Please check the examination details below before entering your candidate information
Candidate surname Other names
Centre Number Candidate Number
Pearson Edexcel
Level 3 GCE
Tuesday 4 June 2019
Morning (Time: 2 hours) Paper Reference 9EC0/03
Economics A
Advanced
Paper 3: Microeconomics and Macroeconomics
You do not need any other materials. Total Marks
Instructions
• Use black ink or ball-point pen.
• centrethe
Fill in boxes at the top of this page with your name,
number and candidate number.
• There are two sections in this question paper.
• InIn Section
Section A, answer all questions 1(a) to 1(c) and one question from 1(d) or 1(e).
• Answer theB,questions
answer all questions 2(a) to 2(c) and one question from 2(d) or 2(e).
• – there may be more space in the spaces provided
than you need.
Information
• The total mark for this paper is 100.
• – usemarks
The for each question are shown in brackets
this as a guide as to how much time to spend on each question.
• Calculators may be used.
Advice
• Read each question carefully before you start to answer it.
• your answers if you have time at the end.
Check
Turn over
*P57192A0136*
P57192A
©2019 Pearson Education Ltd.
1/1/1/1/1/1/1
, SECTION A
Read Figure 1 and the following extracts (A, B and C) before answering Question 1.
Answer ALL Questions 1(a) to 1(c), and EITHER Question 1(d) OR 1(e).
Write your answers in the spaces provided.
You are advised to spend 1 hour on this section.
Question 1
Markets for food and drinks high in fat, salt or sugar (HFSS)
Figure 1: UK market share of potato crisps, 2017
Market share Market share Price
Firm Brand Size
of firm of product (£)
Walkers All Walkers 55.3%
of which:
Regular Standard 35 g 28.1% 0.45
Regular Max 50 g 7.4% 0.63
Sensations 40 g 2.0% 0.59
Doritos 40 g 4.7% 0.45
Other 13.1%
KP KP 50 g 22.7% 0.52
Tayto Golden Wonder 4.2%
<40g 3.1% 0.38
40g+ 1.1% 0.72
Other Other 17.8%
(Source: adapted from https://academic.oup.com/restud/article/3108825/
The-Effects-of-Banning-Advertising-in-Junk-Food 6 April 2017)
2
,Extract A
The effects of a total ban on advertising of HFSS foods
Food and drinks which are high in fat, salt or sugar (HFSS) tend to be sold in highly
concentrated markets. Tough new rules banning advertisements for HFSS products, such
as those for confectionery, fizzy drinks and potato crisps, come into effect in July 2017 as
a means to reduce consumption. The rules apply to media targeted at under-16s and will 5
mean a major reduction in the number of advertisements children see for HFSS products
in posters near schools, in films targeted at children, on catch-up television and in social
media if it is directed at children.
There are three main factors that will determine the effectiveness of the intervention:
first, whether advertising acts to expand the market share or steal rivals’ market share. 10
Secondly, how firms in the market adapt their behaviour in response to the ban. Thirdly,
what substitute products do consumers turn to if they opted out of the targeted market.
Results from a recent survey in the UK suggest that the total quantity of crisps sold would
fall by around 15% in the presence of an advertising ban, or by 10% if firms respond with
price cuts, since the ban acts to make the market more competitive and firms respond to 15
the ban by, on average, lowering their prices.
The survey showed that following a ban, consumers are more likely to switch to another
junk food than to a healthy food, which (in addition to the pricing response of firms) acts
to partially offset any health gains from the policy.
(Source: adapted from The Effects of Banning Advertising in Junk Food Markets,
Dubois, Pierre; Griffith, Rachel, Review of Economic Studies
Copyright © 2017, Oxford University Press https://academic.oup.com/
restud/article/3108825/The-Effects-of-Banning-Advertising-in-Junk-Food
6 April 2017 and https://www.asa.org.uk/news/tougher-new-food-and-
drink-rules-come-into-effect-in-children-s-media.html 30 June 2017)
3
, Extract B
Taxing HFSS foods and subsidising healthy eating widens inequality
Since low-income groups spend a higher proportion of their income on food and tend to
eat less healthily, they are the main targets of taxes on products that are high in fat, salt
or sugar (HFSS). Subsidies on healthy food are seen as an alternative policy approach to
encourage healthy eating. While data on the impact of such policies are scarce, a recent 5
study on the distributional impacts of HFSS taxes and healthy food subsidies found that
these actually widened health and fiscal inequalities. The policies tend to be regressive
and favour higher-income consumers. Taxes on unhealthy food increase prices which
have a greater impact on low income groups rather than higher income groups. Lower
income groups prefer to buy HFSS food. 10
Subsidies encouraged all income groups to buy more fruit and vegetables. However,
those on higher incomes proved more responsive and the average share of budget spent
on healthy food actually increased for the higher income groups who were more likely
to buy the subsidised healthy food and then spend the savings they had enjoyed on yet
more healthy food. The diets of the higher income groups before the subsidy tended 15
to be healthier. The choices of the higher income groups are more responsive to price
changes. By contrast, lower income groups, if they responded to lower prices, often
used the money saved to buy unhealthy items or something else entirely. The long-term
benefits of a healthier diet are harder to grasp for consumers when information gaps
exist. Often the immediate boost of a tasty treat is more appealing. Taxes and subsidies 20
do not change that. Other strategies are needed to promote healthy eating, especially
education.
