OCR A Level Economics Microeconomics June 2025 question paper H460/01

Refer to lines 7–11.

Using information from the stimulus material, explain the term external costs.

Using information from the stimulus material, explain the term information failure.

Refer to lines 15–19.

Calculate the percentage change in branded water bottle consumption predicted by 2028.

‘Bottled water has seen a huge increase in its popularity in the last 50 years.’ Lines 1–2.

Explain, using an appropriate diagram, the impact on the level of producer surplus of an increase in demand for bottled water.

‘Both the market power and the environmental impact of the water industry have been a topic of much debate in the UK recently.’ Lines 20–21.

Evaluate, using evidence from the stimulus material, whether there is market failure in the water industry.

* Two-thirds of England’s biggest water companies employ key executives who previously worked at the water regulator OFWAT. Lines 38–39.

Evaluate, using evidence from the stimulus material, whether regulation of the water industry is

beneficial to consumers.

2* The term ‘Pepsi price power’ has been used to describe how the soft drink giant has been able to increase their revenue by raising price even against the backdrop of cost pressures caused by recent economic shocks worldwide.

Evaluate, using an appropriate diagram(s), the extent to which the principal agent problem is the

main factor influencing the choice of objective for a firm.

3* The price of oil rose to $79.90 per barrel in July 2023. Over the same period, food price inflation reached 13.4% in the UK.

Evaluate, using an appropriate diagram(s), the extent to which a rise in the price of oil will always

lead to a rise in the price of goods and services sold in UK supermarkets.

4* Supporters of the free market have long argued that supply and demand lead to the most effective allocation of society’s scarce resources. However, those in favour of a more interventionist approach have cited the recent high prices of essentials such as gas, electricity and basic foodstuffs as a reason for greater government control in markets.

Evaluate the extent to which the free market is the most effective way to ensure an efficient

allocation of resources.

5* During the COVID pandemic the UK government used information provision in various ways. These included advice on washing hands, the importance of vaccinations and lockdown rules for households and workspaces.

Evaluate the extent to which information provision is effective at incentivising consumers to

change their behaviour.