Unit 4: Evaluating Economic Models and Policies · 1520U40-1
WJEC A-level Unit 4, June 2022
All 12 written questions from WJEC A-level Unit 4 (June 2022), Evaluating Economic Models and Policies. Each question shows its marks and topic, with an examiner insight on 12, and opens the question paper and mark scheme at the right page.
The 2022 question paper carries WJEC's Z22 reference, from the adapted summer 2022 series. Its mark scheme is the summer 2022 one.
Section A
Q1(a)
Using relevant diagrams, explain how a long-run equilibrium position is reached in a perfectly competitive market structure.
Mark splitKnowledge 6Analysis 4
TopicDemand, supply and elasticity
Examiner insight
- What to cover
- Explain the adjustment, not just the end point. From short run abnormal profit, free entry raises market supply, the market price falls, the individual firm's AR and MR shift down, and entry stops when AR is tangential to AC and only normal profit is earned. Run the loss making case in reverse.
- Diagram
- Side by side market and firm diagrams with micro labels. A change in market supply shifts the firm's revenue curves, not its cost curves.
- Watch out
- Middling answers made diagram errors: macro labels on a micro diagram, shifting cost curves instead of revenue curves, or drawing a monopoly. Tie the explanation to profit maximisation plus free entry.
- How it went in the exam
- Examiners said poorly labelled and poorly integrated diagrams were a significant feature across this whole paper, so accurate labelling is cheap marks.
Q1(b)
Assess the reasons why the reduction of monopoly power in an economy may not be entirely desirable.
Mark splitKnowledge 6Analysis 6Evaluation 8
TopicMarket structures
Examiner insight
- What to cover
- Answer the precise question: why cutting monopoly power may not be wholly desirable. Use economies of scale and lower average cost, abnormal profit funding research and dynamic efficiency, natural monopoly, and international competitiveness of large national firms.
- Diagram
- Cost and revenue diagram showing the scale economies of the large firm, or a natural monopoly with AC falling across the market.
- Evaluation
- Recognise that monopoly power is not the same as monopoly, since large oligopolists hold it too, and bring in contestability: the threat of entry may discipline a firm without any reduction in its market share.
- Watch out
- A general pros and cons of monopoly essay was Band 2. Band 3 needed the focus on the effects of reducing monopoly power.
- How it went in the exam
- Examiners singled out the monopoly power against monopoly distinction and contestability as what the very best candidates brought in.
Q2(a)
Using a diagram and examples, explain what is meant by a monopolistically competitive market structure.
Mark splitKnowledge 6Analysis 4
TopicMarket structures
Examiner insight
- What to cover
- Cover every demand of the question: the characteristics of monopolistic competition (many firms, differentiated products, low barriers to entry, downward sloping but elastic demand), a diagram, and real examples such as hairdressers, restaurants or builders.
- Diagram
- Short run abnormal profit and long run normal profit for the monopolistically competitive firm, with micro labels and the correct curves.
- Watch out
- Examples were widely treated as an afterthought, and many diagrams were inaccurate. Do not confuse this structure with monopoly or oligopoly, which made it hard to award any marks at all.
- How it went in the exam
- Examiners reported a proportion of candidates using macro labels on micro diagrams and muddling the curves. Precision here is worth several marks.
Q2(b)
Evaluate the view that firms in monopolistically competitive markets are always less efficient than firms in other market structures.
Mark splitKnowledge 6Analysis 6Evaluation 8
TopicMarket structures
Examiner insight
- What to cover
- Take the three efficiencies in turn, productive, allocative and dynamic, and compare monopolistic competition with at least two other structures, giving the reason in each case rather than asserting it.
- Diagram
- Long run monopolistic competition with excess capacity, against perfect competition at minimum AC and monopoly with P above MC.
- Evaluation
- Attack always. Compare theory with practice: the theoretical loss of allocative efficiency is offset by product differentiation and consumer choice, and structures change over time as firms enter or consolidate.
- Watch out
- Middling answers stated the efficiencies and related them to monopoly and perfect competition with assertions and no analysis, staying entirely in theory. If you wrote about the wrong structure in part (a), the error carries forward.
- How it went in the exam
- Examiners said effective evaluation in economics usually comes from putting theory in a real world context, which is exactly what separated the bands here.
Section B
Q3(a)
Using a production possibility frontier (PPF) diagram, explain the possible causes of actual growth and potential growth in an economy.
Mark splitKnowledge 6Analysis 4
TopicEconomic growth and the economic cycleThe economic problem and resource allocation
Examiner insight
- What to cover
- Cover both types of growth. Actual growth is a move from inside the PPF towards it, caused by rising demand and better use of existing resources. Potential growth is an outward shift, caused by more or better factors of production. Pick a small number of causes and analyse them.
- Diagram
- PPF diagrams, as the question asks, showing a movement towards the frontier and a shift of the frontier. Do not substitute AD and AS.
- Watch out
- A noticeable number covered only one of the two types, and others used the wrong diagram. Long lists of causes earn less than two or three developed ones.
- How it went in the exam
- Some candidates gained full marks in about half a page by doing exactly what was asked and nothing else.
Q3(b)
Evaluate the extent to which economic growth always leads to conflicts with other policy objectives.
Mark splitKnowledge 6Analysis 6Evaluation 8
TopicEconomic growth and the economic cycle
Examiner insight
- What to cover
- Set out the conflicts (demand pull inflation, a widening trade deficit, environmental damage, inequality) and the non conflicts (falling unemployment, higher tax revenue funding public services).
- Diagram
- AD and AS with macro labels, integrated into the written argument.
