AS Level Paper 1, Oct 2020

Q1(a) Give the meaning of a free market economy (2-mark definition).

Q1(b) Identify which situation best shows prices carrying out their rationing function.

Q1(c) Explain a single benefit that free market allocation offers relative to a command economy.

Q2(a) Bus travel has an income elasticity of −1.5 — identify what that implies (a 10% fare rise loses 15% of passengers / falling unemployment raises bus use / negative cross elasticity with rail / buses are an inferior good).

Q2(b) Explain a firm's motive for wanting demand for its products to become less price elastic.

Q3(a) On the loft insulation subsidy diagram, shade the area showing total government spending on the subsidy.

Q3(b) Explain one opportunity cost the government faces when it subsidises energy suppliers to fit loft insulation.

Q4(a) On a diagram showing a specific tax shifting the supply curve, identify the area showing the government's tax revenue.

Q4(b) With an example, explain the government's rationale for levying specific taxes on numerous goods and services.

Q5(a) State what is meant by government failure (2-mark definition).

Q5(b) Explain a probable microeconomic justification for funding HS2 out of taxpayers' money.

Q5(c) On a diagram of the market for passenger rail services, identify the most likely cause of the shift in demand from D1 to D2.

Q6(a) Using Extract A, explain why a PED for higher education of roughly −0.5 matters to English universities.

Q6(b) Assess how rising drop-out rates among poorer students (Extract B) affect the way an economy allocates resources.

Q6(c) Drawing on Extract A, explain one private benefit students gain from higher education plus one external benefit.

Q6(d) Using Figure 2, work out the percentage rise in outstanding student loans between 2013 and 2018.

Q6(e) Discuss the gains from letting universities set higher fees on certain degree courses, using Figure 1 and Extract A.

Q6(f) Evaluate what might be gained by leaving the provision of services like education to free markets.

Q6(g) Evaluate how far state intervention can genuinely remedy market failure in the education sector.