Government intervention in markets

In 2023, the UK prime minister Rishi Sunak said that he wanted to see all students in England study some form of mathematics until they reach the age of 18 to ‘ensure that they leave school better equipped for the jobs of the future’. This would require additional spending on education.

Just half of all 16 to 19 year-olds study mathematics. Yet in a world where data is everywhere and statistics are vital in every job, the workforce will require more analytical skills than ever before.

(Source: adapted from https://educationhub.blog.gov.uk/2023/01/04/ studying-maths-to-18-what-you-need-to-know/)

Evaluate the likely microeconomic effects of increased spending on education.

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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)

Explain one likely reason for the maximum price for an undergraduate university programme.

Which one of the following is an example of government failure associated with the maximum price?

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.

Examine two factors which might influence the supply of labour in the electronics industry.

Assess whether firms in the electronics industry benefit from economies of scale.

Discuss the likely concerns of the competition authorities regarding the proposed merger of the two companies referred to in Extract C.

With reference to Extract D, discuss possible methods of government intervention to reduce electronic waste.

An annual season ticket for a train journey between London and Reading is planned to increase from £5 044 to £5 664 in 2023.

(Source adapted from: https://commonslibrary.parliament.uk/ how-much-could-rail-fares-increase-by-in-2023-and-why)

With reference to the information provided, calculate the percentage change in the price of an annual season ticket.

Explain the likely impact of the increase in price of a season ticket on consumer surplus.

The diagram below shows the demand and supply for sugary drinks.

Which one of the following areas represents the change in producer surplus when a minimum price is imposed?

The average UK household energy bill (gas and electric combined) rose 80% from £1 971 in 2021 to £3 549 in 2022.

(Source adapted from: https://www.telegraph.co.uk/money/consumer-affairs/ energy-price-cap-rise-october-2022-what-happen-household-bills/)

Evaluate possible methods of government intervention to control household energy bills in the UK.

Using 2021 estimates of carbon emissions, it is estimated that a petrol car journey from London to Glasgow emits approximately 3.3 times more carbon dioxide per passenger than the equivalent journey by train.

(Source adapted from: https://www.gov.uk/government/statistics/transport-and-environment-statistics-autumn-2021/transport-and-environment-statistics-autumn-2021)

Evaluate possible methods of government intervention to reduce carbon emissions caused by road transport in the UK.

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A company that provides drinking water and treats waste water has been fined £180 000 after an incident that killed about 2 500 fish. The charges relate to an illegal discharge of sewage from the waste water treatment plant that polluted nine kilometres of the River Severn, a popular tourist destination.

(Source: adapted from https://www.leaderlive.co.uk/news/wrexham/ 19393552.water-company-fined-today-sewage-leaked-wrexham-river-killing-2-500-fish/)

Draw an externalities diagram to show the likely impact of the sewage discharge on the local tourist industry.

Which one of the following is the most likely effect of the £180 000 fine?

To:

Explain the likely impact of diminishing marginal productivity of labour on cabin crew staffing levels. Refer to Extract A in your answer.

Examine the likely impact of Thomas Cook’s plan ‘to reduce their airline emissions’ (Extract B, line 6) on the social optimum position. Use an appropriate externalities diagram in your answer.

With reference to Extract C, assess whether Thomas Cook’s failure was caused by the principal-agent problem.

With reference to Extract C, discuss the proposed government subsidy to prevent Thomas Cook from reaching its shut-down point.

With reference to the information provided, discuss the decision by Jet2 to increase its package holiday prices.

The EU tradable pollution permits scheme is expected to become more effective by 2020, due to recent reductions in the number of tradable pollution permits.

(Source adapted from: https://ec.europa.eu/clima/policies/ets_en)

Explain one likely effect of reducing the number of tradable pollution permits.

Regulation of firms that pollute is likely to be a problem because it

The EU tradable pollution permits scheme is expected to become more effective by 2020, due to recent reductions in the number of tradable pollution permits.

(Source adapted from: https://ec.europa.eu/clima/policies/ets_en)

Explain one likely effect of reducing the number of tradable pollution permits.

Regulation of firms that pollute is likely to be a problem because it

Explain how the Turkish central bank intervenes in the currency market to prevent ‘excessive appreciation or depreciation of the Turkish lira’ (Extract A, lines 7–8).

Examine two reasons why the Turkish government may want to avoid a significant fall in the exchange rate of the Turkish lira.

Discuss the likely success of policies to reduce the consumption of single‑use plastic bags in cities such as Istanbul.

EITHER

Evaluate the likely microeconomic and macroeconomic effects of a rise in interest rates in Turkey.

Evaluate the microeconomic and macroeconomic impact of large infrastructure projects such as the building of a third airport in Istanbul.

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Explain how the Turkish central bank intervenes in the currency market to prevent ‘excessive appreciation or depreciation of the Turkish lira’ (Extract A, lines 7–8).

Examine two reasons why the Turkish government may want to avoid a significant fall in the exchange rate of the Turkish lira.

Discuss the likely success of policies to reduce the consumption of single‑use plastic bags in cities such as Istanbul.

EITHER

Evaluate the likely microeconomic and macroeconomic effects of a rise in interest rates in Turkey.

Evaluate the microeconomic and macroeconomic impact of large infrastructure projects such as the building of a third airport in Istanbul.

Write your answer here: