Paper 3: Microeconomics and Macroeconomics · 9EC0/03
Edexcel A A-level Paper 3, June 2024
All 10 written questions from Edexcel A A-level Paper 3 (June 2024), Microeconomics and Macroeconomics. Case studies: The energy market and Ghana – cocoa and chocolate production. Each question shows its marks and topic, with an examiner insight on 8, and opens the question paper and mark scheme at the right page.
Section A
Case study
The energy market
Extracts: A: Rising gas prices · B: The UK gas market is broken · C: The gender pay gap in the oil and gas industry
In the extracts: North Sea, Questions, Women, Electricity Gas, Notwithstanding, Feb Apr Jun, Aug Oct Dec, Britain, Octopus, Number
Q1(a)
With reference to Figure 1 and Extract A, explain what is meant by ‘price inelastic demand’ (line 8).
Mark splitKnowledge 2Application 2Analysis 1
TopicGovernment intervention in marketsHow markets work
Q1(b)
Examine one likely externality that arises when a producer generates electricity by burning gas. Use a diagram to show the external costs of production.
Mark splitKnowledge 2Application 2Analysis 2Evaluation 2
TopicMarket failure
Examiner insight
- What to cover
- Choose one externality and develop it, such as carbon emissions or air pollution from burning gas. Show marginal social cost above marginal private cost and identify the welfare loss.
- Diagram
- Negative externality of production diagram with MSC above MPC, the socially optimum output Q1 below the free market output Q, and the welfare loss triangle shaded.
- Evaluation
- Comment on the difficulty of valuing the externality and on whether it is already partly internalised by carbon pricing.
- Watch out
- Drawing the diagram without shading and naming the welfare loss area. The question explicitly asks for the external costs to be shown.
Q1(c)
With reference to Figure 2 and Extract B, discuss the possible constraints on business growth for firms supplying energy to households in the UK.
Mark splitKnowledge 2Application 2Analysis 4Evaluation 4
TopicGovernment intervention in marketsHow markets work
Examiner insight
- What to cover
- Identify constraints from the data: the price cap limiting revenue, high wholesale gas costs, regulatory requirements, access to finance, and the size of the market. Link each to the limit on growth.
- Diagram
- Optional: LRAC curve, or a maximum price diagram showing the cap below equilibrium.
- Evaluation
- Weigh which constraint binds hardest. Depends on the level of the cap, wholesale price volatility, and whether the firm has the balance sheet to absorb losses.
- Watch out
- Writing generally about barriers to growth without using Figure 2 and Extract B.
Q1(d)
Evaluate the microeconomic and macroeconomic factors that explain gender-based wage differences in the UK oil and gas industry.
Mark splitKnowledge 4Application 4Analysis 8Evaluation 9
TopicGovernment intervention in marketsHow markets work
Examiner insight
- What to cover
- Cover both sides. Micro: differences in marginal revenue product, occupational and vertical segregation, discrimination, monopsony power, part time work patterns. Macro: labour market participation, productivity, growth and tax revenue.
- Diagram
- Labour market diagram with different demand or supply curves for the two groups, or a monopsony diagram.
- Evaluation
- Judge micro and macro. Separate the explained gap from unexplained discrimination. Depends on hours worked, occupational mix and the time period.
- Watch out
- Assuming the whole gap is discrimination. The marks come from distinguishing the causes.
Q1(e)
Evaluate the microeconomic and macroeconomic advantages for a country specialising in energy production using gas.
Mark splitKnowledge 4Application 4Analysis 8Evaluation 9
TopicGovernment intervention in marketsHow markets work
Examiner insight
- What to cover
- Cover both sides. Micro: jobs and supply chains in the gas sector, lower energy prices for domestic firms. Macro: export earnings, the current account, growth, and energy security.
- Diagram
- PPF or LRAS shifting right, plus a comparative advantage output table.
- Evaluation
- Judge micro and macro. Weigh the gains against primary product dependency, price volatility, the Dutch disease, environmental cost and the shift to renewables.
