Mark Scheme (Results) October 2020
Mark Scheme (Results) October 2020
October 2020
Pearson Edexcel International Advanced
Subsidiary
In Economics (WEC11/01)
Unit 1: Markets in action
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Autumn 2020
Publications Code WEC11_01_2010_msc
All the material in this publication is copyright
© Pearson Education Ltd 2020
General Marking Guidance
(1)
4 – The only correct answer is C
A is not correct because if consumers
were good at computation they would
calculate the benefits of switching and
be more likely to switch
B is not correct because if they
maximised utility they would switch to
the cheaper deal
D is not correct because if
consumers feel valued by
alternative providers they would
switch to them (1)
5 QS9: Interpret, apply and The only correct answer is D
analyse information in
A is not correct because this area
written, graphical, tabular
represents part of the fall in total
and numerical forms
revenue for firms
B is not correct because total revenue
falls by the area PeUVP1 and VUQeQ1
C is not correct because this area
shows producer surplus and not
consumer surplus (1)
6 QS9: Interpret, apply and The only correct answer is A
analyse information in
B is not correct because this represents
written, graphical, tabular
the total government spending
and numerical forms
C is not correct because this is the total
revenue earned by firms from
customers
D is not correct because this is the
total revenue earned by firms from
both customers and the
government subsidy (1)
Section B
Question Answer Mark
Number
7 Knowledge 1, Application 3
Quantitative skills assessed:
QS4: Construct and interpret a range of standard graphical forms
QS9: Interpret, apply and analyse information in written,
graphical, tabular and numerical forms.
Knowledge
Application
1 mark for the following included on diagram:
• Maximum price below the equilibrium price (1)
Knowledge
1 mark for defining ‘positive statement.’
• Value free/ can be verified with evidence/ objective/ based on
facts (1)
1 mark for defining ‘normative statement.’
• Based on value judgement/ cannot be verified or proven/
subjective (1)
Application
2 marks for applying to the statements e.g.:
• Statement 1 is positive as you can verify whether $140bn was
spent on renewable subsidies / $260bn was spent on non-
renewable subsidies/ check if the government subsidised (1)
• Statement 2 is normative as the word ‘should’ shows it is a
value judgement/ suggests a course of action based on a
person’s value judgement (1) (4)
Question Answer Mark
Number
9 Knowledge 1, Application 1, Analysis 2
Knowledge
1 mark for defining regulation, e.g.:
• rules or laws put in place to influence behaviour (1)
Or
1 mark for identifying an impact e.g.:
• The quantity consumed will fall
• The revenue earned by energy drink manufacturers will fall
• Government failure/ Unintended consequences may occur
• Lower costs of treating health problems caused by energy drinks
• Consumers will substitute to alternatives (1)
Application
Up to 1 mark for applying to energy drink market, e.g.:
• Children/ Those under 18 will be prohibited from purchasing
energy drinks (1)
Analysis
Up to 2 marks for explaining the likely impact e.g.:
• The quantity consumed will fall as the quantity of customers falls
with under 18s now unable to buy (1) leading to contracting
supply / caused by decreased demand (1)
• The revenue earned by energy drink manufacturers will fall as
they will no longer sell products to those under the age of 18 (1)
thus a smaller number is multiplied by the price and revenue falls
(1)
• Government failure/ Unintended consequences may occur as
under 18s move to the informal sector to get access to these
products (1) and some of this supply may be of inferior quality (1)
• Fewer health problems caused by energy drinks meaning less
need for health services (1) and lowering the cost to the
government (1)
• The Government will have costs associated with monitoring and
policing the regulation (1) these costs will incur an opportunity
costs to the government as they cannot spend these funds
elsewhere (1)
• Consumers will no longer consume energy drinks and will buy
alternatives instead (1) increasing demand and revenue for the
firms (1)
• Diagram showing leftwards shift of demand curve (1) and
corresponding impact on both lower quantity and lower price (1) (4)
Question Answer Mark
Number
10 Knowledge 1, Application 3
Quantitative skills assessed:
QS8: Make calculations of elasticity and interpret the result.
