SECTION A – 9708/specimen paper 2023/04
,a) Imperfect competition is a competitive market situation where there are many sellers, but they are
selling heterogeneous (dissimilar) goods as opposed to the perfect competitive market scenario. In the
context, when consumer are collecting points torwards a particular goal, the loyalty card may hinder free
competiton and prevent switching between brands. Costs of scheme, $60m for one supermarket, which is
not affordable by smaller firms and can only be funded by big firms (monopoly…); the cost is then
funded by higher prices sell to consumer. Discount scheme used may be confusing to consumer which
might lead to imperfect market knowledge
Note: The most common examples of imperfect competition are monopoly, monopolistic competition, and
oligopoly
b) Price elasticity of demand is a measure of the change in demand for a product in relation to a change in
its price. Loyalty will mean consumers do not change where they will buy the product, this might create a
lower price elasticity demand (inelastic). An inelastic demand would mean if there is a rise in price, TR
increase while if there is a fall in price, TR will decrease. In constrast, an elastic demand, a rise in price
may lead to a decrease in TR, and a fall in price may result in an increase in TR. And depending on the
variety of cost within the firms, it might affect the revenue and profitability level a firm can gain (profit =
revenue – cost)
c) In the context, loyalty cards enable retailers to find out about consumer wants and target promotion. It
help retailers to recognise the importance of price and can offer discounts through loyalty cards. However,
the idea of loyalty cards may not be effective as price is not the most significant factor in determining
choice and there is no loyalty if buying is based on habit or has low emotional involvement. Thus there
does seem to be some conflicting evidence of using loyalty cards which offer price discounts
d) By meaning rational, a consumer is giving out choice that have a reasonable and logical means. On an
indifference curve, consumers are assumed to make rational choices based on perfect information and
does not make choices if there is any uncertainty regarding to the products. They knows their level of
satisfaction and will buy to achieve maximum satisfaction. They can pick out a combination of 2 goods
and make comparision rationally and choose which good is overall preferred to another in the
combination. This is a rational calculation which remains constant over the curve
, SECTION A – 9708/may june 2023/42
a) Recession is linked to GDP, negative growth of GDP/output, over 2 quarters
b) Government borrow to finance government expenditure not covered by receipts or taxation. Borrowing
would be used to increase government spending, which help to increase income from hiring those who are
unemployed, more spending increase output which encourage economic growth to address recession
,a) Imperfect competition is a competitive market situation where there are many sellers, but they are
selling heterogeneous (dissimilar) goods as opposed to the perfect competitive market scenario. In the
context, when consumer are collecting points torwards a particular goal, the loyalty card may hinder free
competiton and prevent switching between brands. Costs of scheme, $60m for one supermarket, which is
not affordable by smaller firms and can only be funded by big firms (monopoly…); the cost is then
funded by higher prices sell to consumer. Discount scheme used may be confusing to consumer which
might lead to imperfect market knowledge
Note: The most common examples of imperfect competition are monopoly, monopolistic competition, and
oligopoly
b) Price elasticity of demand is a measure of the change in demand for a product in relation to a change in
its price. Loyalty will mean consumers do not change where they will buy the product, this might create a
lower price elasticity demand (inelastic). An inelastic demand would mean if there is a rise in price, TR
increase while if there is a fall in price, TR will decrease. In constrast, an elastic demand, a rise in price
may lead to a decrease in TR, and a fall in price may result in an increase in TR. And depending on the
variety of cost within the firms, it might affect the revenue and profitability level a firm can gain (profit =
revenue – cost)
c) In the context, loyalty cards enable retailers to find out about consumer wants and target promotion. It
help retailers to recognise the importance of price and can offer discounts through loyalty cards. However,
the idea of loyalty cards may not be effective as price is not the most significant factor in determining
choice and there is no loyalty if buying is based on habit or has low emotional involvement. Thus there
does seem to be some conflicting evidence of using loyalty cards which offer price discounts
d) By meaning rational, a consumer is giving out choice that have a reasonable and logical means. On an
indifference curve, consumers are assumed to make rational choices based on perfect information and
does not make choices if there is any uncertainty regarding to the products. They knows their level of
satisfaction and will buy to achieve maximum satisfaction. They can pick out a combination of 2 goods
and make comparision rationally and choose which good is overall preferred to another in the
combination. This is a rational calculation which remains constant over the curve
, SECTION A – 9708/may june 2023/42
a) Recession is linked to GDP, negative growth of GDP/output, over 2 quarters
b) Government borrow to finance government expenditure not covered by receipts or taxation. Borrowing
would be used to increase government spending, which help to increase income from hiring those who are
unemployed, more spending increase output which encourage economic growth to address recession