- Evaluation
- Writing about conflicts and non conflicts is analysis, not evaluation. The AO4 marks come from judging the likelihood of each effect or the extent to which it happens, for example how much spare capacity exists and whether the growth is demand led or supply led. Use real examples.
- Watch out
- Many candidates assumed both sides of the argument would earn AO4 marks. It does not. Also stay on growth rather than drifting into how inflation could be reduced.
- How it went in the exam
- Examiners were explicit that Band 2 and 3 AO4 marks went to candidates who evaluated each point, conflicts and non conflicts alike.
Q4(a)
Explain how inflation is calculated using a weighted price index.
Mark splitKnowledge 6Analysis 4
TopicMeasuring economic performance
Examiner insight
- What to cover
- Take the whole process: the Living Costs and Food Survey or Family Expenditure Survey identifies spending patterns, a representative basket is built, prices are collected each month, each item is weighted by its share of spending, and the weighted prices are compared with the base year to give the index.
- Diagram
- A worked numerical example of weights times price relatives is better than a diagram here and was highly rewarded.
- Watch out
- Naming CPI and RPI and defining inflation is AO1 only. The AO3 marks come from explaining how the data becomes a weighted index, ideally with numbers.
- How it went in the exam
- Examiners said many candidates picked up strong AO1 but few AO3 marks on this question, so the calculation is the differentiator.
Q4(b)
Discuss the view that inflation is always costly and never beneficial.
Mark splitKnowledge 6Analysis 6Evaluation 8
TopicMeasuring economic performance
Examiner insight
- What to cover
- Give the costs of inflation (erosion of real incomes and savings, menu and shoe leather costs, uncertainty for investment, loss of competitiveness) and the benefits (erosion of real debt, a buffer against deflation, an easier real wage adjustment).
- Diagram
- AD and AS distinguishing demand pull from cost push inflation, since the costs differ.
- Evaluation
- Judge by how far inflation is above target, whether it was anticipated, and how it differs between economies at different stages of development and with different inflationary expectations and central bank mandates.
- Watch out
- Do not drift into how contractionary monetary policy would reduce inflation, which is a different question. And do not claim inflation causes an appreciation. Higher domestic prices cut demand for exports, which tends to cause a depreciation.
- How it went in the exam
- Examiners rewarded answers that treated demand pull and cost push separately, which gave good marks across all assessment objectives.
Section C
Q5(a)
Explain the likely link between changes in the terms of trade and changes in the current account balance.
Mark splitKnowledge 6Analysis 4
TopicInternational trade and exchange rates
Examiner insight
- What to cover
- Define the terms of trade as the export price index divided by the import price index times 100, then work through the link: an improvement means each export buys more imports, but if demand is elastic, export volumes fall and the current account can worsen.
- Diagram
- Not required. A worked numerical example of an index change is more useful.
- Watch out
- The terms of trade is not the degree of protectionism or bargaining power between countries, and the formula uses prices, not values or quantities. Even candidates who knew the formula often could not say what an improvement does to the trade balance.
- How it went in the exam
- There were very few good answers to this question, so the formula plus the elasticity link is a large and easily won advantage.
Q5(b)
Evaluate the ways in which governments could reduce a sustained current account deficit, in both LEDCs and MEDCs.
Mark splitKnowledge 6Analysis 6Evaluation 8
TopicInternational trade and exchange ratesMeasuring economic performance
Examiner insight
- What to cover
- Take a range of policies: expenditure switching through protectionism or a lower exchange rate, expenditure reducing through tighter fiscal policy, and supply side policies to raise competitiveness. Explain the mechanism of each.
- Diagram
- Tariff diagram or exchange rate diagram, accurately labelled and integrated into the argument.
- Evaluation
- The question names both LEDCs and MEDCs, so judge which policies are feasible and sensible in each, and link the policy to the likely cause of the deficit. Different economies have different needs.
- Watch out
- Do not confuse a current account deficit with a budget deficit. Candidates who did could not be awarded many marks at all.
- How it went in the exam
- Band 2 answers had good theoretical analysis. Band 3 came from the LEDC and MEDC comparison, which most candidates omitted.
Q6(a)
Explain the impacts of industrialisation on an LEDC.
Mark splitKnowledge 6Analysis 4
Examiner insight
- What to cover
- Define industrialisation and set it in an LEDC context, then analyse a small number of impacts in depth: the Lewis model shift out of agriculture, higher productivity and incomes, export earnings and urbanisation, against pollution, inequality and rural decline.
- Diagram
- LRAS or PPF shifting right, or a dual sector model of labour moving from agriculture to industry.
- Watch out
- Identifying many impacts without developing any of them gives high AO1 and low AO3. Pick fewer and analyse them properly.
- How it went in the exam
- Examiners reported some excellent answers here, with the best linking industrialisation carefully to the LEDC context before analysing effects.
Q6(b)
Evaluate the extent to which high levels of national (public sector) debt are damaging for LEDCs.
Mark splitKnowledge 6Analysis 6Evaluation 8
TopicBusiness growth and objectives
Examiner insight
- What to cover
- Make the answer specific to LEDCs: debt service crowding out health and education spending, debt often in foreign currency so exchange rate risk matters, high borrowing costs, the savings gap and dependence on lenders.
- Evaluation
- Weigh against: borrowing that funds productive infrastructure can raise growth and the capacity to repay, and concessional lending and debt relief change the burden. Judge the extent by what the debt funds and who it is owed to.
- Watch out
- Do not confuse public sector debt with a current account deficit, and do not spend the essay on policies to reduce the debt, which is not what is asked.
- How it went in the exam
- Examiners said there were many good answers on the general effects of high public debt but very few that really engaged with the LEDC context, which is where the question is won.
Question text is quoted from the question papers, © WJEC CBAC Ltd, 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.