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AQA MERGED QUESTION PAPER AND MARK SCHEME ECONOMICS PAPER 1-7136/1 MARKETS AND MARKET FAILURE FOR MAY 2024
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IB/G/Jun24/7136/
Section A
Answer EITHER Context 1 OR Context 2.
Context 1 Total for this context: 40 marks
The market for university accommodation
Study Extracts A , B and C and then answer all parts of Context 1 which follow.
Extract A
Table 1: Average weekly university rent, selected UK cities, 2015 and 2021
Figure 1: Number of full-time students at UK universities, and type of accommodation, 2015 to 2021
Selected UK cities
Average weekly university rent, 2015
Average weekly university rent, 2021 Birmingham £113.88 £157. Brighton £143.00 £235. Bristol £141.58 £184. Liverpool £112.97 £136. Manchester £120.87 £180. UK average £121.16 £169.
Source: Cushman Wakefield Student Accommodation Report, 2022
Extract B: A serious shortage of student accommodation
The number of 18-year-olds in the UK applying to university is rising. In addition, there was a record number of 277 000 foreign students in 2022.
Universities have expanded the number of places on offer to students, but the supply of student accommodation is highly inelastic. Providers of rental accommodation have been deterred by stricter rules on shared houses, higher taxes and greater rights for renters. Rising construction costs, interest rates and inflation have resulted in an insufficient number of new developments in many university cities. Supply shortages have been particularly acute in some cities, and certain universities have asked students to live at home.
Shortages of accommodation could mean that some students are discouraged from applying to university. The average private sector rent outside London consumes almost three-quarters of
the maximum student loan, and most students are ineligible for this maximum. Some of the top
Source: News reports, 2023
IB/G/Jun24/7136/
Do NOT answer Context 2 if you have answered Context 1.
Context 2 Total for this context: 40 marks
Trade union membership and industrial disputes
Study Extracts D , E and F and then answer all parts of Context 2 which follow.
Extract D
Table 2 : Trade union membership, % of workforce, 2001 to 2021
Figure 2: Growth in average annual nominal earnings, %, January 2015 to September 2022
Year (^) employeesAll^ Privatesector^ Publicsector
2001 29.3 18.4 59. 2006 28.3 16.6 58. 2011 26.0 14.2 56. 2016 23.5 13.4 52. 2021 23.1 12.8 50.
Source: Department for Business, Energy and Industrial Strategy, 2022
Source: Office for National Statistics, 2023
Extract E: UK public sector workers hit hardest by cost of living crisis
In November 2022, members of nursing trade unions voted to strike. Many more public sector unions have joined the nurses on strike, in attempts to gain pay rises that keep up with inflation. It is notable that many of the employers facing strike action, such as the NHS, are monopsonistic employers, who have considerable labour market power.
UK public sector workers have been particularly hard hit by the cost of living crisis, according to official figures that show the gap between public and private sector pay growth is at its widest on record. Annual growth in pay was 6.6% in the private sector in September 2022, compared with just 2.2% for the public sector. Overall, pay growth accelerated to 5.7% as employers struggled to hire workers due to low unemployment. In November 2022, 13.3% of businesses reported experiencing a shortage of workers leading to upward pressure on wages. The construction and hospitality sectors were worst affected.
However, wage growth has not kept pace with inflation, which reached 10.1% in September 2022, leading to growing industrial unrest. Until recently, strikes largely affected local authorities, transport services and some private sector employers. But the latest figures show the pay squeeze has been far worse for teachers, NHS staff and other public sector workers who have started to take industrial action, including strikes. Louise Murphy, economist at the Resolution Foundation, said there was now a “huge wedge” between private and public sector pay, creating severe difficulties for public sector recruitment and retention. Staff shortages in the public sector are likely to worsen unless public sector pay and working conditions improve.
Source: News reports, 2023
IB/G/Jun24/7136/
Turn over ►
Extract F: The role of trade unions
Over the past century, British unions have successfully campaigned for a minimum wage, holiday and sickness pay, equal opportunity rights, maternity and paternity rights and a two-day weekend for workers. Unions support individual workers in workplace disagreements, and engage in collective bargaining on behalf of their members by negotiating with employers on pay and working conditions. But unions can do much more for employees and even for employers. Research shows that their benefits can include reducing staff turnover, providing or promoting training and encouraging innovation.
