AQA_2024: AS Economics - Paper 1 The Operation of Markets and Market Failure. (Merged Question Paper and Marking Scheme)

AQA_2024: AS Economics - Paper 1
The Operation of Markets and Market Failure.
(Merged Question Paper and Marking Scheme)


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AS
ECONOMICS
Paper 1 The Operation of Markets and Market Failure


Monday 13 May 2024 Morning Time allowed: 1 hour 30 minutes
Materials
For Examiner’s Use
For this paper you must have:
 the Insert Section Mark
 a calculator.
A

Instructions B
 Use black ink or black ball-point pen. Pencil should only be used for drawing. TOTAL
 Fill in the boxes at the top of this page.
 Answer all questions in Section A.
 Answer either Context 1 or Context 2 in Section B.
 You will need to refer to the Insert provided to answer Section B.
 You must answer the questions in the spaces provided. Do not write outside
the box around each page or on blank pages.
 If you need extra space for your answer(s), use the lined pages at the end of
this book. Write the question number against your answer(s).
 Do all rough work in this book. Cross through any work you do not want to be
marked.

Information
 The maximum mark for this paper is 70.
 The marks for questions are shown in brackets.
 No deductions will be made for wrong answers.

,For AS Economics Paper 1: The Operation of Markets and Market Failure, here's a concise revision guide
focusing on the key areas to cover:

1. Basic Economic Problem:

 Scarcity: Resources are limited, but human wants are infinite.
 Opportunity Cost: The cost of forgoing the next best alternative when making a choice.

2. The Operation of Markets:

 Demand: The quantity of a good or service that consumers are willing and able to buy at various prices.
o Law of Demand: As the price of a good falls, the quantity demanded rises (and vice versa).
o Shifts in Demand: Factors such as income, tastes, and the prices of related goods (substitutes
and complements) cause shifts in the demand curve.
 Supply: The quantity of a good or service that producers are willing and able to sell at various prices.
o Law of Supply: As the price rises, the quantity supplied rises (and vice versa).
o Shifts in Supply: Changes in production costs, technology, and the number of producers can
shift the supply curve.
 Market Equilibrium: The point where the quantity demanded equals the quantity supplied, determining
the market price and quantity.
o Surplus: When supply exceeds demand at a given price.
o Shortage: When demand exceeds supply at a given price.

3. Price Mechanism:

 The price mechanism allocates resources in a market economy.
o Signaling Function: Prices signal to consumers and producers to increase or decrease
production and consumption.
o Incentive Function: Higher prices encourage producers to supply more, while lower prices
encourage consumers to buy more.
o Rationing Function: Prices help allocate scarce resources when demand exceeds supply.

4. Elasticity:

 Price Elasticity of Demand (PED): Measures the responsiveness of demand to a change in price.
o Elastic Demand: PED > 1, demand is sensitive to price changes.
o Inelastic Demand: PED < 1, demand is less sensitive to price changes.
o Unitary Elastic Demand: PED = 1, proportional change in demand relative to price.
 Price Elasticity of Supply (PES): Measures the responsiveness of supply to a change in price.
 Income Elasticity of Demand (YED): Measures the responsiveness of demand to changes in income.
o Normal Goods: YED > 0 (demand increases as income increases).
o Inferior Goods: YED < 0 (demand decreases as income increases).

5. Market Failure:

 Definition: Occurs when the market fails to allocate resources efficiently, leading to a loss of welfare.
 Types of Market Failure:
o Externalities: Costs or benefits that affect third parties not involved in the economic transaction.
 Negative Externalities: e.g., pollution. The social cost is greater than the private cost.
 Positive Externalities: e.g., education. The social benefit is greater than the private
benefit.




IB/G/Jun24/G4002/E11 7135/1

, 2
Do not write
outside the
Section A box


Answer all questions in this section.



Only one answer per question is allowed.

For each question completely fill in the circle alongside the appropriate answer.

CORRECT METHOD WRONG METHODS


If you want to change your answer you must cross out your original answer as shown.

If you wish to return to an answer previously crossed out, ring the answer you now wish to select
as shown.



0 1 Which one of the following is a function of prices in a market economy?
[1 mark]


A Allocating resources to the production of public goods

B Ensuring that the distribution of goods and services is fair

C Incentivising firms to produce the goods consumers want

D Providing a measurement of positive and negative externalities



0 2 Which one of the following is a normative statement?

The price of petrol
[1 mark]


A fell in real terms last year.

B is affected by supply.

C is now too high.

D will rise next year.




IB/M/Jun24/7135/1

, 3
Do not write
outside the
0 3 Figure 1 shows the demand curve for Economics textbooks. box



Figure 1




Which one of the following could have caused the movement along the demand curve from
L to M?
[1 mark]


A A fall in the number of people studying Economics

B A fall in the price of Economics textbooks

C An increase in consumer incomes

D An increase in the price of paper



0 4 Partial market failure occurs when
[1 mark]


A prices fall causing firms to make losses.

B there are no positive externalities in consumption.

C there is a missing market for the product.

D there is immobility of factors of production.




Turn over ►


IB/M/Jun24/7135/1