Markets and Market Failure · 7136/1
AQA A-level Paper 1, June 2024
All 14 written questions from AQA A-level Paper 1 (June 2024), Markets and Market Failure. Case studies: The market for university accommodation and Trade union membership and industrial disputes. 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
The market for university accommodation
Extracts: A serious shortage of student accommodation · Policies to solve the shortage of student accommodation
Q1
Inflation resulted in a basket of goods and services that cost £100 in 2015 costing £112 in 2021. Using this information and the data in Extract A (Table 1), calculate the percentage increase in average university rent, in real terms, between 2015 and 2021.
Give your answer to one decimal place.
Give your answer to one decimal place.
TopicPrice determination in a competitive marketDemand & supply
Q2
Explain how the data in Extract A (Figure 1 and Table 1) show that the supply of university and private rental accommodation has failed to match the increase in student numbers between 2015 and 2021.
TopicPrice determination in a competitive marketDemand & supply
Q3
Extract B (lines 3–4) states that ‘Universities have expanded the number of places on offer to students, but the supply of student accommodation is highly inelastic’.
With the help of a diagram, explain the impact of the increase in the number of students attending university on the market for student accommodation.
With the help of a diagram, explain the impact of the increase in the number of students attending university on the market for student accommodation.
TopicPrice determination in a competitive marketDemand & supply
Examiner insight
- What to cover
- More students increases demand for accommodation. Supply is highly price inelastic in the short run because building takes time and land is limited, so rents rise sharply and quantity rises only a little.
- Diagram
- Demand shifting right with an inelastic supply curve.
- Watch out
- Stress inelastic supply, as in the extract.
Q4
Extract C (lines 14–16) states that ‘A maximum rent can help keep the cost of student accommodation lower than it would otherwise be, but risks some landlords withdrawing from the market’.
Using the data in the extracts and your knowledge of economics, discuss the advantages and disadvantages of policies the government might introduce to improve the market for student accommodation.
Using the data in the extracts and your knowledge of economics, discuss the advantages and disadvantages of policies the government might introduce to improve the market for student accommodation.
TopicMarket failure and government interventionPrice controlsGovernment intervention (micro)
Examiner insight
- What to cover
- Policies: a maximum rent, subsidies for purpose-built housing, relaxing planning rules, direct university provision, regulation of standards.
- Diagram
- Maximum price diagram showing a shortage.
- Evaluation
- A maximum rent can cause shortages and poorer quality; supply-side policies take time. Judge by elasticity of supply and time period.
- Watch out
- Discuss both advantages and disadvantages of each policy.
Context 2
Trade union membership and industrial disputes
Extracts: UK public sector workers hit hardest by cost of living crisis · The role of trade unions
Q5
Using the data in Extract D (Table 2), calculate the difference between the mean percentage trade union membership in the private sector and the mean percentage trade union membership in the public sector over the period 2001–2021.
Give your answer to one decimal place.
Give your answer to one decimal place.
TopicThe labour marketTrade unions & monopsony
Q6
Explain how the data in Extract D (Figure 2), show that, since 2015, living standards of people working in the private sector are likely to have increased compared to those working in the public sector.
TopicThe labour marketLabour demand & supplyTrade unions & monopsony
Q7
Extract E (lines 9–10) states that ‘In November 2022, 13.3% of businesses reported experiencing a shortage of workers leading to upward pressure on wages’.
With the help of a diagram, explain how and to what extent a shortage of labour is likely to affect the wage in a competitive labour market.
With the help of a diagram, explain how and to what extent a shortage of labour is likely to affect the wage in a competitive labour market.
TopicThe labour marketLabour demand & supply
Examiner insight
- What to cover
- A shortage of labour means demand is above supply at the current wage, so the wage rises. How far it rises depends on the elasticity of labour supply and demand.
- Diagram
- Labour market diagram with excess demand and a new equilibrium.
- Watch out
- The question says "to what extent": use elasticity to answer it.
Q8
Extract F (lines 12–13) states that ‘Collective pay bargaining, reinforced by the threat of strikes, has achieved some notable successes for workers’.
Using the data in the extracts and your knowledge of economics, evaluate the view that trade unions improve the operation of labour markets by protecting the interests of workers.
Using the data in the extracts and your knowledge of economics, evaluate the view that trade unions improve the operation of labour markets by protecting the interests of workers.
TopicThe labour marketLabour demand & supplyTrade unions & monopsony
Examiner insight
- What to cover
- Unions can raise pay, improve conditions, correct monopsony power and give workers a voice.
- Diagram
- Union in a monopsony labour market.
- Evaluation
- Unions can cause unemployment, strikes and higher costs. Judge by market structure and the extract data on disputes.
- Watch out
- Use the data on strikes and pay in the extracts.
