Paper 1: Markets and Business Behaviour · 9EC0/01
Edexcel A A-level Paper 1, June 2023
All 14 written questions and 5 multiple choice questions from Edexcel A A-level Paper 1 (June 2023), Markets and Business Behaviour. Case studies: The UK online streaming services market. Each question shows its marks and topic, with an examiner insight on 7, and opens the question paper and mark scheme at the right page.
Section A
Q1(a)
With reference to the information provided, explain one advantage of a free market economy.
Mark splitKnowledge 2Application 1Analysis 1
TopicNature of economics
Q1(b)
Which one of the following economic thinkers supported the idea of a command economy?
- AAdam Smith
- BFriedrich Hayek
- CJohn Maynard Keynes
- DKarl Marx
Show the answer
The answer is D.
Mark splitKnowledge 1
TopicNature of economics
Q2(a)
Calculate the opportunity cost of the decision by the farmer to harvest 6 units of wheat this year at point Y (movement from point X to point Y).
Mark splitApplication 2
TopicNature of economics
Q2(b)
Explain the impact on efficiency of producing at point W in the following year.
Mark splitKnowledge 1Analysis 1
TopicNature of economics
Q2(c)
Which one of the following would be most likely to help the farmer reach point Z? An increase in
- Ainvestment in milk production machinery
- Binvestment in modern farming technology
- Cthe demand for wheat
- Dthe price of oats
Show the answer
The answer is B.
Mark splitKnowledge 1
TopicHow markets work
Q3(a)
The likely income elasticity of demand for a luxury good is:
- A–3.40
- B–0.74
- C+0.74
- D+3.40
Show the answer
The answer is D.
Mark splitApplication 1
TopicHow markets work
Q3(b)
Small local bakeries have many of the characteristics of monopolistic competition. Draw the short run profit maximising equilibrium of a loss‐making luxury brownie baker.
Mark splitKnowledge 2Application 2
TopicRevenues, costs and profitsMarket structures
Q4(a)
With reference to the information provided, calculate the percentage change in the price of an annual season ticket.
Mark splitApplication 2
Q4(b)
Explain the likely impact of the increase in price of a season ticket on consumer surplus.
Mark splitKnowledge 1Analysis 1
TopicHow markets work
Q4(c)
Which one of the following areas represents the change in producer surplus when a minimum price is imposed?
- AFEPeP1
- BFMP1
- CGEPeP1
- DGKP1
Show the answer
The answer is C.
Mark splitApplication 1
TopicHow markets workGovernment intervention
Q5(a)
Which one of the following is the ratio of public sector pay relative to private sector pay in 2022?
- A1 : 0.97
- B1 : 1.04
- C1 : 4.0
- D1 : 14.0
Show the answer
The answer is B.
Mark splitApplication 1
TopicBusiness growth
Q5(b)
Over 90% of nurses work in the public sector. Nurses in the public sector have experienced wage rises lower than those in the private sector over the past 10 years. (Source adapted from: https://www.nuffieldtrust.org.uk/resource/chart-of- the-week-real-terms-nhs-staff-pay-from-2010-to-2020) Using the information provided and the concept of monopsony, explain why nurses in the public sector have had lower wage rises than those in the private sector.
Mark splitKnowledge 2Application 1Analysis 1
TopicBusiness growthMarket structures
Section B
Case study
The UK online streaming services market
Extracts: A: How Netflix makes use of behavioural science · B: The economics of price discrimination · C: Educational Website and TV Programmes
In the extracts: Netflix, Amazon Prime Video, Disney+, Oak National Academy, AppleTV+, YouTube, GCSE, BBC, Educational Website and TV, India Disney+ and Prime
Q6(a)
With reference to Figure 1, explain the market structure that best describes the market for UK online streaming services.
Mark splitKnowledge 1Application 2Analysis 2
TopicHow markets workMarket structures
Examiner insight
- What to cover
- Use the market shares in Figure 1 to identify an oligopoly. Explain a high concentration ratio, a few dominant firms, interdependence, differentiated content and high barriers from content spending. Quote the shares as evidence.
- Watch out
- Naming the market structure without using the market share figures to justify it.
Q6(b)
With reference to the information provided, assess whether Netflix subscribers behave rationally.
Mark splitKnowledge 2Application 2Analysis 2Evaluation 4
TopicHow markets work
Examiner insight
- What to cover
- Define rational behaviour as maximising utility with full information. Argue subscribers weigh price against content and cancel when value falls, then set against habit, inertia, default renewals and anchoring on free trial prices.
- Evaluation
- Weigh rational choice against bounded rationality and inertia keeping unused subscriptions running. Depends on how easy cancelling is, income levels and how much information consumers actually process.
- Watch out
- Describing behavioural bias in general without applying it to the streaming evidence provided.
