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Pearson Edexcel GCE A Level MERGED QUESTION PAPER AND MARK SCHEMEIn Economics A (9EC0)Paper 01 Market and Business Behaviour MAY 2024
Typology: Exams
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Wednesday 15 May 2024
Morning (Time: 2 hours) Paperreference 9EC0/
Economics A Advanced PAPER 1: Markets and business behaviour
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SECTION A Answer ALL questions. Write your answers in the spaces provided. Some questions must be answered with a cross in a box. If you change your mind about an answer, put a line through the box and then mark your new answer with a cross. You are advised to spend 30 minutes on this section. Use the data to support your answers where relevant. You may annotate and include diagrams in your answers. 1 The table below shows price elasticity of demand for bus tickets in London 2021
Age Price elasticity of demand 18+ Student −0. Adult −0. system/uploads/attachment_data/file/669090/youth-travel-concessions-price-elasticity.pdf(Source adapted from: https://assets.publishing.service.gov.uk/government/uploads/ and https://tfl.gov.uk/fares/find-fares/bus-and-tram-fares#on-this-page-4) (a) Explain one likely reason for the difference in the price elasticity of demand for the 18+ student bus ticket and the adult bus ticket. (4) .................................................................................................................................................................................................................................................................................... .................................................................................................................................................................................................................................................................................... .................................................................................................................................................................................................................................................................................... .................................................................................................................................................................................................................................................................................... .................................................................................................................................................................................................................................................................................... .................................................................................................................................................................................................................................................................................... .................................................................................................................................................................................................................................................................................... .................................................................................................................................................................................................................................................................................... .................................................................................................................................................................................................................................................................................... .................................................................................................................................................................................................................................................................................... .................................................................................................................................................................................................................................................................................... .................................................................................................................................................................................................................................................................................... ....................................................................................................................................................................................................................................................................................
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(b) In 2021, the adult 7-day bus ticket was £21.90. Bus ticket prices in London in 2022 increased by 4.8%. Ceteris paribus, which one of the following is the percentage decrease in the 7-day bus ticket demand by adults? (1) A 0. B 1. C 3. D 12. (Total for Question 1 = 5 marks)
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2 The table below shows price elasticity of supply for housing in the US in 2020.
US State Price elasticity of supply New York +0. Texas +1. (Source adapted from: https://bankunderground.co.uk/2020/02/25/the-declining-elasticity-of-us-housing-supply/) (a) With reference to the data above, explain one likely reason for the difference in the price elasticity of supply. 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(b) In Texas the price elasticity of supply is +1.8. Which one of the following is the percentage increase in price if the quantity of housing supplied in Texas is increased by 12%? (1) A 0. B 1. C 6. D 21. (Total for Question 2 = 5 marks)
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3 Peloton is a firm which makes exercise bikes. Peloton’s objective is to prioritise selling fitness services rather than to achieve short-term profit maximisation. (Source adapted from: https://www.forbes.com/sites/shelleykohan/2022/01/26/peloton-prioritizes-access-and-acquisition-over-profits/?sh=13d8ee474f40 ) (a) Draw a cost and revenue diagram to illustrate the different business objectives: profit maximisation and revenue maximisation. (4)
(b) If Peloton changes its objective to sales maximisation, then without making a loss, it operates at an output where: (1) A average cost equals average revenue B average cost is minimised C price elasticity of demand is equal to - D price equals marginal cost (Total for Question 3 = 5 marks)
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4 In 2022 the government announced that the maximum undergraduate tuition fee for universities in England will remain at £9 250 per year for the next two years. (Source adapted from: https://questions-statements.parliament.uk/written-statements/detail/2021-10-21/HCWS339) (a) Explain one likely reason for the maximum price for an undergraduate university programme. (4) .................................................................................................................................................................................................................................................................................... .................................................................................................................................................................................................................................................................................... .................................................................................................................................................................................................................................................................................... .................................................................................................................................................................................................................................................................................... .................................................................................................................................................................................................................................................................................... .................................................................................................................................................................................................................................................................................... .................................................................................................................................................................................................................................................................................... .................................................................................................................................................................................................................................................................................... .................................................................................................................................................................................................................................................................................... .................................................................................................................................................................................................................................................................................... .................................................................................................................................................................................................................................................................................... .................................................................................................................................................................................................................................................................................... .................................................................................................................................................................................................................................................................................... .................................................................................................................................................................................................................................................................................... .................................................................................................................................................................................................................................................................................... (b) Which one of the following is an example of government failure associated with the maximum price? (1) A Contraction in demand B Distortion of price signals C Excess supply D Extension in supply (Total for Question 4 = 5 marks)
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5 The graph below shows the largest mortgage lenders in the United Kingdom (UK) in 2020, by market share.