Knowledge
1 mark for the formula for income elasticity of demand:
% change in quantity demanded
% change in income
OR
1 mark for identifying that the good is a normal good
• e.g. In Singapore, new car sales are a normal good as when
income rises, quantity demanded rises. (1)
Application
Up to 3 marks for calculations:
• Change in quantity ÷ original quantity
3 023 ÷ 109 091 x 100 = 2.77% (1)
• Change in income ÷ original income
1236 ÷ 65 796 x 100 = 1.88% (1)
• % Change in quantity ÷ % change in income
2.77% ÷ 1.88% = 1.47 (1)
NB: if correct answer (e.g. 1.47, 1.48, 1.5) is given, award full
marks regardless of working (4)
Question Answer Mark
Number
11 Knowledge 1, Application 1, Analysis 2
Quantitative skills assessed:
QS4: Construct and interpret a range of standard graphical forms
QS8: Make calculations of elasticity and interpret the result.
Knowledge
1 mark for definition/formula of cross elasticity of demand e.g.:
Responsiveness of demand for one product to a change in the price
of another product
Or
% change in quantity demanded of good x
% change in price of good y (1)
Application
1 mark for identifying that Pepsi cola and Coca Cola are substitutes
• The XED is positive and therefore they are substitutes. (1)
Analysis
Up to 2 marks for likely impact on Pepsi cola
Application
Up to 2 mark for application to Extract A
• Competing vegetable oils such as rapeseed, soybean and
sunflower
OR
Crude oil is a substitute for palm oil (used in biodiesel) (1)
• With so many substitutes an increase in the price of palm oil
would see customers substitute to alternative- crude oil/
rapeseed/ soybean/ sunflower oil (1) meaning demand will be
relatively elastic / cause the PED to increase (1) (4)
Question Answer Mark
Number
12 (c) Knowledge 2, Application 2, Analysis 2
Quantitative skills assessed:
QS4: Construct and interpret a range of standard graphical forms
QS9: Interpret, apply and analyse information in written,
graphical, tabular and numerical forms
Knowledge
Up to 2 marks for the diagram showing:
• Original supply and demand curves and equilibrium (1)
• Where a candidate correctly shifts supply to the right or
demand curve to the left (1)
Application
1 marks for one demand factor:
Causing leftward shift in the demand curve:
• Price of competing oils/ soya/ rapeseed/ sunflower have
fallen (1)
• Lower crude oil prices, substitute for palm oil/ biodiesel (1)
1 marks for one supply factor:
Causing rightward shift in the supply curve:
• More produced/ abundant supply (1)
Analysis
Up to 2 marks for development of how reason(s) leads to lower
prices, e.g.:
• Where a candidate has shifted the second curve correctly
e.g. rightwards shift in supply AND leftwards shift in demand
(1).
• Final equilibrium following shift in both supply and demand
(1)
(6)
Question Answer Mark
Number
12 (d) Knowledge 2, Application 2, Analysis 2, Evaluation 2
QS9: Interpret, apply and analyse information in written,
graphical, tabular and numerical forms
Knowledge
Up to 2 marks for knowledge of PES, e.g.:
• Definition of price elasticity of supply: responsiveness of quantity
supplied to a change in price (1)
• Price elastic supply- value of PES greater than 1/ where there is a
more than proportionate change in supply in response to a
change in price/ Diagram illustrating elastic supply (1)
• Price inelastic supply- value of PES between 0 and 1/ where there
is a less than proportionate change in supply in response to a
change in price/ Diagram illustrating inelastic supply (1)
Evaluation
Up to 2 marks for evaluative comments, e.g.:
• The supply will be relatively inelastic in the short run and become
more elastic in the long run as factors become variable (1+1) (8)
• The size of the price change will be important in determining how
much supply will respond/ the larger change of price at -25.94%
suggests a greater influence on supply (1+1)
• Factors such as the weather can have a significant impact on the
ability to respond with supply (1+1)
• New technologies could help increase production enabling supply
to respond better (1+1)
Question Indicative content
Number
12 (e) Indicative content guidance
Answers must be credited by using the level descriptors (below) in line with the
general marking guidance.
The indicative content below exemplifies some of the points that candidates
may make but this does not imply that any of these must be included. Other
relevant points must also be credited.
Quantitative skills assessed
QS4: Construct and interpret a range of standard graphical forms
QS9: Interpret, apply and analyse information in written, graphical, tabular and
numerical forms
External costs
• Definition of ‘external cost’ – where there are negative impact on third
parties
External benefits
• Definition of ‘external benefits’ – where there are positive impact on third
parties
• Diagram showing external benefits
• Consumers consider their private benefits
• Consumers ignore impacts on third parties/ external benefits
• Consumers are undervaluing the benefit of palm oil
• The market equilibrium price, PME is below the social optimum price, PSO/ The
market equilibrium price PME is below the social optimum price PSO.
