Unit 2: Economics in Action · 2520U20-1
WJEC AS Unit 2, June 2019
All 10 written questions from WJEC AS Unit 2 (June 2019), Economics in Action. Case studies: A bridge too far! and Chancellor under pressure. Each question shows its marks and topic, with an examiner insight on 5, and opens the question paper and mark scheme at the right page.
Case study
A BRIDGE TOO FAR!
In the extracts: Severn Crossings, Wales, London Congestion Charge, Cardiff Bristol Bath, Renamed The Prince, England and Wales, Weston-Super-Mare, Welsh Secretary, Merthyr Tydfil, Severn Bridge
Q1(a)
(i) Outline what is meant by the phrase "in 2017 prices". (lines 15 and 16) (ii) Calculate the 2017 toll price of £6.70 in 1966 prices. Give your answer to the nearest whole penny.
Mark splitKnowledge 2Application 2
TopicMarket failureEconomic growth and the economic cycleGovernment intervention in markets
Q1(b)
(i) Identify two injections from the data given. (ii) With reference to the circular flow of income model, explain how increasing injections might lead to a larger increase in national income.
Q1(c)
Discuss whether roads are a good example of a public good.
Mark splitKnowledge 2Analysis 2Evaluation 4
TopicMarket failure
Examiner insight
- What to cover
- Define a public good with the technical terms: non rival, non excludable, non diminishable. Then test roads against each characteristic in turn, using the data. Ordinary roads are close to non excludable, tolled roads and congested roads are not.
- Evaluation
- Take a two sided view. Congestion makes roads rival, tolls make them excludable, so roads are a quasi public good rather than a pure public good.
- Watch out
- A public good is not the same as a publicly funded good. Candidates who confused the two scored very few marks.
- How it went in the exam
- The mean was 4.3 out of 8 with a standard deviation of 2.1. The two sided treatment of each characteristic is what separated the top answers.
Q1(d)
Consider whether the use of road tolls or investment into public transport would be more effective at reducing traffic congestion in the UK.
Mark splitApplication 2Analysis 4Evaluation 4
TopicAggregate demandMarket failure
Examiner insight
- What to cover
- The command word consider requires evaluation. Take road tolls and investment in public transport in turn, showing how each cuts congestion: tolls internalise the external cost and price drivers off the road, better public transport shifts demand to a substitute.
- Diagram
- Negative externality diagram for road use with a tax equal to the external cost, or a demand and supply diagram for public transport as a substitute.
- Evaluation
- Compare the two: price elasticity of demand for car travel, equity effects of tolls on low income drivers, the cost and time lag of transport investment, and the UK context of commuting habits and existing services.
- Watch out
- Answers must consider the pros and cons of both policies. AO2 marks came from real UK thinking, such as commuting patterns or the quality of public transport, even though the data gave little to work with.
- How it went in the exam
- The mean was 5.3 out of 10 with a standard deviation of 2.0, so most scores sat between 3 and 7.
Q1(e)
(i) Using the data, calculate the typical cost of a motorist driving from Bristol to Cardiff in 2017. Give your answer to 2 decimal places. (ii) To what extent will the removal of tolls on the Severn Crossings affect the level of consumption and private investment in Wales?
TopicAggregate demand
Examiner insight
- What to cover
- Part (i) is a calculation to two decimal places, so show the workings. Part (ii) must separate consumption from private investment. Lower travel costs raise disposable income and commuting, which lifts consumption, and improve access to markets and labour, which can attract investment into south Wales.
- Diagram
- AD and AS for Wales with AD shifting right, or a circular flow showing the injection.
- Evaluation
- Judge the size of the saving against total household spending, the time lag before firms relocate, the habitual nature and low elasticity of travel, and whether the effect is felt beyond Cardiff and Swansea, for example in Newport and Bristol commuting.
- Watch out
- Too many candidates lumped consumption and investment together. Treat them as two separate flows and evaluate the effect on each.
- How it went in the exam
- Examiners praised specific Welsh application here. Top evaluation built chains of reasoning about the extent of the effect rather than a list of points at the end.
Case study
CHANCELLOR UNDER PRESSURE
In the extracts: Potential, UK Government Spending, Chancellor, Public, General Election, Phillip Hammond, Suggestions, Exchequer, Keynesian, Education
Q2(a)
Using examples, define the terms 'government current expenditure' and 'government capital expenditure'.
Mark splitKnowledge 4
TopicBusiness growth and objectivesMacroeconomic objectives and policyAggregate demand
Q2(b)
Using Figures 1 and 2, discuss the relationship between Government spending and GDP in the UK 2001-2016.
Mark splitApplication 2Analysis 2Evaluation 2
TopicAggregate demandMacroeconomic objectives and policy
Q2(c)
Using a labour market diagram, explain why imposing a pay ceiling on public sector workers might cause labour shortage issues.
Mark splitKnowledge 1Application 2Analysis 3
TopicThe labour marketBusiness growth and objectives
Q2(d)
Discuss whether a Keynesian approach to fiscal policy will be beneficial for the UK economy.
Mark splitKnowledge 2Application 2Analysis 4Evaluation 4
TopicMacroeconomic objectives and policy
Examiner insight
- What to cover
- Stay on Keynesian demand side fiscal policy. Explain how higher government spending or lower taxes raise AD, with the multiplier, and why Keynesians think this is needed when the economy is below capacity. Tie it to the UK data and Philip Hammond's position.
- Diagram
- Keynesian AD and AS with AD shifting right along the shallow section of AS, output rising with little price effect.
- Evaluation
- Drawbacks of the same policy: a larger budget deficit and debt, demand pull inflation if the economy is near capacity, crowding out, income inequality effects, and time lags.
- Watch out
- Do not answer with policy X is poor but policy Y is better. Supply side effects of health and education earned limited credit, and anything about interest rates earned none.
- How it went in the exam
- The mean was 5 out of 12 with a facility factor of 41.8, the toughest question of the 2019 AS series.
Q2(e)
With reference to the data, discuss whether merit goods like higher education and healthcare should be provided free of charge by the government.
Mark splitKnowledge 2Application 2Analysis 2Evaluation 6
TopicMarket failure
Examiner insight
- What to cover
- Frame it first as a micro market failure: merit goods are under consumed because of information failure and positive externalities. Then add the macro side, where free provision raises human capital and shifts LRAS right.
- Diagram
- Merit good diagram with MPB below MSB, under consumption at the free market quantity and the welfare gain from moving to the social optimum.
- Evaluation
- Weigh the opportunity cost of the spending and the tax needed, excess demand and rationing by waiting, the risk of government failure, and who benefits, since free higher education can be regressive.
- Watch out
- A purely macro answer runs out of material and repeats itself. Endless analysis of education and health shifting LRAS earned limited credit. Keep to economics, not morality or ethics.
- How it went in the exam
- 98.4 per cent attempted this final question, more than the Keynesian question before it. The best answers combined micro and macro.
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.