Paper 1: Markets and Business Behaviour · 9EC0/01
Edexcel A A-level Paper 1, June 2024
All 12 written questions and 5 multiple choice questions from Edexcel A A-level Paper 1 (June 2024), Markets and Business Behaviour. Case studies: The electronics industry. 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)
Explain one likely reason for the difference in the price elasticity of demand for the 18+ student bus ticket and the adult bus ticket.
Mark splitKnowledge 2Application 1Analysis 1
TopicHow markets work
Q1(b)
In 2021, the adult 7-day bus ticket was £21.90. Bus ticket prices in London in 2022 increased by 4.8%. Ceteris paribus, which one of the following is the percentage decrease in the 7-day bus ticket demand by adults?
- A0.08
- B1.92
- C3.36
- D12.00
Show the answer
The answer is B.
TopicNature of economics
Q2(a)
With reference to the data above, explain one likely reason for the difference in the price elasticity of supply.
Mark splitKnowledge 2Application 1Analysis 1
TopicHow markets work
Q2(b)
In Texas the price elasticity of supply is +1.8. Which one of the following is the percentage increase in price if the quantity of housing supplied in Texas is increased by 12%?
- A0.15
- B1.50
- C6.67
- D21.60
Show the answer
The answer is C.
TopicHow markets work
Q3(a)
Draw a cost and revenue diagram to illustrate the different business objectives: profit maximisation and revenue maximisation.
Mark splitKnowledge 2Application 2
TopicBusiness growthRevenues, costs and profits
Q3(b)
If Peloton changes its objective to sales maximisation, then without making a loss, it operates at an output where:
- Aaverage cost equals average revenue
- Baverage cost is minimised
- Cprice elasticity of demand is equal to -1
- Dprice equals marginal cost
Show the answer
The answer is A.
TopicRevenues, costs and profitsHow markets workBusiness growth
Q4(a)
Explain one likely reason for the maximum price for an undergraduate university programme.
Mark splitKnowledge 2Application 1Analysis 1
Q4(b)
Which one of the following is an example of government failure associated with the maximum price?
- AContraction in demand
- BDistortion of price signals
- CExcess supply
- DExtension in supply
Show the answer
The answer is B.
TopicGovernment interventionHow markets work
Q5(a)
With reference to the information on the preceding page, explain the market structure of mortgage lending in the UK.
Mark splitKnowledge 2Application 1Analysis 1
Q5(b)
The value of all mortgage loans was £1 601 billion at the end of 2020. Which one of the following is the value of Lloyds’ market share?
- A£82 billion
- B£126 billion
- C£312 billion
- D£8 210 billion
Show the answer
The answer is C.
Section B
Case study
The electronics industry
Extracts: A: Rising prices of electronics devices · B: Labour shortages in the electronics industry · C: Serious concerns over merger · D: The growing problem of electronic waste
In the extracts: Include, CMA, Beijing-based, Competition, Scarborough, Electronic, Authority, Cambridge, Bytedance, Computer
Q6(a)
With reference to Extract A, explain the likely reasons for the change in price of electronic devices. Include a supply and demand diagram in your answer.
Mark splitKnowledge 1Application 1Analysis 3
TopicBusiness growthGovernment intervention in marketsRevenues, costs and profits
Examiner insight
- What to cover
- Take the reasons from Extract A. Better technology, economies of scale or cheaper components shift supply right and lower price, while component shortages shift supply left and raise it. State the direction the extract supports.
- Diagram
- Supply and demand for electronic devices. Shift the supply curve in the direction Extract A supports, mark the new equilibrium, and label P1 to P2 and Q1 to Q2.
- Watch out
- Giving textbook reasons for price changes instead of taking them from Extract A.
Q6(b)
Examine two factors which might influence the supply of labour in the electronics industry.
Mark splitKnowledge 2Application 2Analysis 2Evaluation 2
TopicLabour marketHow markets work
Examiner insight
- What to cover
- Pick two factors and explain the shift in labour supply for each. Wages and net advantages, the number of engineering and coding graduates, training time, migration policy, and pay in rival technology industries.
- Diagram
- Labour market diagram for the electronics industry. Show the labour supply curve shifting, with the resulting wage and employment changes labelled.
- Evaluation
- Judge which factor has more effect. Depends on the time period, since specialist skills take years to train, so labour supply is wage inelastic in the short run.
- Watch out
- Explaining demand for labour, such as demand for devices, when the question asks about supply of labour.
Q6(c)
Assess whether firms in the electronics industry benefit from economies of scale.
