Unit 4: Evaluating Economic Models and Policies · 1520U40-1
WJEC A-level Unit 4, June 2024
All 12 written questions from WJEC A-level Unit 4 (June 2024), 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.
Section A
Q1(a)
Using examples, explain how a firm may experience: i) internal growth and ii) external growth.
Mark splitKnowledge 6Analysis 4
TopicBusiness growth and objectives
Examiner insight
- What to cover
- Three things are needed: internal (organic) growth, external growth, and examples. Use precise terminology for external growth, naming horizontal, vertical and conglomerate integration, then analyse the consequences of each route for the firm.
- Diagram
- LRAC showing the firm moving to a larger scale and lower unit cost, if used.
- Watch out
- Describing the two types of growth earns AO1 only. The AO3 marks come from chains of reasoning about how each is achieved and its pros and cons for the business. Limited use of examples was the main block on top band AO1.
- How it went in the exam
- The mean was 6 out of 10, but only 15.5 per cent of candidates chose Question 1, and part (b) had the lowest essay mean on the paper.
Q1(b)
Discuss the likely impact on firms of greater flexibility in both product markets and factor markets.
Mark splitKnowledge 6Analysis 6Evaluation 8
Examiner insight
- What to cover
- Cover both markets. Factor market flexibility: zero hours and temporary contracts, easier hiring and firing, mobile labour, so lower costs and faster adjustment. Product market flexibility: easier entry and exit, fewer regulations, faster price and output adjustment, so more competition.
- Diagram
- Labour market with a more elastic labour supply, or a market structure diagram showing easier entry.
- Evaluation
- Counter each point. Zero hours contracts cut costs but damage motivation and make recruitment harder. Easier entry raises competition but cuts margins and the funds for investment. Close with a weighted judgement using it depends on.
- Watch out
- Product market flexibility is the weaker half for most candidates, and answers covering only one of the two markets were limited. Make sure you can define both.
- How it went in the exam
- This essay had the lowest mean of all 20 mark options at 8.3 out of 20, so it is a demanding choice unless product market flexibility is secure.
Q2(a)
Using examples, explain why a firm may choose objectives other than profit maximisation.
Mark splitKnowledge 6Analysis 4
TopicCosts, revenues and profit
Examiner insight
- What to cover
- Explain several alternative objectives with examples: revenue maximisation, sales maximisation, satisficing, survival, market share, social and ethical goals. For each, explain why a firm would choose it over profit maximisation.
- Diagram
- Cost and revenue diagram marking the output under each objective. Not required, but many candidates used one well.
- Watch out
- The AO3 marks are in the why: the principal agent problem where managers not owners decide, a new firm building market share, appealing to different stakeholders. Missing examples blocked top band AO1.
- How it went in the exam
- The mean was 6.3 out of 10, the highest of the 10 mark options on the paper.
Q2(b)
The disadvantages of a firm choosing to profit maximise are greater than the advantages. Discuss the extent to which this statement is true.
Mark splitKnowledge 6Analysis 6Evaluation 8
TopicCosts, revenues and profit
Examiner insight
- What to cover
- Take the advantages of profit maximisation (funds for investment and dynamic efficiency, returns to shareholders, signals for resource allocation, survival) against the disadvantages (higher prices and lower output, reduced consumer welfare, short termism, pressure on workers and suppliers, regulatory risk).
- Evaluation
- Compare the two sides continually rather than in blocks, and judge by the market structure, the time horizon and which stakeholder you are judging for. Give a weighted judgement.
- Watch out
- Weaker answers identified pros and cons but never developed the impacts or spread them across stakeholders, and gave no weighted judgement.
- How it went in the exam
- The mean was 11.8 out of 20, one of the stronger essay options. Section A's 10 mark questions were the most accessible on the paper.
Section B
Q3(a)
Explain how economic growth can reduce inequality in an economy.
Mark splitKnowledge 6Analysis 4
TopicPoverty and inequalityEconomic growth and the economic cycle
Examiner insight
- What to cover
- Link the two concepts, do not just describe them. Show how growth narrows the gap between high and low incomes: tighter labour markets raising wages fastest at the bottom, higher employment, and higher tax revenue funding redistribution.
- Diagram
- Lorenz curve moving towards the line of equality, or a labour market diagram for low paid work.
- Watch out
- Inequality is not poverty. Most answers analysed how growth helps people on low incomes, which answers a poverty question. Stay on the gap between groups, and note that some types of growth widen it.
- How it went in the exam
- The mean was 5.5 out of 10. Only a minority of candidates connected growth to the inequality gap itself, so the distinction is a real differentiator.
Q3(b)
Discuss the likely impact on an economy of rising labour costs. Use relevant diagrams in your answer.
Mark splitKnowledge 6Analysis 6Evaluation 8
Examiner insight
- What to cover
- Give the negative impacts of rising labour costs: higher costs of production, cost push inflation, lower international competitiveness, substitution of capital for labour and unemployment. Then the positive side: higher incomes raising consumption and AD, incentives to invest in productivity, lower staff turnover.
- Diagram
- AD and AS with SRAS shifting left for the cost effect and AD shifting right for the income effect. The question requires diagrams.
- Evaluation
- Counter arguing is where candidates struggled. Judge by whether productivity rises with wages, the share of labour in total costs, the position in the cycle, and how open the economy is. End with a weighted judgement.
- Watch out
- Detailed one sided chains on the negatives are common and cap AO4 marks. Plan the counter argument before you start writing.