Lloyds NationwideSantander UKNatwestBarclays Virgin Money
HSBC Other
19.5%
0
5
Market share^10
15
20
25
12.7% 11.1% 10.9% (^) 9.8% 7.2% 3.9%
24.9% %
(Source adapted from: https://www.statista.com/statistics/727348/uk-banks-gross-lending-market-share/)
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(a) With reference to the information on the preceding page, explain the market structure of mortgage lending in the UK. (4) .................................................................................................................................................................................................................................................................................... .................................................................................................................................................................................................................................................................................... .................................................................................................................................................................................................................................................................................... .................................................................................................................................................................................................................................................................................... .................................................................................................................................................................................................................................................................................... .................................................................................................................................................................................................................................................................................... .................................................................................................................................................................................................................................................................................... .................................................................................................................................................................................................................................................................................... .................................................................................................................................................................................................................................................................................... .................................................................................................................................................................................................................................................................................... .................................................................................................................................................................................................................................................................................... .................................................................................................................................................................................................................................................................................... .................................................................................................................................................................................................................................................................................... .................................................................................................................................................................................................................................................................................... .................................................................................................................................................................................................................................................................................... .................................................................................................................................................................................................................................................................................... (b) The value of all mortgage loans was £1 601 billion at the end of 2020. Which one of the following is the value of Lloyds’ market share? (1) A £82 billion B £126 billion C £312 billion D £8 210 billion (Total for Question 5 = 5 marks) TOTAL FOR SECTION A = 25 MARKS
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SECTION B Read the following extracts (A to D) before answering Question 6. Write your answers in the spaces provided. You are advised to spend 1 hour on this section. Question 6 The electronics industry Extract A Rising prices of electronics devices Computer chips act as the “brain” in all electronic devices. Makers of electronic devices face significant increases in the price of computer chips as they try to source enough components, including games consoles, computers and smartphones. The price of some computer chips has jumped from $0.20 each to more than $1. The prices of electronic devices have risen for a range of reasons, including higher material costs and the growing popularity of home entertainment. (Source: adapted from https://www.ft.com/content/8c718a74-cd95-4b2d-ac0e-de0682e4e3cd)
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Extract B Labour shortages in the electronics industry Every year, highly skilled and experienced employees in the electronics industry retire. The current tight labour market has made an already difficult problem of hiring suitable engineering and computing graduates worse, especially since the nature of the industry is becoming increasingly technical. As production becomes more automated, electronics jobs are more likely to require problem solving and analysis than just assembling skills. However, artificial intelligence and other new technologies can help fill some of the skills gap. In addition, by giving hazardous, repetitive, grimy work to robots, human beings can focus on more creative, analytic tasks. (Source: adapted from https://www.ericsson.com/en/blog/2021/12/manufacturing-problems-that-keep-ceos-awake-at-night)
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Extract C Serious concerns over merger The Competition and Markets Authority (CMA) has said the takeover of the Cambridge- based computer chip designer Arm by its US rival Nvidia raises serious competition concerns. It has launched an in-depth investigation into the £29.5 billion deal. The CMA said the merger could reduce choice for firms reliant on computer chips, pushing up prices of products including cars, games consoles and mobile phones. In addition, severe global shortages of computer chips has disrupted the manufacture of a range of electronic goods pushing up costs for firms. Despite this, large electronics firms benefit from economies of scale and are able to finance high-risk innovation and global advertising. business/2021/aug/20/watchdog-expresses-concerns-(Source adapted from: https://www.theguardian.com/ over-nvidias-takeover-of-uk-chip-designer-arm )
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Extract D The growing problem of electronic waste Electronic waste is the fastest growing element of the world’s household waste problem. The problem in the UK is particularly bad. The country produces 24.9 kg a person a year – nearly 10 kg more than the EU average. In 2018, 1.2 million tonnes of electrical devices were sold in the UK, and 500 000 tonnes made it to recycling centres. Some appliances are more likely to be recycled than others. The recycling rate for big appliances, such as fridges and cookers, is about 80%. Of small appliances, barely one in five makes it to the recycling centre. As items such as toasters, hairdryers and headphones fit into household bins, they are not often taken to a recycling centre. This causes many problems, such as hazardous substances contaminating soil, water pollution and other external costs. Policy makers have a long list of options to combat this problem including stricter regulation, environmental education, taxation and financial incentives. In some countries, for example, household rubbish is weighed and recycling initiatives are subsidised. (Source adapted from: https://www.ft.com/content/26e1aa74-2261-11ea-92da-f0c92e957a96)
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6 (a) With reference to Extract A, explain the likely reasons for the change in price of electronic devices. Include a supply and demand diagram in your answer. (5) (b) Examine two factors which might influence the supply of labour in the electronics industry. (8) (c) Assess whether firms in the electronics industry benefit from economies of scale. (10) (d) Discuss the likely concerns of the competition authorities regarding the proposed merger of the two companies referred to in Extract C. (12) (e) With reference to Extract D, discuss possible methods of government intervention to reduce electronic waste. (15)
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6 (a) With reference to Extract A, explain the likely reasons for the change in price of electronic devices. Include a supply and demand diagram in your answer. 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(b) Examine two factors which might influence the supply of labour in the electronics industry. 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(c) Assess whether firms in the electronics industry benefit from economies of scale. 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(d) Discuss the likely concerns of the competition authorities regarding the proposed merger of the two companies referred to in Extract C. 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(e) With reference to Extract D, discuss possible methods of government intervention to reduce electronic waste. 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(Total for Question 6 = 50 marks) TOTAL FOR SECTION B = 50 MARKS