A-level
ECONOMICS
Paper 1 Markets and Market Failure
Wednesday 15 May 2024 Morning Time allowed: 2 hours
.
7136/1
, 2
Section A
Answer EITHER Context 1 OR Context 2.
EITHER
Context 1 Total for this context: 40 marks
The market for university accommodation
Study Extracts A, B and C and then answer all parts of Context 1 which follow.
Extract A
Table 1: Average weekly university rent, Figure 1: Number of full-time students at UK
selected UK cities, 2015 and universities, and type of
2021 accommodation, 2015 to 2021
Average Average
Selected UK weekly weekly
cities university university
rent, 2015 rent, 2021
Birmingham £113.88 £157.94
Brighton £143.00 £235.93
Bristol £141.58 £184.38
Liverpool £112.97 £136.61
Manchester £120.87 £180.60
UK average £121.16 £169.35
Extract B: A serious shortage of student accommodation
The number of 18-year-olds in the UK applying to university is rising. In addition, there was a
record number of 277 000 foreign students in 2022.
Universities have expanded the number of places on offer to students, but the supply of student
accommodation is highly inelastic. Providers of rental accommodation have been deterred by
stricter rules on shared houses, higher taxes and greater rights for renters. Rising construction 5
costs, interest rates and inflation have resulted in an insufficient number of new developments
in many university cities. Supply shortages have been particularly acute in some cities, and
certain universities have asked students to live at home.
Shortages of accommodation could mean that some students are discouraged from applying to
university. The average private sector rent outside London consumes almost three-quarters of 10
the maximum student loan, and most students are ineligible for this maximum. Some of the top
universities may become out of reach to poorer students who do not live locally.
Source: News reports, 2023
IB/G/Jun24/7136/1
, 3
Extract C: Policies to solve the shortage of student accommodation
The causes of the shortage of student accommodation are varied and some, but not all, result
from market failure. Rising rents ought to incentivise more supply, but that has not worked
recently. Planning restrictions have limited the number of new building projects. Relaxing such
rules might help, but local residents complain that high numbers of students can alter the nature
of their communities. Subsidies to the builders of student accommodation could increase 5
supply, but with a likely delay of many years.
Some students have been offered financial incentives to defer their entry by a year or to live at
home. To reduce further the demand for student accommodation, some people have urged the
government to restrict foreign student numbers. However, the 22% of students who are foreign
pay 44% of all tuition fees and so subsidise costs for UK students. 10
Policies to tackle high rents could include rent subsidies from the government or an increase in
the grants and loans available to students. In Scotland, university students have benefited from
controls which limit rent increases to a fixed percentage each year. The National Union of
Students is calling for nationwide rent controls. A maximum rent can help keep the cost of
student accommodation lower than it would otherwise be, but risks some landlords withdrawing 15
from the market. Some argue that high-quality student accommodation is a merit good and
ought to be provided by the government at a fair rent.
Source: News reports, 2023
0 1 Inflation resulted in a basket of goods and services that cost £100 in 2015 costing £112
in 2021. Using this information and the data in Extract A (Table 1), calculate the
percentage increase in average university rent, in real terms, between 2015 and 2021.
Give your answer to one decimal place.
[2 marks]
0 2 Explain how the data in Extract A (Figure 1 and Table 1) show that the supply of
university and private rental accommodation has failed to match the increase in student
numbers between 2015 and 2021.
[4 marks]
0 3 Extract B (lines 3–4) states that ‘Universities have expanded the number of places on
offer to students, but the supply of student accommodation is highly inelastic’.
With the help of a diagram, explain the impact of the increase in the number of students
attending university on the market for student accommodation.
[9 marks]
0 4 Extract C (lines 14–16) states that ‘A maximum rent can help keep the cost of student
accommodation lower than it would otherwise be, but risks some landlords withdrawing
from the market’.
Using the data in the extracts and your knowledge of economics, discuss the advantages
and disadvantages of policies the government might introduce to improve the market for
student accommodation.
[25 marks]
Turn over ►
IB/G/Jun24/7136/1
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller williesmaish2999. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $12.49. You're not tied to anything after your purchase.
