Unit 2: Economics in Action · 2520U20-1
WJEC AS Unit 2, June 2018
All 11 written questions from WJEC AS Unit 2 (June 2018), Economics in Action. Case studies: Plastic bags: to charge or not to charge? and Has brazil's bubble burst?. Each question shows its marks and topic, with an examiner insight on 6, and opens the question paper and mark scheme at the right page.
Case study
PLASTIC BAGS: TO CHARGE OR NOT TO CHARGE?
In the extracts: Wales, Department for Environment, Food and Rural Affairs, Bags for Life, According, Millions, American, Consumer, Likewise, England
Q1(a)
Using mathematical examples, explain why "the flat 5p charge will hit the poorest hardest as a percentage of their weekly income." (lines 34-35)
Mark splitKnowledge 2Analysis 2
TopicAggregate demandDemand, supply and elasticity
Q1(b)
With reference to lines 5-7, draw a supply curve for the production of plastic bags and explain the curve that you have drawn.
Q1(c)
Consider whether the price elasticity of demand for plastic bags is likely to be elastic or inelastic.
Mark splitKnowledge 2Analysis 2Evaluation 2
Q1(d)
Using a welfare loss diagram and with reference to the data, explain how the consumption of plastic bags can lead to market failure.
TopicMarket failureAggregate demand
Examiner insight
- What to cover
- Identify the negative externalities of plastic bag consumption from the text (litter, marine damage, landfill), then take the argument up to the socially optimum level of output, with MSC, MSB and the overconsumption at the free market quantity.
- Diagram
- Welfare loss diagram: MSC above MPC or MPB above MSB, free market quantity beyond the social optimum, welfare loss triangle shaded.
- Watch out
- Application and definitions were done well by most. The marks were separated by the diagram and by the higher order analysis in terms of the socially optimum level and MSB against MSC, so use that language.
- How it went in the exam
- Examiners said candidates identified the externalities from the text easily. The discriminators were the diagram and the technical analysis on top of it.
Q1(e)
Using the data, discuss the extent to which the 5p charge on plastic bags should be considered an example of government failure.
Mark splitKnowledge 2Application 2Analysis 2Evaluation 4
TopicGovernment intervention in markets
Examiner insight
- What to cover
- Define government failure as intervention that causes a greater misallocation of resources. Use the data to test the 5p charge against it: unintended consequences, administrative cost, regressive effects on low income shoppers, substitution into thicker bags.
- Evaluation
- Set that against the evidence of success, the fall in bag use and the revenue raised for good causes. Judge the extent, and note the charge may still be the best of the available options.
- Watch out
- Most candidates handled government failure and the data well. What held answers back from full marks was the evaluation, so leave time for it.
- How it went in the exam
- The mean was 6.7 out of 10 with a high facility factor, so this was one of the friendlier questions on the paper.
Q1(f)
To what extent are tradeable pollution permits effective at reducing the environmental damage within a country?
Mark splitKnowledge 2Analysis 2Evaluation 4
TopicGovernment intervention in marketsMarket failure
Examiner insight
- What to cover
- No application required, so this is a straight advantages against disadvantages question. Explain how a permit scheme caps total emissions, puts a price on pollution and gives firms an incentive to abate where it is cheapest, with trading between firms.
- Diagram
- Market for permits: a vertical (fixed) supply of permits with demand setting the permit price, and the effect of tightening the cap.
- Evaluation
- Weigh against the problems: setting the cap correctly, over allocation, monitoring and enforcement, firms relocating abroad, and the cost passed on to consumers. Compare with a pollution tax or regulation.
- Watch out
- This is a revision gap, not a timing gap. Know the mechanism of a permit market, not just the name.
- How it went in the exam
- The mean was only 4.1 out of 8, and 4 per cent of candidates did not attempt it even though it sits in the middle of the paper. Examiners put that down to the topic not being revised.
Case study
HAS BRAZIL'S BUBBLE BURST?
In the extracts: Brazil, GDP, Brazilian, China, USA, Alternatively Mr Tombini, Central Bank of Brazil, Alexandre Tombini, Joaquim Levy, Consumption
Q2(a)
Using an AD/AS diagram, explain why inflation in Brazil is so high.
Mark splitKnowledge 2Application 2Analysis 2
Q2(b)
Using the data in lines 26 to 28, calculate: (i) Brazil's GDP in 2015 (ii) the value of Brazilian exports bought by China and the USA.
Q2(c)
To what extent can the use of supply-side policies increase the level of investment in Brazil?
Mark splitKnowledge 2Application 2Analysis 2Evaluation 4
TopicAggregate demandMacroeconomic objectives and policy
Examiner insight
- What to cover
- Say clearly what a supply side policy is and what it is designed to do, then apply specific ones to investment in Brazil using the data hooks: infrastructure, education and skills, tax incentives, deregulation, privatisation.
- Diagram
- LRAS shifting right, with the investment effect shown as the mechanism rather than the conclusion.
- Evaluation
- Time lags before the capacity appears, the cost to a stretched Brazilian budget, whether political instability and corruption deter investment more than the policies encourage it, and the role of interest rates and confidence.
- Watch out
- Supply side policies are a perennial weak spot. Many candidates could not articulate what an SSP is before trying to apply it. Get the definition and mechanism right first.
- How it went in the exam
- This had the lowest facility factor of any question across both papers, and a standard deviation of 2.7, so candidates who handled it gained a real advantage.
Q2(d)
Discuss whether the policies of increased taxes on petrol and lowering state pensions are likely to be beneficial for the Brazilian economy.
Mark splitKnowledge 2Application 2Analysis 2Evaluation 4
TopicAggregate demandEconomic growth and the economic cycleInternational trade and exchange rates
Examiner insight
- What to cover
- Take the two policies separately. A petrol tax raises revenue and cuts emissions but raises transport costs and prices. Lower state pensions cut the deficit but reduce the incomes and spending of pensioners. Link each to a named macro objective.
- Diagram
- AD and AS: the petrol tax shifting SRAS left, the pension cut shifting AD left, or an indirect tax diagram on the petrol market.
- Evaluation
- Weigh the fiscal gain against the loss of output and the equity effects, and consider the state of the Brazilian cycle. Any macro objective can be used as the yardstick.
- Watch out
- Be careful with real values. Examiners said repeatedly that candidates confuse billions and millions and have no feel for the size of a GDP or a budget.
- How it went in the exam
- Examiners were pleased with this one and said candidates reached sensible conclusions on both policies.
Q2(e)
Discuss whether Alexandre Tombini should "keep interest rates high". (line 40)
Mark splitKnowledge 2Application 2Analysis 2Evaluation 6
TopicMacroeconomic objectives and policy
Examiner insight
- What to cover
- Use more than one strand of the transmission mechanism. Higher rates cut consumption and investment, raise the exchange rate and cut import prices, and affect confidence and asset prices. Apply each to Brazil using the hooks in the last few lines of the data.
- Diagram
- AD and AS with AD shifting left and the price level falling, or an exchange rate diagram for the import price channel.
- Evaluation
- Weigh the inflation gain against the cost in growth and unemployment in a weak economy, the debt servicing burden, and the exchange rate effect on exporters. Reach a justified view on whether Tombini should keep rates high.
- Watch out
- Only discussing consumption against saving is not enough analysis for 12 marks. Many answers were bland and unapplied despite the hooks in the data.
- How it went in the exam
- Examiners note the last question of a paper suffers from candidates running out of steam. The best answers justified a view one way or the other.
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.