Friday’s Unit 1 (AS) Micro Paper AS Micro Unit 1 May 2011

Grade Boundaries for AS Micro Data is from the Jan 2011 paper (raw mark out of a total of 75) For the paper as a whole – these were the grade boundaries A: 54 B: 47 C: 40 D: 34 E: 28

Obey key instruction words such as define, compare, significant, explain and evaluate. Start a new paragraph on each occasion that a new argument or line of reasoning is introduced into the answer

Market Prices Market Failure Policy Options Govt Failure Welfare issues

Data Question (8 marks) Start each point of comparison or identification with a separate paragraph Always give unit of measurement (e.g. $billion or % of GDP) Avoid simple “data trawling” Take note of the question - e.g. “take note of the word significant” Look for trends / volatility / convergence / divergence / correlation Always put data into your answer Always make at least one calculation

Explanation questions (12 marks) E.g. With the help of a demand and supply diagram, explain how a tax on the plastic bags distributed by shops and supermarkets might affect the use of plastic bags 1.Quality of diagrams matters a lot (labelling, clarity, accuracy – size – at least 1/3 rd of a side of A4) 2.Draw from prompts in the data when explaining 3.Double diagrams often work well 4.Remember the importance of elasticity of demand and supply in shaping the analysis 5.Explanation requires building a “chain of reasoning”

Evaluation Question (25 marks) Max mark of 15/25 if there is no evaluation Analysis comes first! “good evaluation first requires sound economic analysis of the issue or problem posed by the question.” Examiners are keen to reward good awareness of recent or current economic events Make good use of the extracts (including the data) to score marks for application Go back to the charts / tables in the 25 mark question – they are there for a reason! “Candidates do need to use the data explicitly when responding to the context questions”

OK... What to revise – what really matters in the next 24 hrs? Be really prepared with knowledge of key definitions The power of market forces (crucial) – i.e. the role of signals and incentives in driving resource allocation Elasticity of demand and supply and price volatility in markets – and the consequences of this State provision versus the market – Health care – Public goods issues Benefits and costs of monopoly power / competitive forces Economic welfare and efficiency (including externalities) Supply and demand side interventions and their impact Government failure (crucial) – in the short and long run

Government failure 1.Decisions made in pure political self interest 2.Poor value for money from public sector investment 3.Government policy myopia 4.Regulatory capture 5.Disincentives arising from specific policies 6.Information failures in government policies 7.The “law of unintended consequences” 8.The costs of regulation may outweigh the benefits

Unintended consequences Higher capital gains tax – reduces new house building - worsens housing shortages /affordability Bank bail-outs – raises the problem of moral hazard Bio-fuel subsidy – causes food price inflation and hits the poorest in society Smoking ban – increases demand for and use of energy inefficient patio-heaters Windfall tax on North Sea oil and gas companies led to a huge fall in investment and exploration – just years before oil prices surged Tariffs on steel – hits domestic car and construction firms Targets for treating patients – leads to reduction in the quality of care e.g. Staffordshire General scandalStaffordshire General scandal

W Wider context – consider the bigger picture and use it to weight your arguments E Efficiency – Does this achieve a more/less efficient allocation of resources? E Equality – Do some parties benefit more/less than others S Scope – How many people are affected by the point? Is it wide reaching or narrow? T Time – How long will it last, SR or LR or both? E Effectiveness – does it solve the issue that it was intended to solve? P Prioritisation – which of your points is the strongest and why. Be specific about the context of the question S Scale or Magnitude – where people are affected how strong is the impact?

Above all Be strict on timing Develop one argument per paragraph + evaluate Use lots of supporting examples Make sure handwriting and diagrams are legible Use more paper rather than less Always finish with a reasoned final paragraph – but don’t repeat points already made Give the examiner plenty of current context