Markets & Market FailureGuide to the Exam Tips, Techniques, & Structure
Exam BasicsThe Exam Paper is 1hr 15 minutesIt is divided into two partsSection 1 is the Objective Testing Questions (Multiple Choice)Section 2 is the Data ResponseSection 1– Objective TestingThis part of the exam paper consists of 25 questions with an option of A,B,C or D. Theywill test you on all your economic knowledge from the current unit from Supply & De-mand to Markets Failures and government intervention.Questions will quite often try and use smaller words which will alter the meaning of astatement to through you off course, or contain a distractor. Take this example fromJune 2011In this question, the distractor is D—’there are many substitutes for its output’, this isbecause it links to Price Elasticity of Demand rather than Price Elasticity of Supply.Look out for questions like this.Its important to make sure that you read the questions carefully to ensure that youcan answer them correctly.Easy Marks can be picked up in this section of the paper. You should aim to spend 25Minutes on this part of the exam paper.
Section 2– Data ResponseIn the exam you will have a choice of two sets of questions called Contexts. One willbe on Markets and the other on Market Failure. Both sets require similar structure butwill require different skills in each. Each context comes with 3 extracts which youshould study. One extract will always be a graph which shows two things on the samegraph. The others tend to be articles or information.Question 1: Define [5 Marks]This is the same for both contexts and will normally ask you to define a term men-tioned in one of the extracts you have read. This question requires a simple one linedefinition from you which is easy marks as it is work 5 marks.E.g. January 2012: Define the term Composite Demand.Composite Demand is where a good is demanded for two or more different purposes,for example aluminium may be demanded for both the production of drinks cans andaeroplanesThat was answer was awarded 5 marksQuestion 2: Compare [8 Marks]This requires the graph or chart extract. You should identify two significant points ofcomparison which would be when a price peaked or was at a low. You must includespecific numerical values to gain top marks. Each comparison is worth 4 Marks.To help the examiner place each comparison in a new paragraph.Question 3: Mini Essay [12 Marks]This question in the paper will require that you use a diagram and a specific extract toexplain why something happens. In the Markets Context a simple Demand and SupplyDiagram are appropriate. In the Market Failure context and Externalities Graph is re-quired.You should make your graphs big not small (see over page). Make sure that you do thefollowing: Label the Axis Use a Ruler Label the Curves Use lines to indicate areas of importance e.g. Price Level or Quantity Demanded
You can make your graphs about half a page big as this makes it easier the examinerto see and award you the appropriate marks. Dont worry about running out of space,as extra sheets or booklets can be given out should you need them. It’s important thatyou make them big to gain the best possible mark for them.Remember:Markets Context use Supply and Demand GraphsMarket Failure use Marginal Social Cost / Benefit Diagrams
Question 4: Essay [25 Marks] In this question you will be presented with an evaluate style question. You should aim to make use of the extracts as these are likely to contain vital information to help you complete the exam question. You can pick up easy marks here by defining the term in which you are going to evalu- ate as this would ground your economic knowledge and use of specialist vocabulary. When evaluating you should go through the options that would be available in relation to your question and analyse each one. You can look at ISWOT to make your evaluation better and allow it cover the maximum amount of areas available for evaluation. Using a graph here would also add marks, and make you look like a more serious eco- nomic student Evaluating ISWOT Evaluation can gain a candidate a good amount of marks and if done right you can be right on the money! Impact: it is important that with all economic decisions that you mention as to how far they go what would be affected or who would be affected by the policy Short Run/ Long Run: All decisions or options are going to haveISWOT short run and long term effects and it is up to you to decide what they might be. For example a buffer stock scheme may in the long run affect price levels but in the short run its effectiveness may be limited Weaknesses/Strengths: Policies or decisions are likely to be stronger or weaker than others, so comment on these. Opportunity Cost / Other Things Remain Equal: A decision is likely to have an opportunity cost attached to it so comment on it, what could the money required be used for if not the decision. Most policies or decisions assume that everything else remains equal and it is likely that it wont, so therefore comment on the changing circumstances Time Lag: All policies will have a delay in coming into effect such as the building of motorways will take time for the positive exter- nalities to be felt as well as the negatives such as pollution Follow this to ensure a sound evaluation in your exam