AQA
A-level
ECONOMICS
7136/1
Paper 1 Markets and Market Failure
Version: 1.0 Final
,A-level
ECONOMICS
Paper 1 Markets and Market Failure
Thursday 18 May 2023 Morning Time allowed: 2 hours
Materials
For this paper you must have:
• an AQA 12-page answer book
• a calculator.
Instructions
• Use black ink or black ball-point pen. Pencil should only be used for drawing.
• Write the information required on the front cover of your answer book.
The Paper Reference is 7136/1.
• In Section A, answer EITHER Context 1 OR Context 2.
• In Section B, answer ONE essay.
Information
• The marks for questions are shown in brackets.
• The maximum mark for this paper is 80.
• There are 40 marks for Section A and 40 marks for Section B.
Advice
• You are advised to spend 1 hour on Section A and 1 hour on Section B.
IB/G/Jun23/E5 7136/1
, 2
Section A
Answer EITHER Context 1 OR Context 2.
EITHER
Context 1 Total for this context: 40 marks
Electric cars and battery production
Study Extracts A, B and C and then answer all parts of Context 1 which follow.
Extract A
Table 1: Sales of cars by fuel type Figure 1: UK demand for lithium-ion batteries,
in the UK, 2020 and 2021 Gigawatt hours (GWh), 2015 to 2030
2020 2021
Diesel 261 772 135 773
Petrol 903 961 762 103
Battery
108 205 190 727
Electric
Hybrid
357 126 558 578
Electric*
Total 1 631 064 1 647 181
*Hybrid Electric cars use lithium-ion
batteries and diesel/petrol
Extract B: The electric vehicle revolution
Sales of electric vehicles (EVs) in Europe have jumped from 198 000 in 2018 to an expected
1.17 million in 2021. They are an alternative to petrol and diesel vehicles, which create
damaging emissions through air pollution and contribute to climate change. EVs still only make
up about 1% of all cars on the road, but global sales of EVs are forecast to reach 10.7 million by
2025 and then 28.2 million by 2030. Carmakers have announced a total of $330 billion of 5
investment into electric and battery technology over the next five years. In fact, several
manufacturers have begun to phase out petrol and diesel cars altogether.
Why is this happening now? Regulations are becoming tighter. Ambitious plans to expand the
use of electric vehicles are one of the most obvious ways to meet emissions targets set by
national governments. The UK has already announced plans to ban the sale of petrol and 10
diesel cars by 2035. Meeting this target will require government spending to install the charging
points needed to convince consumers to switch to electric vehicles.
Another reason for the EV revolution is the improved choice of such vehicles. There are around
330 EV models on sale today, compared with just 86 five years ago. While many are still more
expensive than petrol vehicles, they boast substantially lower running costs, even more so as 15
global petrol prices rise. Also, many governments still offer generous financial incentives to
encourage people to purchase EVs.
IB/G/Jun23/7136/1
, 3
Driving cars of all fuel types creates environmental problems, traffic congestion and road traffic
accidents. Critics have suggested that, instead of governments offering subsidies and tax
exemptions for electric vehicles, all vehicle owners should be forced to pay the full costs of their 20
driving. This would incentivise people to consider using public transport, cycling or walking.
Source: News reports, 2021
Extract C: Are electric vehicles as green as claimed?
Redwood Materials, a US firm, recycles discarded batteries into a fresh supply of metals
needed for new cars. Its goal is to solve the most glaring problem for electric vehicles. While
they are ‘zero emission’ when being driven, the mining, manufacturing and disposal process for
batteries could soon become an environmental disaster. Cobalt, one of the metals used in
batteries, typically originates in the Democratic Republic of Congo, where it is extracted in large 5
energy-intensive industrial mines and also dug by hand using basic tools. Then it might be
shipped to Finland, home to Europe’s largest cobalt refinery, before heading to China where the
majority of the world’s battery production occurs. From there it can be shipped to the US or
Europe for packing, then shipped again to car factories. In all, the cobalt can travel more than
20 000 miles before becoming part of a ‘zero emission’ car. 10
Every day, about 60 tonnes of old smartphones, power tools and scooter batteries are delivered
to Redwood’s warehouse. The firm then separates out the nickel, cobalt and lithium, so that
they can re-enter the supply chain as the building blocks for new lithium-ion batteries.
Reclaiming these metals at scale is a massive task: roughly 10 000 smartphones need to be
recycled to produce one EV battery. 15
Redwood hope to play a role in the emergence of ‘the circular economy’ – a grand hope born in
the 1960s that society can re-engineer the way goods are designed, manufactured and recycled
so as to avoid waste. It has been estimated that recycling batteries could account for 30% of
the emissions cuts needed to meet the targets set in the Paris climate change agreement and
‘create 10 million safe and sustainable jobs around the world’ by 2030. 20
Source: News reports, 2021
0 1 Using the data in Extract A (Table 1), calculate the index of total car sales in 2021 if, in
the base year, total car sales were 1.25 million.
Give your answer to two decimal places.
[2 marks]
0 2 Explain how the data in Extract A (Table 1 and Figure 1) show that developments in
the car market are the main reason for the changing demand for lithium-ion batteries
in the UK.
[4 marks]
0 3 Extract C (lines 3–4) states that ‘the mining, manufacturing and disposal process for
batteries could soon become an environmental disaster.’
With the help of a diagram, explain why the production and sale of lithium-ion batteries
might lead to market failure.
[9 marks]
0 4 Extract B (lines 20–21) states that ‘all vehicle owners should be forced to pay the full
costs of their driving. This would incentivise people to consider using public transport,
cycling or walking.’
Evaluate policies that could be used to reduce the environmental impact of
all types of car.
[25 marks]
Turn over ►
IB/G/Jun23/7136/1
