working in the gig economy.
Assess the view that government intervention in the UK labour market is necessary to protect the interests of people who are working in the gig economy.
TopicThe labour marketLabour demand & supplyGovernment intervention (micro)
Examiner insight
- What to cover
- Gig workers face insecure hours, low pay, few employment rights and weak bargaining power. Intervention: minimum pay rules, worker status law, sick pay, support for unions.
- Evaluation
- Flexibility suits some workers and firms. Regulation can raise costs, reduce jobs or push work abroad. Judge by type of intervention and the evidence in the extracts.
- Watch out
- Use the extract on the gig economy and new unions to support both sides.
Context 2
The UK supermarket sector
Extracts: Have Aldi and Lidl reached their peak? · Regulatory intervention in supermarkets
Q5
Using the data in Extract D (Figure 3), calculate, in percentage terms, how much more expensive a basket of groceries at Waitrose was than at Lidl in April 2020.
Give your answer as a percentage to two decimal places.
Give your answer as a percentage to two decimal places.
TopicMarket structuresOligopoly
Q6
Explain how the data in Extract D (Figure 4) show that the supermarket sector is competitive.
TopicMarket structuresOligopoly
Q7
Extract E (lines 16–17) states that, ‘Supermarkets set prices interdependently, and price wars look very likely.’
With the help of a diagram, analyse the impact on grocery consumers of interdependence between supermarkets.
With the help of a diagram, analyse the impact on grocery consumers of interdependence between supermarkets.
TopicMarket structuresOligopoly
Examiner insight
- What to cover
- Interdependent firms consider rivals' reactions. Prices can become rigid (kinked demand), firms compete on loyalty cards and quality, or a price war breaks out and prices fall.
- Diagram
- Kinked demand curve, or a simple game theory payoff matrix.
- Watch out
- Explain what each outcome means for consumers: prices, choice and quality.
Q8
Extract E (lines 17–19) states that, ‘the price gap between discounters and conventional supermarkets is now about 10–12%, against more than 20% a few years ago.’
Evaluate the view that the supermarket sector is serving customers' interests well.
Evaluate the view that the supermarket sector is serving customers' interests well.
TopicMarket structuresOligopolyCompetition policy & regulation
Examiner insight
- What to cover
- Serving consumers well: discounters have forced prices down, choice is wide, online delivery has grown.
- Evaluation
- Concerns: oligopoly power, the price gap with discounters narrowing, supplier squeeze, possible tacit collusion. Judge using the price data in the extracts.
- Watch out
- Use the price gap data. The trend matters more than a single year.
Q9Essay 1
Explain how the price mechanism allocates resources in a market economy.
Essay stimulus. The government has promised that everyone will be able to access superfast broadband by 2025. As more people have switched to studying and working remotely, good Internet connections have become more important. Low-income households have difficult choices to make between high-speed Internet and essential items such as food, heating and clothing.
TopicEconomic methodology and the economic problemEconomic systemsDemand & supply
Examiner insight
- What to cover
- The price mechanism allocates resources through three functions. Signalling: price changes show where demand has shifted. Incentive: higher prices reward firms that supply more. Rationing: higher prices reduce quantity demanded to match scarce supply.
- Diagram
- Demand and supply diagram with a demand shift, showing the new equilibrium.
- Watch out
- Explain all three functions with one worked example.
Q10Essay 1
Assess the view that high-speed Internet connection is a necessity for modern life and should be provided by the government, free of charge, to all households.
Essay stimulus. The government has promised that everyone will be able to access superfast broadband by 2025. As more people have switched to studying and working remotely, good Internet connections have become more important. Low-income households have difficult choices to make between high-speed Internet and essential items such as food, heating and clothing.
TopicMarket failure and government interventionPublic goodsMerit & demerit goodsGovernment intervention (micro)
Examiner insight
- What to cover
- High-speed internet has positive externalities (productivity, education, access to services) and may be under-consumed, especially in rural areas.
- Diagram
- Positive externality diagram showing under-provision.
- Evaluation
- Free provision is costly, may be inefficient and can crowd out private investment. Alternatives: subsidies, vouchers for low-income households, regulation of rural coverage. Judge by equity, cost and government failure.
- Watch out
- Say what type of good it is and why the market under-provides it.
Q11Essay 2
Explain the difference between complete and partial market failure.
Essay stimulus. Markets fail for a variety of reasons and governments can play an important role in reducing the inefficiencies associated with such failures. However, Milton Friedman once suggested that “When government, in pursuit of good intentions, tries to rearrange the economy...the costs come in inefficiency, lack of motivation, and loss of freedom. Government should be a referee, not an active player.”
TopicMarket failure and government interventionMarket failure (general)
Examiner insight
- What to cover
- Complete failure: the market does not exist, as with public goods that are non-excludable and non-rival (free-rider problem). Partial failure: the market exists but gives the wrong quantity or price, as with externalities, merit and demerit goods, and monopoly.
- Watch out
- Give a clear example of each and explain why the market fails in that way.
Q12Essay 2
Evaluate the view that government failure means that government intervention in markets will rarely lead to an improvement in economic welfare.
Essay stimulus. Markets fail for a variety of reasons and governments can play an important role in reducing the inefficiencies associated with such failures. However, Milton Friedman once suggested that “When government, in pursuit of good intentions, tries to rearrange the economy...the costs come in inefficiency, lack of motivation, and loss of freedom. Government should be a referee, not an active player.”
TopicMarket failure and government interventionGovernment failureGovernment intervention (micro)
Examiner insight
- What to cover
- Government failure: imperfect information, unintended consequences, administrative cost, regulatory capture, political short-termism.
- Evaluation
- Intervention often improves welfare: public goods, smoking laws, minimum wage evidence. Judge by type of policy, quality of information and whether the failure it corrects is large.
- Watch out
- Use real examples of both successful and failed intervention.
Q13Essay 3
Explain the main causes of inequality in the distribution of pre-tax incomes.
Essay stimulus. Data from the Organisation for Economic Co-operation and Development (OECD) suggest that countries with very different levels of pre-tax income inequality often have similar levels of post-tax income inequality.
TopicDistribution of income and wealthInequality & poverty
Examiner insight
- What to cover
- Pre-tax income differs because of differences in wages (skills, education, productivity, discrimination, union power, occupation), hours worked, and income from wealth (rent, interest, dividends).
- Watch out
- Keep the focus on pre-tax income. Taxes and benefits belong in another question.
Q14Essay 3
Evaluate whether the best way to reduce inequality in disposable income is to reduce differences in pre-tax incomes rather than through taxes and welfare benefits.
Essay stimulus. Data from the Organisation for Economic Co-operation and Development (OECD) suggest that countries with very different levels of pre-tax income inequality often have similar levels of post-tax income inequality.
TopicDistribution of income and wealthInequality & poverty
Examiner insight
- What to cover
- Reducing pre-tax differences: education and training, minimum wage, union bargaining. Redistribution: progressive taxes, means-tested benefits.
- Evaluation
- Pre-tax measures can keep incentives and take longer; taxes and benefits act faster but can reduce incentives and cost more. Use the stimulus that post-tax inequality can be similar across countries with different pre-tax inequality.
- Watch out
- Compare both approaches directly, and use the stimulus.
Question text is quoted from the question papers, © AQA, for students’ private study. Open the official papers and mark schemes from the links on each question. Examiner insights are written with AI assistance and moderated by Finn.