(Source: adapted from Economist 5 October 2017 https://www.economist.
com/news/finance-and-economics/21730033-study-suggests-
lower-income-families-end-up-paying-more-their-food-taxing-fat
and https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3031005
The Economic Journal September 2017 Vol 127 Issue 604)
Extract C
Tax on fatty foods in Denmark is an economic disaster
Denmark introduced a specific tax on saturated fat in October 2011. Recognised as a
world-leading public health policy, it was abandoned just 15 months later having been
both an economic and political disaster.
Indirect taxes of this sort are invariably regressive, disproportionately affecting the 5
elderly and the poor. The specific tax led to prices rising on average 15% for highest-fat
products, yielding a total decrease of 5% in the intake of saturated fat from products such
as minced beef and cream. 80% of Danish consumers did not change their shopping
habits at all. The behavioural change was economically damaging as consumers switched
to cheaper brands and crossed the border to Sweden and Germany to do their shopping. 10
Danish tax revenue fell as a result.
(Source: adapted from https://iea.org.uk/in-the-media/press-release/
evidence-shows-a-fat-tax-would-hit-poorest-the-hardest 25 May 2013 and
https://www.cambridge.org/core/journals/public-health-nutrition/article/
effects-of-the-danish-saturated-fat-tax-on-the-demand-for-meat-and-dairy-
products/984CF03634C819D50E66C7B5DC5209DA/core-reader)
4
Candidate surname Other names
Centre Number Candidate Number
Pearson Edexcel
Level 3 GCE
Tuesday 4 June 2019
Morning (Time: 2 hours) Paper Reference 9EC0/03
Economics A
Advanced
Paper 3: Microeconomics and Macroeconomics
You do not need any other materials. Total Marks
Instructions
• Use black ink or ball-point pen.
• centrethe
Fill in boxes at the top of this page with your name,
number and candidate number.
• There are two sections in this question paper.
• InIn Section
Section A, answer all questions 1(a) to 1(c) and one question from 1(d) or 1(e).
• Answer theB,questions
answer all questions 2(a) to 2(c) and one question from 2(d) or 2(e).
• – there may be more space in the spaces provided
than you need.
Information
• The total mark for this paper is 100.
• – usemarks
The for each question are shown in brackets
this as a guide as to how much time to spend on each question.
• Calculators may be used.
Advice
• Read each question carefully before you start to answer it.
• your answers if you have time at the end.
Check
Turn over
*P57192A0136*
P57192A
©2019 Pearson Education Ltd.
1/1/1/1/1/1/1
, SECTION A
Read Figure 1 and the following extracts (A, B and C) before answering Question 1.
Answer ALL Questions 1(a) to 1(c), and EITHER Question 1(d) OR 1(e).
Write your answers in the spaces provided.
You are advised to spend 1 hour on this section.
Question 1
Markets for food and drinks high in fat, salt or sugar (HFSS)
Figure 1: UK market share of potato crisps, 2017
Market share Market share Price
Firm Brand Size
of firm of product (£)
Walkers All Walkers 55.3%
of which:
Regular Standard 35 g 28.1% 0.45
Regular Max 50 g 7.4% 0.63
Sensations 40 g 2.0% 0.59
Doritos 40 g 4.7% 0.45
Other 13.1%
KP KP 50 g 22.7% 0.52
Tayto Golden Wonder 4.2%
<40g 3.1% 0.38
40g+ 1.1% 0.72
Other Other 17.8%
(Source: adapted from https://academic.oup.com/restud/article/3108825/
The-Effects-of-Banning-Advertising-in-Junk-Food 6 April 2017)
2
,Extract A
The effects of a total ban on advertising of HFSS foods
Food and drinks which are high in fat, salt or sugar (HFSS) tend to be sold in highly
concentrated markets. Tough new rules banning advertisements for HFSS products, such
as those for confectionery, fizzy drinks and potato crisps, come into effect in July 2017 as
a means to reduce consumption. The rules apply to media targeted at under-16s and will 5
mean a major reduction in the number of advertisements children see for HFSS products
in posters near schools, in films targeted at children, on catch-up television and in social
media if it is directed at children.