Q9Essay 1
Explain why imperfect and asymmetric information may lead to market failure in the market for food.
Essay stimulus. In the UK, 64% of the population are considered to be overweight. Many policies have focused on promoting active lifestyles, whilst taxes have been introduced on sugary drinks and alcohol. There has also been regulation of advertising aimed at young children. Attention has recently turned to the use of behavioural economics techniques to change diets.
TopicIndividual economic decision makingImperfect informationMarket failure (general)
Examiner insight
- What to cover
- Consumers do not know the full health effects of food, so they over-consume unhealthy food and under-consume healthy food. Sellers know more about ingredients than buyers (asymmetric information).
- Diagram
- Demerit good diagram.
- Watch out
- Use examples, such as hidden sugar or misleading labels.
Q10Essay 1
Evaluate the view that the consumption of unhealthy foods can best be reduced through the use of nudges and other techniques from behavioural economics.
Essay stimulus. In the UK, 64% of the population are considered to be overweight. Many policies have focused on promoting active lifestyles, whilst taxes have been introduced on sugary drinks and alcohol. There has also been regulation of advertising aimed at young children. Attention has recently turned to the use of behavioural economics techniques to change diets.
TopicIndividual economic decision makingBehavioural economics
Examiner insight
- What to cover
- Nudges: traffic-light labelling, placing healthy food at eye level, smaller default portions, calorie counts on menus.
- Diagram
- A demerit good diagram helps for comparison with a tax.
- Evaluation
- Compare with taxes (sugar levy), regulation and education. Judge by cost, effectiveness, how long behaviour changes last, and freedom of choice.
- Watch out
- Use named real examples.
Q11Essay 2
Explain the likely impact on consumer surplus and producer surplus as an industry moves away from a competitive market structure to one that is dominated by a few large firms.
Essay stimulus. In 2018, the Competition and Markets Authority issued a report which criticised a ‘situation where businesses charge higher prices to existing customers who stay with them, than they do to new customers’. However, according to Citizens Advice, some broadband and mobile phone companies continue to charge existing customers more than they charge new customers.
TopicMarket structuresMonopoly & market powerOligopoly
Examiner insight
- What to cover
- As a market moves from competition to oligopoly, price rises and output falls. Consumer surplus falls, part of it becomes producer surplus, and a deadweight loss appears.
- Diagram
- Competitive versus monopoly outcome with consumer surplus, producer surplus and deadweight loss labelled.
- Watch out
- Label every area on the diagram.
Q12Essay 2
Evaluate the view that price discrimination is damaging for consumers.
Essay stimulus. In 2018, the Competition and Markets Authority issued a report which criticised a ‘situation where businesses charge higher prices to existing customers who stay with them, than they do to new customers’. However, according to Citizens Advice, some broadband and mobile phone companies continue to charge existing customers more than they charge new customers.
TopicMarket structuresMonopoly & market power
Examiner insight
- What to cover
- Price discrimination can harm consumers who pay more and transfer consumer surplus to firms.
- Diagram
- Price discrimination diagram.
- Evaluation
- It can help consumers with elastic demand (off-peak fares), increase output and fund services. Judge by who pays more and less, and how profit is used.
- Watch out
- Use real examples, such as rail fares.
Q13Essay 3
Explain, using examples, how the existence of economies and diseconomies of scale affect firms’ average costs of production.
Essay stimulus. Britain’s energy market was plunged into chaos in 2021 as surges in wholesale electricity and gas prices exposed the weaknesses of many companies. Since deregulation in 2016, 49 energy supply companies have collapsed, with customers taken on by larger firms. This market chaos has led to renewed calls for the government to nationalise the energy industry.
TopicProduction, costs and revenueCosts & economies of scale
Examiner insight
- What to cover
- Economies of scale (technical, purchasing, financial, managerial) lower long-run average costs as output rises. Diseconomies (communication, coordination, motivation) raise them beyond the minimum efficient scale.
- Diagram
- LRAC curve with economies, MES and diseconomies.
- Watch out
- Use real examples for each type.
Q14Essay 3
Assess the view that privatised industries, such as electricity and gas, should be taken back into public ownership.
Essay stimulus. Britain’s energy market was plunged into chaos in 2021 as surges in wholesale electricity and gas prices exposed the weaknesses of many companies. Since deregulation in 2016, 49 energy supply companies have collapsed, with customers taken on by larger firms. This market chaos has led to renewed calls for the government to nationalise the energy industry.
TopicMarket structuresCompetition policy & regulation
Examiner insight
- What to cover
- Case for public ownership: natural monopoly, social objectives, long-term investment, lower borrowing costs.
- Evaluation
- Case against: government failure, cost to taxpayers, lack of profit incentive. Stronger regulation is an alternative. Judge by industry and regulation.
- Watch out
- Use real examples such as energy price shocks.
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.