UK trade union membership peaked at 13.2 million members in 1979 but fell consistently during the 1980s and 1990s. There has been a recent reversal of this trend with membership increasing in each of the last four years, primarily amongst public sector workers. Unions suggest that new members have been joining due to wages falling in real terms, and the hope that a trade union might protect their interests. Collective pay bargaining, reinforced by the threat of strikes, has achieved some notable successes for workers, such as the 18% pay rise for London bus drivers in February 2023. However, 205 000 working days were lost to strike action in September 2022, almost as many as in the whole of 2019. Critics argue that strikes by transport workers, teachers, nurses and others create enormous disruption for everybody else and make labour markets less efficient. Source: News reports, 2023
0 5 Using the data in Extract D (Table 2) , calculate the difference between the mean percentage trade union membership in the private sector and the mean percentage trade union membership in the public sector over the period 2001–2021.
Give your answer to one decimal place. [2 marks]
(^0 6) Explain how the data in Extract D (Figure 2) , show that, since 2015, living standards of people working in the private sector are likely to have increased compared to those working in the public sector. [4 marks]
(^0 7) Extract E (lines 9–10) states that ‘In November 2022, 13.3% of businesses reported experiencing a shortage of workers leading to upward pressure on wages’.
With the help of a diagram, explain how (^) and to what extent a shortage of labour is likely to affect the wage in a competitive labour market. [9 marks]
(^0 8) Extract F (lines 12–13) states that ‘Collective pay bargaining, reinforced by the threat of strikes, has achieved some notable successes for workers’.
Using the data in the extracts and your knowledge of economics, evaluate the view that trade unions improve the operation of labour markets by protecting the interests of workers. [25 marks]
Essay 3
Britain’s energy market was plunged into chaos in 2021 as surges in wholesale electricity and gas prices exposed the weaknesses of many companies. Since deregulation in 2016, 49 energy supply companies have collapsed, with customers taken on by larger firms. This market chaos has led to renewed calls for the government to nationalise the energy industry.
1 3 Explain, using examples, how the existence of economies and diseconomies of scale affect firms’ average costs of production. [15 marks]
1 4 Assess the view that privatised industries, such as electricity and gas, should be taken back into public ownership. [25 marks]
There are no questions printed on this page
2
Mark schemes are prepared by the Lead Assessment Writer and considered, together with the relevant questions, by a panel of subject teachers. This mark scheme includes any amendments made at the standardisation events which all associates participate in and is the scheme which was used by them in this examination. The standardisation process ensures that the mark scheme covers the students’ responses to questions and that every associate understands and applies it in the same correct way. As preparation for standardisation each associate analyses a number of students’ scripts. Alternative answers not already covered by the mark scheme are discussed and legislated for. If, after the standardisation process, associates encounter unusual answers which have not been raised they are required to refer these to the Lead Examiner.
It must be stressed that a mark scheme is a working document, in many cases further developed and expanded on the basis of students’ reactions to a particular paper. Assumptions about future mark schemes on the basis of one year’s document should be avoided; whilst the guiding principles of assessment remain constant, details will change, depending on the content of a particular examination paper.
No student should be disadvantaged on the basis of their gender identity and/or how they refer to the gender identity of others in their exam responses.
A consistent use of ‘they/them’ as a singular and pronouns beyond ‘she/her’ or ‘he/him’ will be credited in exam responses in line with existing mark scheme criteria.
3
Level of response marking instructions
Level of response mark schemes are broken down into levels, each of which has a descriptor. The descriptor for the level shows the average performance for the level. There are marks in each level.
Before you apply the mark scheme to a student’s answer read through the answer and annotate it (as instructed) to show the qualities that are being looked for. You can then apply the mark scheme.
Step 1 Determine a level
Start at the lowest level of the mark scheme and use it as a ladder to see whether the answer meets the descriptor for that level. The descriptor for the level indicates the different qualities that might be seen in the student’s answer for that level. If it meets the lowest level then go to the next one and decide if it meets this level, and so on, until you have a match between the level descriptor and the answer. With practice and familiarity you will find that for better answers you will be able to quickly skip through the lower levels of the mark scheme.
