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582 views4 pages

Paper-2-Effects-Of-The-Pandemic Ms

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alyasin.ics
Copyright
© © All Rights Reserved
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Paper 2

Microeconomic consequences of the pandemic data


response question
Markscheme
This markscheme provides students with guidance for what can be included in their answers and is
not a model answer.

Answer the following questions

a. (i) Define the term resources. [Text A, paragraph 1][2]

Resources are the factors of production (land, labour, capital and enterprise) used to produce goods
and services.

(ii) Using a production possibility curve (PPC) diagram, explain the effect on the allocation of
resources of factors of production moving from the office space market to the IT market. (Text A,
paragraph 1) [4]

As people have worked at home during


the pandemic there has been less demand
for office space and more demand for
goods and services related to IT such as
video communication. In the diagram, this
has caused a movement along the PPC
from A to B as resources have been
reallocated with X-X1 more IT units
produced with Y-Y1 fewer office space
units produced.

© Alex Smith
InThinking www.thinkib.net/Economics 1
b. Using a demand and supply diagram, explain how the efficiency gains amongst financial services
firms might affect the market price and quantity in the financial services market. [Text 1,
paragraph 3] [4]

As technology advances because of its


increased use in the pandemic, firms in
the financial services industry will become
more efficient. As firms in the industry
become more efficient this will cause the
market supply in financial services will
increase and shift from S to S1 leading to a
fall in price and increase in quantity.

c. (i) Define the term producer surplus. [Text C, paragraph 4] [2]

The producer surplus is the difference between the price firms in the market are willing to sell their
good or service for and the market equilibrium price.

(ii) Using a demand and supply diagram explain the impact the fall in demand for cinemas during
the pandemic has had on the producer surplus of firms in the cinema market such as Cineworld.
[Text C, paragraph 4] [4]

As the demand for cinemas falls during


the pandemic the demand curve in the
market falls from D to D1 in the diagram.
This leads to a fall in the producer surplus
in the market shown by the yellow
shaded area. Companies such as
Cineworld will receive a lower price P –
P1 and quantity Q – Q1 this will reduce
their producer surplus.

d. (i) State the relationship between cinemas and online streaming services such as Netflix. [Text
C, paragraph 5] [1]

Cinemas and online streaming services are substitutes.

© Alex Smith
InThinking www.thinkib.net/Economics 2
(ii) List two complements of online streaming services such as Netflix. [Text C, paragraph 4] [2]

Two complements for online streaming services might come from televisions, computers, tablets,
mobile phones, broadband subscriptions, mobile-internet subscriptions.

e. (i) Define the term negative externality. [Text C, paragraph 6] [2]

A negative externality is a spill-over cost on a third party resulting from economic activity.

(ii) Using and cost and benefit diagram, explain a negative production externality associated with
air travel. [Text C, paragraph 6] [4]

The production of air travel leads to


external costs at a local level as, for
example, the noise pollution from aircraft
taking off and landing at an airport is a
cost to local residents who live near the
airport.

f. Using information from the text and your knowledge of economics, evaluate the view that
improvements in technology because of the pandemic have increased economic welfare in
society. [15]

• Definition of welfare as the quality of life of different stakeholders (consumers, producers,


government and wider population in society).
• Explanation that improvements in technology have increased productive efficiency
(‘industries from financial services to law will see efficiency gains’) which leads to increased
supply and lower prices for consumers in some markets. This is shown in the diagram of the
market for financial services where S shifts to S1 as technology improves in the industry and
prices fall from P to P1 and quantity increases to Q1.
• Explanation that governments might gain as improvements in the IT sector increase
efficiency in the provision of public services such as healthcare (‘helped the healthcare
sector in areas such as organising the vaccination programme’).

© Alex Smith
InThinking www.thinkib.net/Economics 3
• Explanation that producers in some
markets will see their producer
surplus increase as efficiency
improvements (‘financial services to
law will see efficiency gains’) reduce
their costs. This is shown by the
diagram as efficiency improvements
in financial services shift S to S1 and
lead to a larger consumer surplus in
the industry shown by the yellow
shaded area.
• Explanation that wider society might benefit from improvements in IT as more people can
work from home which reduces the amount of car travel and this reduces the negative
externalities associated with car use.

Evaluation might include discussion of the problems advances in technology might have on different
stakeholders such as business failure as fewer people are travelling. This could reduce the amount of
air travel (‘air travel has been one of the hardest-hit industries’) resulting in business failure and
unemployment. Advances in technology might also mean some sectors decline because of increased
competition from online competition such as Cineworld closing cinemas because of competition
from Netflix (‘Cineworld has struggled, online media entertainment providers such as Netflix’).

Total [40]

© Alex Smith
InThinking www.thinkib.net/Economics 4

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