- How it went in the exam
- The mean was 10.7 out of 20. Examiners said AO4 was harder to earn on this question than on the alternative.
Q4(a)
Explain the possible supply-side causes of unemployment.
Mark splitKnowledge 6Analysis 4
TopicMeasuring economic performance
Examiner insight
- What to cover
- Cover supply side causes only: structural change and occupational or geographical immobility, skills mismatch, frictional and search unemployment, benefit replacement rates and the unemployment trap, and real wage or minimum wage effects. Link each cause to why the person cannot find work.
- Diagram
- Labour market showing a wage floor above equilibrium, or a long run Phillips curve at the natural rate.
- Watch out
- Do not drift into demand side causes. A common error was naming the national minimum wage and then analysing it from the demand for labour side. Every cause must be tied to why it makes finding a job harder, or the AO3 marks go.
- How it went in the exam
- The mean was 5.9 out of 10 and 96 per cent of Section B candidates chose Question 4.
Q4(b)
Assess the policies that could be used to tackle deflation. Use relevant diagrams in your answer.
Mark splitKnowledge 6Analysis 6Evaluation 8
TopicMeasuring economic performance
Examiner insight
- What to cover
- Deflation is a falling price level, not slowing inflation. Assess the policies that raise the price level: expansionary monetary policy including lower rates, QE and forward guidance, expansionary fiscal policy, and exchange rate depreciation.
- Diagram
- AD and AS with AD shifting right and the price level rising. The question requires diagrams, so refer to them in the argument.
- Evaluation
- Judge whether each policy actually cures deflation, not just whether it has side effects. The liquidity trap, the zero lower bound, entrenched expectations of falling prices, and the difficulty of escaping a deflationary spiral are the strong lines. End with the effectiveness depends on.
- Watch out
- Saying a tax cut worsens the fiscal deficit is credited as AO4 but is weak, because it does not say why the policy may fail to end deflation. And do not confuse deflation with disinflation.
- How it went in the exam
- The mean was 12.1 out of 20, the highest essay mean on the paper, so this was the most accessible 20 mark choice in 2024.
Section C
Q5(a)
Explain the possible causes of a structural deficit on the current account of the balance of payments.
Mark splitKnowledge 6Analysis 4
TopicInternational trade and exchange ratesMeasuring economic performance
Examiner insight
- What to cover
- Explain the current account and what makes a deficit structural rather than cyclical: persistent weak competitiveness, low productivity, a long term decline in manufacturing, a high marginal propensity to import, a persistently overvalued exchange rate. Show how each causes imports to exceed exports.
- Watch out
- Understanding of the current account is usually strong, understanding of structural is not. Each cause must be shown to be an underlying problem that persists through the cycle, and must be traced through to imports exceeding exports.
- How it went in the exam
- The mean was 5.6 out of 10. Only 3.1 per cent of candidates chose Question 5, so these figures rest on very few scripts.
Q5(b)
Evaluate the impact of a rising terms of trade index for economies at different stages of development.
Mark splitKnowledge 6Analysis 6Evaluation 8
TopicInternational trade and exchange rates
Examiner insight
- What to cover
- A rising terms of trade index means export prices rising relative to import prices. Work through the effect for an MEDC and for an LEDC in turn: cheaper imports and higher real income against the loss of export competitiveness and export volumes, with primary product dependency making LEDCs more exposed.
- Evaluation
- Judge the extent to which each type of economy gains or loses, rather than simply saying it is good for one and bad for the other. Name actual MEDCs and LEDCs where you can.
- Watch out
- A rising terms of trade index is about relative prices, not about selling more exports and buying fewer imports. That confusion was common. Your own numerical example demonstrates the point quickly.
- How it went in the exam
- The mean was 8.7 out of 20, far below the 11.9 on the alternative Question 6b, so this was a demanding choice.
Q6(a)
Explain the ways in which living standards can be measured in economies at different stages of development.
Mark splitKnowledge 6Analysis 4
TopicMeasuring economic performance
Examiner insight
- What to cover
- Describe the measures (GDP or GNI per capita at PPP, HDI, and wider indicators such as literacy, life expectancy, the Multidimensional Poverty Index), then explain how appropriate each one is for economies at different stages of development.
- Watch out
- Saying that LEDCs score near 0 and MEDCs near 1 on the HDI is AO1 only. The AO3 marks come from relevance, for example why repatriation of profits by multinationals makes national income a poor guide to living standards in an LEDC. Link measures to countries you have studied.
- How it went in the exam
- The mean was 5.1 out of 10, the most challenging part (a) on the paper, entirely because of the AO3 link to different stages of development.
Q6(b)
Assess the view that free international trade is always beneficial for developing economies.
Mark splitKnowledge 6Analysis 6Evaluation 8
TopicGrowth and developmentInternational trade and exchange rates
Examiner insight
- What to cover
- Build the case for free trade for developing economies: larger export markets, cheaper raw materials and capital goods, comparative advantage, competition and technology transfer. Then the case against: comparative advantage in low value volatile primary goods, infant industries, lost tariff revenue, and domestic producers displaced by imports.
- Evaluation
- Attack always. Different LEDCs face different obstacles, so distinguish between them, and give a weighted judgement at the end.
- Watch out
- Free trade does not automatically bring free movement of labour or capital. If you use FDI, explain why liberalisation makes the country more attractive to it, rather than assuming it comes as part of the package. Generic answers that never focus on LEDCs were limited to low bands.
- How it went in the exam
- The mean was 11.9 out of 20 and 95.9 per cent of candidates chose Question 6, the most popular choice on the paper.
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.