• The market equilibrium quantity, QME is below the social optimum quantity,
QSO- there is underconsumption
• The welfare gain that can be achieved by moving to social optimum is
shaded/ labelled
• 36 000 000 tonnes produced in Indonesia/ 21 000 000 tonnes produced in
Malaysia will generate substantial export income helping to fund the import
of more capital goods helping to boost long term growth for all
• Private benefit of palm oil production tripling between 1998 and 2018-
generating more revenue creates an external benefit as firms spent more
within economy
• The palm oil sector employs 4.7 million in Malaysia and Indonesia, with these
workers spending more money within their economies
• A further 11 million are employed in the two countries who are indirectly
dependent on the sector
Positive or negative externalities may be offered as KAA and evaluation
may consider the other type of externality
Level Mark Descriptor
0 No rewardable material
Level 1 1–3 Displays isolated, superficial or imprecise knowledge and
understanding of economic terms, principles, concepts, theories and
models.
Use of generic material or irrelevant information or inappropriate
examples.
Descriptive approach, which has no chains of reasoning.
Level 2 4–6 Displays elements of knowledge and understanding of economic
terms, principles, concepts, theories and models.
Ability to apply knowledge and understanding to some elements of the
question. Some evidence and contextual references are evident in
the answer.
Chains of reasoning in terms of cause and/or consequence are evident
but they may not be developed fully or some stages are omitted.
Level 3 7–8 Demonstrates accurate and precise knowledge and understanding of
economic terms, principles, concepts, theories and models.
Ability to link knowledge and understanding in context using relevant
examples which are fully integrated to address the broad elements of
the question.
Analysis is clear, coherent, relevant and focused. The answer
demonstrates logical and multi-stage chains of reasoning in terms of
cause and/or consequence.
Impact on consumers
• Price paid higher at P1
• Incidence of tax on consumer per unit - PP1/ consumer incidence CFPP1
• Reduced consumer surplus
Impact on government
• Government revenue ABCP1
• Funds that can be used elsewhere- e.g. roads
Level Mark Descriptor
0 No rewardable material.
Level 1 1–3 Displays isolated, superficial or imprecise knowledge and
understanding of economic terms, principles, concepts, theories and
models.
Use of generic material or irrelevant information or inappropriate
examples.
Descriptive approach which has no chains of reasoning.
Level 2 4–6 Displays elements of knowledge and understanding of economic
terms, principles, concepts, theories and models.
Limited application of knowledge and understanding to economic
problems in context.
A narrow response or superficial, only two-stage chains of reasoning in
terms of cause and/or consequence.
Level 3 7–9 Demonstrates accurate knowledge and understanding of economic
terms, principles, concepts, theories and models.
Ability to apply knowledge and understanding to some elements of the
question. Some evidence and contextual references are evident in the
answer.
Analysis is clear and coherent. Chains of reasoning in terms of cause
and/or consequence are evident but they may not be developed fully
or some stages are omitted.
Level 4 10–12 Demonstrates accurate and precise knowledge and understanding of
economic terms, principles, concepts, theories and models.
Ability to link knowledge and understanding in context, using
appropriate examples which are fully integrated to address the broad
elements of the question.
Analysis is clear, coherent, relevant and focused. The answer
demonstrates logical and multi-stage chains of reasoning in terms of
cause and/or consequence.
Evaluation (8 marks) – indicative content
• Magnitude- 68% of the price charged is indirect tax- significant impact
• Germany at just 59% may make it attractive to purchase in Germany but
only for those close to border
• Changed in behaviour to alternative fuels may take a very long term
• Demand is likely to be highly inelastic so even if tax means higher price
the quantity demanded will fall less than proportionately
• Tax evasion/ avoidance may reduce tax revenues
• Difficult to measure the correct indirect tax that should be charged
• Electric cars may still be significantly more expensive than petrol cars so
there will be little impact on the demand for petrol
• Public transport is less convenient for the consumer leading to less
consumer substituting
• Depends on how significant petrol taxes are as a proportion of total
business costs e.g. significant issue for logistics/delivery companies
• Impact of the tax may affect those on different income levels differently