Unit 2: Economics in Action · 2520U20-1
WJEC AS Unit 2, June 2023
All 7 written questions from WJEC AS Unit 2 (June 2023), Economics in Action. Case studies: Sin city and The welsh economy. 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
SIN CITY
In the extracts: Philadelphia, USA, GDP, Entertainment Healthcare Food, Education Philadelphia USA, Foreign Restaurant Sugary, Alcohol Salt, SIN CITY, Obesity, Several
Q1(a)
Using the data in Figure 1, calculate the estimated price elasticity of demand (PED) for the following goods and state whether they have price elastic or price inelastic demand. (i) Foreign travel (ii) Sugary soft drinks
Q1(b)
(i) Using the data, calculate Philadelphia's GDP per capita. Give your answer to the nearest whole number. (ii) With reference to the data, outline why entertainment could be considered an inferior good.
TopicMeasuring economic performanceDemand, supply and elasticity
Q1(c)
To what extent does the consumption of alcohol and sugary soft drinks result in negative externalities?
Mark splitKnowledge 2Application 2Analysis 2Evaluation 4
TopicMarket failureAggregate demand
Examiner insight
- What to cover
- Define external costs, then give the third party costs of alcohol and sugary drinks: strain on healthcare, lost productivity, crime and disorder. Make the third party link explicit, for example by tying healthcare strain to higher taxes or to the opportunity cost of other public spending.
- Diagram
- Not required, but a negative externality diagram is an efficient way to reach Band 2 for AO1.
- Evaluation
- To what extent, so weigh how large the externalities are, how far they are already internalised by existing taxes, and whether some of the costs are private rather than external.
- Watch out
- Long passages on the private costs of drinking and sugar do not answer the question. Keep the focus on costs falling on third parties.
- How it went in the exam
- Examiners said most candidates explained the external costs well. The stronger answers were more explicit in linking healthcare strain to tax rates or opportunity cost.
Q1(d)
(i) Identify one ad valorem tax from the data and draw a diagram to illustrate its effect on the market supply curve. (ii) Using a mathematical example, discuss whether indirect taxes are always regressive.
TopicGovernment intervention in marketsDemand, supply and elasticity
Examiner insight
- What to cover
- Part (i): identify an ad valorem tax from the data, such as VAT or alcohol duty, and draw it. Part (ii): define regressive precisely as taking a higher proportion of income from lower earners, then show it with a worked example of the same tax paid on two different incomes.
- Diagram
- Ad valorem tax: the supply curve pivots so the gap widens as price rises. Do not draw a parallel shift, which is a specific tax, and do not shift demand.
- Evaluation
- Discuss whether indirect taxes are always regressive. Use YED: a tax on a luxury good with high income elasticity falls mainly on higher earners, so it need not be regressive.
- Watch out
- In the mathematical example, isolate the tax itself as a percentage of income, not the whole purchase. Many candidates made this slip.
- How it went in the exam
- Examiners said many candidates did not attempt evaluation here, but those who did generally did it well, usually through YED and luxury goods.
Q1(e)
Consider whether the imposition of an indirect tax on sugary soft drinks raises revenue for the government and reduces the amount of sugar that people consume in Philadelphia. Use an appropriate diagram in your answer.
Mark splitApplication 2Analysis 4Evaluation 4
TopicGovernment intervention in markets
Examiner insight
- What to cover
- Answer both halves: the revenue raised and the fall in sugar consumption. Show the tax shifting supply left, price rising and quantity falling, and mark the government revenue rectangle.
- Diagram
- Indirect tax diagram with the supply shift, the new equilibrium, and government revenue labelled, distinguished from consumer and producer incidence.
- Evaluation
- Inelastic demand for sugary drinks means good revenue but a small fall in consumption, which is the central tension. Add substitutes, sugar consumed in other forms, and using the revenue to discourage consumption further.
- Watch out
- Most candidates did not label government revenue at all, and most of those who did confused it with consumer incidence. The question asks for a diagram, so label it fully.
- How it went in the exam
- Examiners said the inelastic demand line was used very effectively by a number of candidates. The strongest added substitutes and the use of the revenue.
Case study
THE WELSH ECONOMY
In the extracts: Wales, Welsh, CITB, Asia and Oceania Sub-Saharan, Caribbean European Union, Construction Industry, North America Western, Middle East and North, Africa Latin America, Republic of Ireland
Q2(a)
(i) Define the term Gross Domestic Product (GDP) growth. (ii) The data states that the construction sector is likely to 'achieve an average annual growth rate of 4.6% in Wales during the years 2019 to 2024' (lines 5–6). Evaluate the factors that could have caused high growth in this industry. (iii) Discuss the likely causes of wage differentials between construction sector jobs in Wales as shown in Table 1.
TopicThe labour market
Examiner insight
- What to cover
- Part (i): define GDP growth, not just GDP, and stress total value rather than number of goods and services. Part (ii): explain the causes of high growth in the construction sector specifically, such as low interest rates, government infrastructure spending and housing demand. Part (iii): give several causes of wage differentials, linked to demand and supply for each type of labour.
- Diagram
- Labour market diagrams for skilled and unskilled construction labour, showing why the equilibrium wage differs.
- Evaluation
- Evaluation is half the marks on part (iii) and is required in (ii) as well, so judge how likely and how large each cause is.
- Watch out
- Keep part (ii) on the construction sector, not the whole economy, and do not treat sector growth as the same thing as employment in the sector. In part (iii), discussing only education requirements limits AO1 to Band 1.
- How it went in the exam
- Examiners said many candidates did not attempt evaluation on part (iii) even though it is 50 per cent of the marks, which was a significant limitation. Those who did attempt it usually did it well.
Q2(b)
(i) With reference to Figure 1, calculate the percentage of total exports from Wales that went to the European Union over the period shown. Give your answer to two decimal places. (ii) Evaluate the likely effects of 'the pound having lost around 10% of its value against the euro and US dollar since the UK voted to leave the EU in 2016' (lines 18–19) on Welsh households and firms. (iii) To what extent might an improvement in Wales' trade balance contribute to the attainment of other government economic policy objectives?
TopicInternational trade and exchange rates
Examiner insight
- What to cover
- Part (i) is a percentage to two decimal places. Part (ii): take the 10 per cent fall in the pound through to Welsh firms, with cheaper exports and dearer imported inputs, and Welsh households, with dearer imports and holidays. Part (iii): link an improving trade balance to growth, employment and inflation.
- Diagram
- AD and AS with AD rising as net exports improve, and a cost push case if imported input prices rise.
- Evaluation
- Weigh the size and durability of the effect, the import content of Welsh exports, the Marshall Lerner condition, and the conflict between a better trade balance and higher inflation.
- Watch out
- The balance of payments and the balance of trade are not interchangeable terms. SPICED and WPIDEC will get you started but will not earn the analysis marks on their own, and many answers lost marks by using no data or no evaluation.
- How it went in the exam
- Examiners said the effects on Welsh firms were handled better than those on households, and that a weaker pound can cause both demand pull and cost push inflation, a link the strongest candidates made.
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.