- Watch out
- Only listing advantages. A 25 mark Evaluate needs the counterarguments and a supported conclusion even when the question is one sided.
Case study
Ghana – cocoa and chocolate production
Extracts: D: From a managed to a floating exchange rate · E: There is a lot of money in chocolate but the growers of cocoa see very little of it. · F: A new trade bloc for Africa
In the extracts: Ghana, African Continental Free, Trade Agreement, Nigeria, Cocoa, Continental Free Trade, Trade and Industry, Africa The African, GhanaHomePage, African Union
Q2(a)
Explain one reason why a country might operate a managed exchange rate. Refer to Extract D in your answer.
Mark splitKnowledge 2Application 2Analysis 1
Q2(b)
With reference to the second paragraph of Extract E, examine two likely problems for the expansion of the chocolate industry in Ghana.
Mark splitKnowledge 2Application 2Analysis 2Evaluation 2
TopicMacroeconomic objectives and policyHow markets work
Examiner insight
- What to cover
- Give two problems and develop each. Options include a lack of capital and processing technology, poor infrastructure and power supply, tariff escalation in destination markets, and competition from established chocolate firms.
- Diagram
- Optional: tariff diagram showing escalation on processed goods.
- Evaluation
- Say which problem is the greater obstacle for Ghana and note that some ease with FDI or trade agreements.
- Watch out
- Writing about cocoa growing rather than the expansion of chocolate manufacturing, which is what Extract E is about.
Q2(c)
Discuss factors influencing the level of aggregate demand in Ghana. Use an aggregate demand and aggregate supply diagram in your answer.
Mark splitKnowledge 2Application 2Analysis 4Evaluation 4
TopicAggregate demandAggregate supply
Examiner insight
- What to cover
- Identify the components of AD and the factors moving them in Ghana: consumer incomes and confidence, interest rates and credit, government spending, exchange rate and world cocoa demand.
- Diagram
- AD and AS diagram with AD shifting right, showing the change in real output and the price level.
- Evaluation
- Weigh which component matters most in Ghana, where exports of cocoa are a large share of AD. Depends on world prices and on the size of the multiplier.
- Watch out
- Listing the components of AD without applying them to Ghana. The application marks need the extracts.
Q2(d)
Evaluate the microeconomic and macroeconomic effects of high interest rates in Ghana, or another developing country of your choice.
Mark splitKnowledge 4Application 4Analysis 8Evaluation 9
TopicMacroeconomic objectives and policyEmerging and developing economies
Examiner insight
- What to cover
- Cover both sides. Micro: dearer credit for farmers and small firms, lower investment, higher costs. Macro: weaker AD, lower inflation, a stronger cedi, slower growth and a heavier debt burden.
- Diagram
- AD and AS with AD shifting left, plus an exchange rate diagram showing appreciation.
- Evaluation
- Judge micro and macro. Depends on financial inclusion, the share of borrowing in foreign currency, and whether inflation is cost push, which rates cannot easily fix.
- Watch out
- Applying UK monetary policy logic. Weak financial development limits the transmission mechanism in Ghana.
Q2(e)
Evaluate the microeconomic and macroeconomic effects of Ghana joining the African Continental Free Trade Agreement (Extract F).
Mark splitKnowledge 4Application 4Analysis 8Evaluation 9
Examiner insight
- What to cover
- Cover both sides. Micro: cheaper inputs, tougher competition for Ghanaian firms, larger market for chocolate exports. Macro: trade creation and diversion, FDI, growth, tariff revenue loss.
- Diagram
- Tariff removal diagram showing imports rising and the areas of welfare gain, or a comparative advantage table.
- Evaluation
- Judge micro and macro. Weigh trade creation against trade diversion, infant industry losses and the fiscal cost of lost tariff revenue. Depends on non tariff barriers.
- Watch out
- Assuming free trade areas only create trade. Trade diversion and the loss of tariff revenue must be weighed.
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.