There are three main factors that will determine the effectiveness of the intervention:
first, whether advertising acts to expand the market share or steal rivals’ market share. 10
Secondly, how firms in the market adapt their behaviour in response to the ban. Thirdly,
what substitute products do consumers turn to if they opted out of the targeted market.
Results from a recent survey in the UK suggest that the total quantity of crisps sold would
fall by around 15% in the presence of an advertising ban, or by 10% if firms respond with
price cuts, since the ban acts to make the market more competitive and firms respond to 15
the ban by, on average, lowering their prices.
The survey showed that following a ban, consumers are more likely to switch to another
junk food than to a healthy food, which (in addition to the pricing response of firms) acts
to partially offset any health gains from the policy.
(Source: adapted from The Effects of Banning Advertising in Junk Food Markets,
Dubois, Pierre; Griffith, Rachel, Review of Economic Studies
Copyright © 2017, Oxford University Press https://academic.oup.com/
restud/article/3108825/The-Effects-of-Banning-Advertising-in-Junk-Food
6 April 2017 and https://www.asa.org.uk/news/tougher-new-food-and-
drink-rules-come-into-effect-in-children-s-media.html 30 June 2017)
3
, Extract B
Taxing HFSS foods and subsidising healthy eating widens inequality
Since low-income groups spend a higher proportion of their income on food and tend to
eat less healthily, they are the main targets of taxes on products that are high in fat, salt
or sugar (HFSS). Subsidies on healthy food are seen as an alternative policy approach to
encourage healthy eating. While data on the impact of such policies are scarce, a recent 5
study on the distributional impacts of HFSS taxes and healthy food subsidies found that
these actually widened health and fiscal inequalities. The policies tend to be regressive
and favour higher-income consumers. Taxes on unhealthy food increase prices which
have a greater impact on low income groups rather than higher income groups. Lower
income groups prefer to buy HFSS food. 10
Subsidies encouraged all income groups to buy more fruit and vegetables. However,
those on higher incomes proved more responsive and the average share of budget spent
on healthy food actually increased for the higher income groups who were more likely
to buy the subsidised healthy food and then spend the savings they had enjoyed on yet
more healthy food. The diets of the higher income groups before the subsidy tended 15
to be healthier. The choices of the higher income groups are more responsive to price
changes. By contrast, lower income groups, if they responded to lower prices, often
used the money saved to buy unhealthy items or something else entirely. The long-term
benefits of a healthier diet are harder to grasp for consumers when information gaps
exist. Often the immediate boost of a tasty treat is more appealing. Taxes and subsidies 20
do not change that. Other strategies are needed to promote healthy eating, especially
education.
(Source: adapted from Economist 5 October 2017 https://www.economist.
com/news/finance-and-economics/21730033-study-suggests-
lower-income-families-end-up-paying-more-their-food-taxing-fat
and https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3031005
The Economic Journal September 2017 Vol 127 Issue 604)
Extract C
Tax on fatty foods in Denmark is an economic disaster
Denmark introduced a specific tax on saturated fat in October 2011. Recognised as a
world-leading public health policy, it was abandoned just 15 months later having been
both an economic and political disaster.
Indirect taxes of this sort are invariably regressive, disproportionately affecting the 5
elderly and the poor. The specific tax led to prices rising on average 15% for highest-fat
products, yielding a total decrease of 5% in the intake of saturated fat from products such
as minced beef and cream. 80% of Danish consumers did not change their shopping
habits at all. The behavioural change was economically damaging as consumers switched
to cheaper brands and crossed the border to Sweden and Germany to do their shopping. 10
Danish tax revenue fell as a result.
(Source: adapted from https://iea.org.uk/in-the-media/press-release/
evidence-shows-a-fat-tax-would-hit-poorest-the-hardest 25 May 2013 and
https://www.cambridge.org/core/journals/public-health-nutrition/article/
effects-of-the-danish-saturated-fat-tax-on-the-demand-for-meat-and-dairy-
products/984CF03634C819D50E66C7B5DC5209DA/core-reader)
4
