Unit 2: Economics in Action · 2520U20-1
WJEC AS Unit 2, June 2025
All 12 written questions from WJEC AS Unit 2 (June 2025), Economics in Action. Case studies: Heating Up and All about trade. 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
Heating Up
In the extracts: Heat, Manufacturers, Heating Up, Research, Sales
Q1(a)
Using Figure 1, calculate the approximate percentage change in the price of natural gas from August 2016 to August 2022.
Mark splitApplication 2
Q1(b)
(i) Using an example from the data, outline the concept of opportunity cost. (ii) Using an example from the data, outline the concept of complementary goods.
Mark splitKnowledge 2Application 2
TopicThe economic problem and resource allocationDemand, supply and elasticity
Q1(c)
Using the data, discuss whether wood-burning stoves and gas boilers can be considered strong substitutes.
Mark splitApplication 2Analysis 4Evaluation 4
TopicDemand, supply and elasticity
Examiner insight
- What to cover
- Define substitutes, then focus on the strength of the relationship, which is what the question asks. Use the data on the price of gas and the growth in sales of wood burning stoves to argue how closely consumers switch between them.
- Evaluation
- Give reasons they may be weak substitutes: the high installation cost of a stove, so they are closer substitutes for higher income households, the aesthetic value a stove has that a boiler does not, and the higher emissions of stoves, which makes environmentally conscious consumers less willing to switch.
- Watch out
- Many candidates never addressed the strength of the relationship, which capped their marks. If you try an XED calculation, note that the data gives the price of gas, not of gas boilers, and that sales doubling is a 100 per cent increase, not 200 per cent.
- How it went in the exam
- Candidates found this question difficult even though most understood what substitutes are. The evaluation points on income and aesthetics were generally well made.
Q1(d)
Draw a negative externalities diagram to illustrate the market failure associated with wood-burning stoves. No explanation is necessary.
TopicMarket failure
Q1(e)
Using a diagram, discuss the advantages of using indirect taxes to reduce the sales of wood-burning stoves.
Mark splitKnowledge 2Application 2Analysis 2Evaluation 4
TopicGovernment intervention in markets
Examiner insight
- What to cover
- Draw the indirect tax, then complete the argument: the tax raises price and cuts the quantity of stoves sold, and that is an advantage because it reduces the negative externality and corrects the market failure. The phrase internalising the externality is worth using.
- Diagram
- Indirect tax shifting the supply curve left, with the new price and quantity. Do not shift demand, and label the x axis Quantity, not Quantity Demanded.
- Evaluation
- Weigh against the inelasticity of demand, the regressive effect on low income households, and the risk of substitution into other polluting fuels.
- Watch out
- Explaining that the tax discourages consumption is only half the answer. Say why that is an advantage. Many candidates gave no application at all, though the question requires the data.
- How it went in the exam
- Diagrams in the questions that explicitly required them were generally handled well in 2025. The marks were lost on the link and the application.
Q1(f)
Using a subsidy diagram, evaluate the extent to which government subsidies may lead to government failure.
Mark splitKnowledge 2Analysis 4Evaluation 4
TopicGovernment intervention in markets
Examiner insight
- What to cover
- Draw the subsidy, then define government failure properly as intervention that leads to a net welfare loss or a greater misallocation of resources. Test the subsidy against that: information failure in setting the right amount, unintended consequences, and the cost.
- Diagram
- Subsidy shifting supply right, with the lower price, higher quantity and the cost of the subsidy shaded. Label the x axis Quantity.
- Evaluation
- Judge the extent. Where the subsidy corrects a positive externality it improves welfare, so government failure depends on the size of the misjudgement and the cost relative to the benefit.
- Watch out
- Saying the subsidy has an opportunity cost is not government failure by itself. You must explain how that opportunity cost could outweigh the net social benefit of the subsidy.
- How it went in the exam
- Apart from the diagram, candidates found this the harder part of Question 1, and a weak grasp of government failure was the main reason. Government failure is one of the less frequently examined topics.
Case study
All about trade
In the extracts: Wales, Welsh, Agriculture, Australian, Transport, Petroleum, FTA, Republic of Ireland and Germany, Ceredigion and Powys, Gross Value Added
Q2(a)
Calculate the value of Welsh exports to Brazil, South Africa and Malaysia in 2022, as a percentage of Wales' average yearly export total.
Mark splitApplication 2
Q2(b)
With reference to the functions of prices, explain how the free market allocates resources to different sectors such as agriculture or petroleum.
Mark splitKnowledge 2Analysis 2
Q2(c)
With reference to Extract B, outline two supply-side policies that might increase the potential output of the agricultural industry in Wales.
Mark splitKnowledge 4Application 2
Q2(d)
Consider whether increasing net exports (value of exports minus value of imports) is always desirable for an economy.
Mark splitAnalysis 4Evaluation 4
TopicInternational trade and exchange ratesAggregate demand
Examiner insight
- What to cover
- Show the benefit first: higher net exports raise AD, so growth and employment rise, with the multiplier magnifying the effect. Then the cost, that AD rising near capacity adds inflationary pressure.
- Diagram
- AD and AS with AD shifting right, which is often effective here.
- Evaluation
- The strongest answers go past the growth against inflation trade off and take in other objectives: employment, the government budget, inequality and the sustainability of relying on external demand.
- Watch out
- The command word is consider, which requires evaluation. Always means you must find the cases where it is not desirable.
- How it went in the exam
- Examiners said a well explained growth against inflation argument merited Band 2 for both AO3 and AO4, so the extra objectives are what lift the answer further.
Q2(e)
Discuss the likely impact of a depreciation of the Pound against the Euro on the value of Welsh exports.
Mark splitKnowledge 2Application 2Analysis 2Evaluation 4
TopicInternational trade and exchange rates
Examiner insight
- What to cover
- A weaker pound makes Welsh exports cheaper in euros, so volumes rise and the total value of exports rises. Trace it through specific Welsh exports.
- Diagram
- Exchange rate diagram, or the export market showing the price fall in euros and the volume response.
- Evaluation
- Judge by the size and duration of the depreciation, whether the pound fell against other currencies too, and the PED of Welsh exports, since the value only rises if demand is price elastic.
- Watch out
- Analysis was generally good here and evaluation was the weak point. The elasticity argument is the strongest available and few candidates used it.
- How it went in the exam
- Most candidates earned the AO3 marks. Examiners said the few who used PED explained it well.
Q2(f)
Using a tariff diagram, discuss the extent to which removing an import tariff on lamb may negatively affect the Welsh economy.
Mark splitKnowledge 2Application 2Analysis 2Evaluation 4
TopicInternational trade and exchange rates
Examiner insight
- What to cover
- Start with the removal of the tariff, not its imposition. Removing it lowers the price of imported lamb, so imports rise, Welsh lamb producers lose sales and revenue, and rural incomes and jobs fall.
- Diagram
- Tariff diagram showing the removal: price falling to the world price, domestic supply contracting, imports expanding. Use micro labels, Q and P, not rGDP and PL.
- Evaluation
- Balance it: cheaper lamb for Welsh consumers, lower input costs for food processors, possible reciprocal access for Welsh exports. Judge the extent of the harm.
- Watch out
- Do not spend time describing how a tariff is implemented or why governments impose tariffs. Answer the question directly. Some answers were weakened by being one sided.
- How it went in the exam
- Most candidates drew the removal accurately. Time management was a problem across 2.d, 2.e and 2.f, so keep the openings short.
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.