When assigning a level you should look at the overall quality of the answer and not look to pick holes in small and specific parts of the answer where the student has not performed quite as well as the rest. If the answer covers different aspects of different levels of the mark scheme you should use a best fit approach for defining the level and then use the variability of the response to help decide the mark within the level, ie if the response is predominantly level 3 with a small amount of level 4 material it would be placed in level 3 but be awarded a mark near the top of the level because of the level 4 content.
Step 2 Determine a mark
Once you have assigned a level you need to decide on the mark. The descriptors on how to allocate marks can help with this. The exemplar materials used during standardisation will help. There will be an answer in the standardising materials which will correspond with each level of the mark scheme. This answer will have been awarded a mark by the Lead Examiner. You can compare the student’s answer with the example to determine if it is the same standard, better or worse than the example. You can then use this to allocate a mark for the answer based on the Lead Examiner’s mark on the example.
You may well need to read back through the answer as you apply the mark scheme to clarify points and assure yourself that the level and the mark are appropriate.
Indicative content in the mark scheme is provided as a guide for examiners. It is not intended to be exhaustive and you must credit other valid points. Students do not have to cover all of the points mentioned in the Indicative content to reach the highest level of the mark scheme.
An answer which contains nothing of relevance to the question must be awarded no marks.
5
Section A
Context 1 Total for this context: 40 marks
0 1 Inflation resulted in a basket of goods and services that cost £100 in 2015 costing £112 in
2021. Using this information and the data in Extract A (Table 1) , calculate the percentage increase in average university rent, in real terms, between 2015 and 2021.
Give your answer to one decimal place. [2 marks]
Calculation:
Cost of average rent in 20 15 at 20 21 prices: 121.16 X 1.12 = 135.
Increase in real average rent: 169.35 – 135.6992 = 33.
% increase in real average rent: 33.6508/135.6992 X 100 = 24.79 8
Correct answer: 24.8%
or
Cost of average rent in 2021 at 2015 prices: 169.35/1.12 = 151.
Increase in real average rent: 151.205 - 121.16 = 30.
% increase in real average rent: 30.045/121.16 X 100 = 24.79 8
Correct answer: 24.8%
or
169.35/121.16 X 100/112 = 1.24798 then subtract 1 and multiply by 100
Response Max 2 marks
For the correct answer, to one decimal place, with % sign: 24.8% 2 marks
For the correct answer but without the % sign and/or not to one decimal place: eg 24.8 or 24.798% OR For the correct method, but the wrong answer, to one decimal place, with the % sign OR For subtracting 12 from 39.8 to get 27.8%
1 mark
6
(^0 2) Explain how the data in Extract A (Figure 1 and Table 1) show that the supply of university and private rental accommodation has failed to match the increase in student numbers between 2015 and 2021. [4 marks]
Response Max 4 marks
4 marks
3 marks
2 marks
1 mark
Relevant issues include:
Allow a margin of error of +/- 100 000 MAXIMUM FOR QUESTION 02: 4 MARKS
8
Expected diagram
A supply and demand diagram is expected, showing a shift in demand to the right. It is also expected that the student’s diagram will show an inelastic supply curve.
Relevant issues include:
MAXIMUM FOR QUESTION 03: 9 MARKS
9
(^0 4) Extract C (lines 1 4 – 16 ) states that ‘A maximum rent can help keep the cost of student accommodation lower than it would otherwise be, but risks some landlords withdrawing from the market’.
Using the data in the extracts and your knowledge of economics, discuss the advantages and disadvantages of policies the government might introduce to improve the market for student accommodation. [25 marks]
Areas for discussion include:
The use of relevant diagrams to support the analysis should be taken into account when assessing the quality of the student’s response to the question.
Use the level mark scheme on page 4 to award students marks for this question.
11
(^0 6) Explain how the data in Extract D (Figure 2) show that, since 201 5 , living standards of people working in the private sector are likely to have increased compared to those working in the public sector. [4 marks]
Response Max 4 marks
4 marks
3 marks
2 marks
1 mark
12
Relevant issues include:
Allow a margin of error of +/- 0. 5 percentage points MAXIMUM FOR QUESTION 06: 4 MARKS
