Includes 3 detailed essay plans of past paper questions from AQA A level Economics board with diagrams and 3 separate points with an evaluation. The questions are the following:
1. Using examples to illustrate your answer, assess the usefulness of behavioural economic theory compared to traditio...
Using examples to illustrate your answer, assess the usefulness of behavioural
economic theory compared to traditional economic policies in helping
governments to correct market failures.
[25 marks] June 2019
Intro
- Beheivioural: investigates the thought process behind economic related
decisions specifically limitations of consumers rationality
- behavioural economics → consumers are irrational (fast thinking)
- Traditional economics → consumers are rational (slow thinking)
- Market failure occurs when the price mechanism lead to a misallocation of
resources
- Complete and partial
- Complete: missing market
- Partial: quantity or price of a good supplied is wrong
Paragraph 1
- Nudging by making drugs less accessible
- Consumers not attracted to them
- Could backfire
- Bounded self control → economic agents make decisions based on feelings
and emotions
- They could have a lack of self control and they may not give up the drug
- lack of self-control then leads to economic agents making decisions which
will not maximise their welfare, such as them leaving their jobs to be able to
maintain this addiction
- involve themselves in crime to make fast and easy money
- failure of the labour market.
Paragraph 2
- 1 in 5 children grow in an abusive household
- Three times as likely to be abused
- Government response: increase minimum price of alcohol
- Inelastic in demand, might not have and effect
- Also could create a black market making it worse
, -
Paragraph 3
- Information gaps in people's minds make overconsumption of demerit goods
- Information gaps can be filled with framing
- Advertising information accessible to everyone
- There if there is a discontent with the government this won't work as they
won't obey schemes made by their government
Conclusion
Discuss whether large firms in the UK today are necessarily more efficient than
small firms.
[25 marks] June 2012
Intro
- Productive efficiency: output level where average total costs are minimised
- Allocative efficiency: impossible to increase economic welfare by reallocating
resources in markets.
- Dynamic efficiency: efficiency over time, arising from new technology,
innovation and invention.
Paragraph 1
- Large firms can benefit from economies of scale
- Bulk buying: minimises average total costs as
they operate on a low point on the ATC curve,
allowing costs to be at C.
- Big firms are able to make supernormal profits of
PABC and maximise profit margins due to lower
average costs
- They can then re invest using the abnormal profit
and reaching dynamic efficiency through means
small businesses can’t use
- E.g. Amazon has different drivers for different
regions to minimise transport costs → increases
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