Mark splitKnowledge 2Application 2Analysis 2Evaluation 4
TopicRevenues, costs and profits
Examiner insight
- What to cover
- Define economies of scale as falling long run average cost as output rises. Apply technical, purchasing, marketing and risk bearing economies to large electronics firms with heavy fixed costs in plant and research.
- Diagram
- Long run average cost curve. Show LRAC falling to minimum efficient scale then rising with diseconomies. Label the output range over which economies of scale are gained.
- Evaluation
- Weigh against diseconomies from coordinating global supply chains, and note smaller firms may never reach minimum efficient scale. Depends on firm size and the pace of technical change.
- Watch out
- Confusing economies of scale with short run falling costs, or with rising profits rather than falling average cost.
Q6(d)
Discuss the likely concerns of the competition authorities regarding the proposed merger of the two companies referred to in Extract C.
Mark splitKnowledge 2Application 2Analysis 4Evaluation 4
TopicBusiness growth
Examiner insight
- What to cover
- Identify the merger type from Extract C. Explain the competition authority worry that a higher concentration ratio gives market power, so price rises above marginal cost, choice narrows and entry barriers rise for rivals.
- Diagram
- Monopoly diagram for the merged firm. Show output where MC equals MR, price above marginal cost, supernormal profit and the deadweight welfare loss triangle. Label the competitive output.
- Evaluation
- Weigh against economies of scale lowering average cost, possible lower prices and more research spending. Depends on the combined market share, contestability and whether savings reach consumers.
- Watch out
- Not stating whether the merger is horizontal, vertical or conglomerate, which drives the competition concern.
Q6(e)
With reference to Extract D, discuss possible methods of government intervention to reduce electronic waste.
Mark splitKnowledge 3Application 3Analysis 3Evaluation 6
Examiner insight
- What to cover
- Treat electronic waste as a negative externality. Take two or three policies from Extract D: a tax on devices, recycling subsidies, deposit return schemes, extended producer responsibility, or regulation on repairability.
- Diagram
- Negative externality diagram with MSC above MPC and the market output above the social optimum. Add a tax shifting MPC up to MSC. Label the welfare loss and the tax per unit.
- Evaluation
- Weigh internalising the external cost against inelastic demand for devices, monitoring costs, illegal dumping and exporting waste. Depends on the size of the external cost and on enforcement. Judge the best policy.
- Watch out
- Writing about pollution in general instead of the specific electronic waste evidence in Extract D.
Section C
Q7
A small hotel in Scarborough has seen its energy bills increase from £2 000 to £8 000 per month. Small businesses do not have the energy management teams of larger companies to negotiate better deals. (Source adapted from: https://www.ft.com/content/d07797e7- 2eb7-4240-b15d-692b39510def ) Evaluate the microeconomic effects of rising energy bills on the hotel industry or an industry of your choice.
Mark splitKnowledge 4Application 4Analysis 8Evaluation 9
Examiner insight
- What to cover
- Take the hotel industry. Energy is a variable cost, so average and marginal cost rise, industry supply shifts left, room prices rise and output falls. Profit margins shrink and small hotels may cut staff or exit.
- Diagram
- Cost and revenue diagram with AC and MC shifting up and the profit rectangle shrinking. Or industry supply shifting left with a higher price and lower quantity. Label the new equilibrium.
- Evaluation
- Weigh passing costs on if demand is inelastic against lost bookings if it is elastic. Small hotels lack the buying power of chains. Depends on elasticity, contract length and how long prices stay high.
- Watch out
- Slipping into macroeconomic effects such as inflation and growth when the question says microeconomic.
Q8
Bytedance, which owns TikTok, has launched its own fragrance ‘Emotif’. The Beijing-based social media giant has already entered the food and drink markets. (Source adapted from: https://www.businessoffashion.com/news/china/ tiktoks-parent-company-enters-chinas-perfume-market/) Evaluate the level of contestability in the fragrance industry or another industry of your choice.
Mark splitKnowledge 4Application 4Analysis 8Evaluation 9
Examiner insight
- What to cover
- Define contestability by barriers to entry and exit and by sunk costs. Apply to fragrance: brand building and advertising are large sunk costs, but production can be outsourced, so ByteDance can enter quickly.
- Diagram
- Diagram of an incumbent under threat of entry, setting price at or near average cost. Show supernormal profit competed away towards normal profit, with the limit price labelled.
- Evaluation
- Weigh low production barriers against brand loyalty, shelf space and celebrity endorsement costs. Depends on whether incumbents can limit price and on how much entry spending is recoverable. Give a judgement.
- Watch out
- Judging contestability by how many firms already sell fragrance rather than by freedom of entry and exit.
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.