Q6(c)
With reference to the information provided, examine the likely numerical value of the cross elasticity of demand between UK online streaming services.
Mark splitKnowledge 2Application 2Analysis 2Evaluation 2
TopicHow markets work
Examiner insight
- What to cover
- State the cross elasticity formula and that substitutes give a positive value. Argue Netflix and rivals such as Disney Plus are close substitutes, so the value is positive and above one, though exclusive content weakens it.
- Evaluation
- Note the value depends on how different the content libraries are, on switching costs, and on households subscribing to several services at once, which reduces substitutability.
- Watch out
- Giving a negative value, which would mean complements, or quoting a precise figure with no justification.
Q6(d)
With reference to Extract C, discuss the likely private and external benefits of viewing educational websites and TV programmes.
Mark splitKnowledge 2Application 2Analysis 4Evaluation 4
TopicMarket failure
Examiner insight
- What to cover
- Separate private benefits, better grades and higher future earnings for the viewer, from external benefits, a more productive workforce, higher tax revenue and lower welfare spending. Marginal social benefit therefore exceeds marginal private benefit.
- Diagram
- Positive consumption externality diagram. MSB above MPB, free market output where MPB equals MSC, social optimum where MSB equals MSC. Label the underconsumption and the potential welfare gain triangle.
- Evaluation
- Weigh how large the external benefits really are against the difficulty of valuing them. Depends on content quality, whether viewing displaces formal study, and the long lag before benefits appear.
- Watch out
- Blurring private and external benefits together when the question asks you to discuss both.
Q6(e)
Using examples from Figure 2 or Extract B, discuss the likely impact of price discrimination on a firm’s profits. Use a relevant diagram to support your answer.
Mark splitKnowledge 3Application 3Analysis 3Evaluation 6
TopicMarket structures
Examiner insight
- What to cover
- Define price discrimination and the conditions needed. Explain that charging different prices to different subscriber groups converts consumer surplus into producer surplus, so revenue rises for the same costs and profit increases.
- Diagram
- Third degree price discrimination diagram with an elastic and an inelastic submarket sharing the same MC, or a single market showing consumer surplus converted into profit. Label each price, output and the extra profit.
- Evaluation
- Weigh the profit gain against administration and enforcement costs, the risk of account sharing and resale, consumer resentment and regulation. Depends on keeping the markets separate and on elasticity differences.
- Watch out
- Drawing the diagram but never explaining how the shaded areas show the extra profit earned.
Section C
Q7
The average UK household energy bill (gas and electric combined) rose 80% from £1 971 in 2021 to £3 549 in 2022. (Source adapted from: https://www.telegraph.co.uk/money/consumer-affairs/ energy-price-cap-rise-october-2022-what-happen-household-bills/) Evaluate possible methods of government intervention to control household energy bills in the UK.
Mark splitKnowledge 4Application 4Analysis 8Evaluation 9
Examiner insight
- What to cover
- Take two or three methods: a price cap on energy bills, subsidies or direct payments to households, and a windfall tax funding support. Explain how each lowers the price paid and affects quantity demanded and supplier revenue.
- Diagram
- Supply and demand for household energy with a maximum price set below equilibrium. Label the cap, the contraction of supply, the extension of demand and the resulting shortage. Or show a subsidy shifting supply right.
- Evaluation
- Weigh lower bills against shortages, supplier exit, the fiscal cost and weaker incentives to save energy. Depends on elasticity of supply, world gas prices and how long the cap lasts. Judge the best method.
- Watch out
- Describing the policies without a diagram, or using a price cap diagram that never shows the shortage.
Q8
Using 2021 estimates of carbon emissions, it is estimated that a petrol car journey from London to Glasgow emits approximately 3.3 times more carbon dioxide per passenger than the equivalent journey by train. (Source adapted from: https://www.gov.uk/government/statistics/transport-and- environment-statistics-autumn-2021/transport-and-environment-statistics-autumn-2021) Evaluate possible methods of government intervention to reduce carbon emissions caused by road transport in the UK.
Mark splitKnowledge 4Application 4Analysis 8Evaluation 9
Examiner insight
- What to cover
- Treat carbon from driving as a negative externality. Take two or three policies: fuel duty or a carbon tax, tradable permits, road pricing, subsidies for rail and electric vehicles, and emissions regulation.
- Diagram
- Negative externality diagram with MSC above MPC and a welfare loss triangle. Add an indirect tax shifting MPC up to MSC so output falls to the social optimum. Label the tax per unit.
- Evaluation
- Weigh internalising the externality against regressive effects on low income drivers, inelastic demand for fuel limiting the fall in journeys, and the difficulty of valuing carbon. Judge which policy works best.
- Watch out
- Recommending a tax without judging how inelastic demand for petrol is, which limits the fall in emissions.
Question text is quoted from the question papers, © Pearson Edexcel, 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.