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Pearson Edexcel
Number
GCE A Level In
Number
Economics A (9EC0)
Paper
A ■ ■
Advanced
PAPER 3: Microeconomics and Macroeconomics
Instructions
• Fill in the boxes at the top of this page with your name, centre number
• In Section B, answer all questions 2(a) to 2(c) and one question from 2(d) or 2(e).
– there may be more space than you need.
Information
• The total mark for this paper is 100.
– use 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.
Turn over
,
, SECTION A
Read Figures 1 and 2 and the following extracts (A to 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
The energy market
Figure 1: UK wholesale gas prices per therm, 2021, in pence
500p
Price per
therm
400p
352p
300p
200p
100p
0p
Feb Apr Jun Aug Oct Dec
Figure 2: Number of firms supplying gas and electricity in the UK, 2004–2021
80
60
40
20
0
2004 06 08 10 12 14 16 18 21
Gas and electricity
Electricity
Gas
2
■■■■
, Extract A
Rising gas prices
UK consumers are some of the biggest users of gas. 85% of homes use gas central
heating, and gas generates a third of the country‟s electricity. North Sea gas is running
out – and as Britain has replaced coal-fired energy production with wind power in order
to reduce carbon emissions, it has become dependent on gas imports. 5
Almost all UK businesses face significant rises in fuel costs over the next few months, and
there is no substitute for energy, at least in the short run – an almost perfect example of
price inelastic demand.
(Source: adapted from https://www.theecoexperts.co.uk/
blog/reasons-for-uk-gas-price-increase)
Extract B
The UK gas market is broken
During the past decade the government has allowed new entrants into the retail energy
market with business models that left them ill-prepared to achieve long term business
growth. Now the UK must choose between letting its energy market collapse and
offering large subsidies for energy retailers. 5
The problem began in the 1980s and 1990s, when privatisation created an oligopolistic
energy market dominated by the “Big Six”, which paid their shareholders high dividends
and their bosses excessive salaries. The government responded to anger over high
energy bills with further liberalisation. Some of the new entrants were innovative, such
as Bulb, which offered consumption-tracking apps, and Octopus, which discouraged 10
consumption when demand was high with dynamic pricing. But most were under-
capitalised and produced no energy, merely buying it on global wholesale markets
and selling it on. Some paid little attention to ensuring continuity of supply or forward
buying of gas.
The constraints on energy retailers worsened in 2017 with the closure of a big 15
gas-storage facility, which left the UK able to store just 2% of its annual demand. Other
big gas importing countries, by contrast, can store 20%–30%. The risks rose further
in 2019, when the government capped consumer prices in response to continued
complaints about high energy bills.
The perfect storm came in the summer of 2021. As economies opened up, global 20
demand for energy rose. Gas supply in Russia, a big producer, was disrupted, and
unusually calm weather reduced UK wind turbine energy production to 11% of capacity.
In August Ofgem, the industry regulator, said that from October the firms would be able
to raise prices for households by 54%. But since then the wholesale price of gas paid by
UK energy firms has risen by more than 70%. The result is that UK energy firms are tied 25
into contracts to supply gas to households at far less than they must pay to get it.
(Source: adapted from https://www.economist.com/britain/britains-gas-market-is-broken/)
3
■■■■ Turn over
Pearson Edexcel
Number
GCE A Level In
Number
Economics A (9EC0)
Paper
A ■ ■
Advanced
PAPER 3: Microeconomics and Macroeconomics
Instructions
• Fill in the boxes at the top of this page with your name, centre number
• In Section B, answer all questions 2(a) to 2(c) and one question from 2(d) or 2(e).
– there may be more space than you need.
Information
• The total mark for this paper is 100.
– use 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.
Turn over
,
, SECTION A
Read Figures 1 and 2 and the following extracts (A to 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
The energy market
Figure 1: UK wholesale gas prices per therm, 2021, in pence
500p
Price per
therm
400p
352p
300p
200p
100p
0p
Feb Apr Jun Aug Oct Dec
Figure 2: Number of firms supplying gas and electricity in the UK, 2004–2021
80
60
40
20
0
2004 06 08 10 12 14 16 18 21
Gas and electricity
Electricity
Gas
2
■■■■
, Extract A
Rising gas prices
UK consumers are some of the biggest users of gas. 85% of homes use gas central
heating, and gas generates a third of the country‟s electricity. North Sea gas is running
out – and as Britain has replaced coal-fired energy production with wind power in order
to reduce carbon emissions, it has become dependent on gas imports. 5
Almost all UK businesses face significant rises in fuel costs over the next few months, and
there is no substitute for energy, at least in the short run – an almost perfect example of
price inelastic demand.
(Source: adapted from https://www.theecoexperts.co.uk/
blog/reasons-for-uk-gas-price-increase)
Extract B
The UK gas market is broken
During the past decade the government has allowed new entrants into the retail energy
market with business models that left them ill-prepared to achieve long term business
growth. Now the UK must choose between letting its energy market collapse and
offering large subsidies for energy retailers. 5
The problem began in the 1980s and 1990s, when privatisation created an oligopolistic
energy market dominated by the “Big Six”, which paid their shareholders high dividends
and their bosses excessive salaries. The government responded to anger over high
energy bills with further liberalisation. Some of the new entrants were innovative, such
as Bulb, which offered consumption-tracking apps, and Octopus, which discouraged 10
consumption when demand was high with dynamic pricing. But most were under-
capitalised and produced no energy, merely buying it on global wholesale markets
and selling it on. Some paid little attention to ensuring continuity of supply or forward
buying of gas.
The constraints on energy retailers worsened in 2017 with the closure of a big 15
gas-storage facility, which left the UK able to store just 2% of its annual demand. Other
big gas importing countries, by contrast, can store 20%–30%. The risks rose further
in 2019, when the government capped consumer prices in response to continued
complaints about high energy bills.
The perfect storm came in the summer of 2021. As economies opened up, global 20
demand for energy rose. Gas supply in Russia, a big producer, was disrupted, and
unusually calm weather reduced UK wind turbine energy production to 11% of capacity.
In August Ofgem, the industry regulator, said that from October the firms would be able
to raise prices for households by 54%. But since then the wholesale price of gas paid by
UK energy firms has risen by more than 70%. The result is that UK energy firms are tied 25
into contracts to supply gas to households at far less than they must pay to get it.
(Source: adapted from https://www.economist.com/britain/britains-gas-market-is-broken/)
3
■■■■ Turn over
