Edexcel A · Theme 3: Business behaviour and the labour market · 3.5 Government intervention in markets
Edexcel A Economics past paper questions: Government intervention in markets
Every Edexcel A question on Government intervention in markets from 2018 to 2024: 2 essays, 7 data response questions and 3 short answer questions. It covers Revenues, costs and profits, How markets work, Labour market, Business growth and Aggregate demand. Each question links to its paper, mark scheme and examiner report.
SubtopicsRevenues, costs and profits 4How markets work 4Labour market 3Business growth 3Aggregate demand 1
Essay questions on government intervention in markets
Case study: The energy market
Evaluate the microeconomic and macroeconomic factors that explain gender-based wage differences in the UK oil and gas industry.
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.
- Watch out
- Assuming the whole gap is discrimination. The marks come from distinguishing the causes.
Case study: The energy market
Evaluate the microeconomic and macroeconomic advantages for a country specialising in energy production using gas.
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.
- Watch out
- Only listing advantages. A 25 mark Evaluate needs the counterarguments and a supported conclusion even when the question is one sided.
Data response questions on government intervention in markets
Case study: The UK Rail Industry
Assess whether complete nationalisation of the rail industry might protect employees.
Examiner insight
- What to cover
- Define nationalisation. Explain the chain: state ownership removes the profit motive, so cost cutting and redundancies are less likely, union bargaining power rises, and pay and job security for rail employees may improve.
- Watch out
- Writing about passengers and fares instead of keeping the whole answer on employees.
Case study: Energy and telecommunication markets in the UK
With reference to Extract B, examine the likely benefits to consumers of the integration between BT and EE.
Examiner insight
- What to cover
- Explain consumer benefits from the BT and EE integration using Extract B: economies of scale and synergies lowering costs and prices, bundled services, wider network coverage and more network investment.
- Watch out
- The benefits must reach consumers, so treat firm gains only as a route to lower prices or better service.
Case study: Energy and telecommunication markets in the UK
With reference to Extract C, assess possible reasons why many ‘landline-only’ customers do not switch to a cheaper telephone provider.
Examiner insight
- What to cover
- Use Extract C to explain information gaps, search and switching costs, inertia and habit, loyalty, and the age profile of these customers. Weak switching makes demand inelastic so prices stay high.
- Watch out
- Behavioural reasons must be linked to the market outcome, not just listed as consumer laziness.
Case study: Energy and telecommunication markets in the UK
Discuss one likely reason for the rise in BT’s profit (Figure 2, Extracts B and C). Use a cost and revenue diagram to support your answer.
Examiner insight
- What to cover
- Choose one reason, such as the EE takeover raising revenue and bringing economies of scale, or market power keeping price above average cost. Link it to profit as total revenue minus total cost, using Figure 2.
- Watch out
- Only one reason is credited, and the supernormal profit rectangle must be clearly labelled.
Case study: The UK energy market
With reference to Figure 1, explain one likely reason for the overall trend in the real price of gas and electricity.
Examiner insight
- What to cover
- Give one developed reason for the trend in Figure 1, such as rising wholesale gas costs, environmental levies, network investment costs, or limited competition between the large suppliers.
- Watch out
- Real prices are adjusted for inflation, so state the trend in Figure 1 before explaining it.
Case study: The UK energy market
With reference to Extract A, discuss the likely effectiveness of ‘measures to open up and increase competition’ in the UK energy market.
Examiner insight
- What to cover
- Explain measures from Extract A such as easier switching, price comparison and helping new entrants. Lower barriers to entry push prices down toward average cost and raise efficiency.
- Watch out
- More suppliers does not mean effective competition if consumers do not actually switch.
Case study: The UK energy market
With reference to Extract C and your own knowledge, discuss policies businesses and government might implement to reduce labour immobility to benefit the energy sector.
Examiner insight
- What to cover
- Split immobility into occupational and geographical. Explain training, apprenticeships and employer links for skills, and relocation help, housing and transport for movement. Show labour supply to the energy sector rising. Use Extract C.
- Watch out
- Separate occupational from geographical immobility and cover both business and government measures.
Short answer questions on government intervention in markets
Case study: The energy market
With reference to Figure 1 and Extract A, explain what is meant by ‘price inelastic demand’ (line 8).
Case study: The energy market
With reference to Figure 2 and Extract B, discuss the possible constraints on business growth for firms supplying energy to households in the UK.
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.
- Watch out
- Writing generally about barriers to growth without using Figure 2 and Extract B.
Case study: The food delivery industry
With reference to Extract C, discuss the likely effects of increasing integration within the food delivery market.
Examiner insight
- What to cover
- Integration between platforms and restaurants raises concentration. Trace the chain to greater market power, possible higher commission for restaurants and higher prices for consumers, set against economies of scale.
- Watch out
- Describing types of integration instead of analysing the effects of increasing integration on this market.
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.