Microeconomics
Extract B (lines 12–14) states that ‘The Universal Postal Service obligations require Royal Mail to deliver letters and parcels to all parts of the country six days a week’. With the help of a monopoly diagram, explain how the Universal Postal Service obligations are likely to affect Royal Mail’s costs and profits. (June 2017)
Extract E (lines 22–23) states that ‘The tendency for women to participate in low-productivity sectors is now a bigger factor in their low pay than discrimination’. With the help of a diagram, explain how the difference between the marginal revenue product of male and female workers might account for the lower average earnings of women. (June 2017)
Extract C (lines 10–11) states that ‘There is ample opportunity for new players to enter the sector.’ With the help of a diagram, explain how the lowering of barriers to entry in the banking market might lead to lower prices and a situation in which banks make normal profit. (June 2018)
Extract E (lines 4–5) claims that workers in the 18th century saw wages rise in line with productivity. With the help of a diagram, explain how advances in modern technology are likely to lead to rising wages in some industries. (June 2018)
Extract B (line 18) states that the global trade in sand has been ‘made possible by cheaper transportation’. With the help of a diagram, explain how cheaper transportation and a construction boom in East Asia have led to growth in the market for sand. (June 2019)
Extract E (lines 10–11) describes the British railway sector as a ‘natural monopoly’, which was split up into ‘no less than 100 pieces’ when it was privatised. With the help of a diagram, explain why breaking up a natural monopoly in rail may affect long-run average costs. (June 2019)
Extract B (lines 8–10) states: ‘many companies intentionally make it difficult to repair their products in order to increase sales. This is both economically inefficient and environmentally foolish; it imposes costs on the environment even though it may make sense for individual companies.’ With the help of a diagram, explain how the production of goods which are designed not to last long may result in market failure. (June 2020)
Extract E (lines 5–7) states: ‘Until the 1990s, almost all workers in the care sector were employed by the government, which acted as a monopsonist by keeping wages low.’ With the help of a diagram, explain how a monopsonistic public sector can lead to low pay for social care work. (June 2020)
Extract B (lines 9–10) states: ‘After the monopoly’s patent expires, other companies can manufacture and market the same drug under its generic name, usually at a lower price.’ With the help of a diagram, explain why prices of pharmaceutical drugs supplied by a monopoly are likely to be higher than in markets which are more competitive. (June 2021)
Extract F (lines 18–19) states: the Government ‘could also take steps to recognise foreign qualifications, thus removing obstacles for well-qualified foreign-born workers.’ With the help of a diagram, explain how UK firms not recognising foreign qualifications may lead to some ethnic groups receiving lower pay. (June 2021)
Extract C (lines 4–5) states that, as a result of trade union action, ‘The hospital trust increased their £8.21 minimum wage to the London Living Wage of £10.75.’ With the help of a diagram, analyse how a trade union might achieve higher pay for its members. (June 2022)
Extract E (lines 16–17) states that, ‘Supermarkets set prices interdependently, and price wars look very likely.’ With the help of a diagram, analyse the impact on grocery consumers of interdependence between supermarkets. (June 2022)
Extract C (lines 3–4) states that ‘the mining, manufacturing and disposal process for batteries could soon become an environmental disaster.’ With the help of a diagram, explain why the production and sale of lithium-ion batteries might lead to market failure. (June 2023)
Extract E (lines 19–20) states that ‘Some out-of-work benefits have not kept up with inflation, putting downward pressure on wages, contributing to the rise in in-work poverty.’ With the help of a diagram, explain how a reduction in out-of-work benefits may lead to lower wages in some labour markets. (June 2023)
Extract B (lines 3–4) states that ‘Universities have expanded the number of places on offer to students, but the supply of student accommodation is highly inelastic’. With the help of a diagram, explain the impact of the increase in the number of students attending university on the market for student accommodation. (June 2024)
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. (June 2024)
Extract B (lines 11–12) states that there is ‘no evidence of collusion between energy suppliers to date.’ With the help of a diagram, explain how collusion between energy suppliers could affect the retail prices paid by consumers. (Specimen)
Extract F (lines 9–10) states that ‘concentrating income in fewer and fewer hands eventually leads to bubble economies in which the prices of assets, such as houses and shares, rise continuously’. With the help of a diagram, explain how growing inequality might lead to a persistent rise in the price of houses. (Specimen)
Macroeconomics
Extract B (lines 17–19) states ‘India still protects its economy with anti-dumping measures and export subsidies that are designed to promote economic growth.’ With the help of a diagram, explain how export subsidies may help promote economic growth in India. (June 2017)
Extract E (lines 9–10) states ‘Improvements in productivity on the supply side of the economy could actually lead to more deflation.’ With the help of a diagram, explain how improvements in productivity could cause deflation. (June 2017)
Extract C (lines 8–9) states ‘Trade deficits and surpluses may be selfcorrecting in a floating exchange rate system.’ With the help of a diagram showing the supply of and demand for a currency, explain how a floating exchange rate may help to correct a trade surplus. (June 2018)
Extract E (lines 16–17) states ‘However, some argue that trying to maintain stable prices and low unemployment could create trade-offs.’ With the help of a diagram, explain why a trade-off between price stability and low unemployment might occur. (June 2018)
Extract B (lines 8–9) states ‘If injections into an economy’s circular flow of income increase, then this may generate multiple increases in GDP.’ With the help of a diagram, explain how an increase in injections may generate multiple increases in an economy’s GDP. (June 2019)
Extract E (lines 11–12) states ‘If growth could be increased, the budget deficit would fall much faster.’ With the help of a diagram, explain why a higher rate of economic growth is likely to reduce the budget deficit. (June 2019)
Extract C (line 19) states: ‘Improving workers’ productivity is the key to increasing real GDP’. With the help of a diagram, explain how improving productivity should lead to rising real GDP. (June 2020)
Extract E (lines 10–11) states: ‘US tariffs on $200bn of Chinese imports came into effect in September.’ With the help of a diagram, explain how the imposition of a tariff may affect the volume of imports. (June 2020)
Extract B (line 9) states: ‘The government spending cuts also severely damaged private-sector jobs.’ With the help of a diagram, explain how a reduction in government spending could increase unemployment in the private sector. (June 2021)
Extract E (line 14) states: ‘Investment in R&D has been an important driver of economic growth and industrial progress.’ With the help of a diagram, explain how investment in research and development (R&D) can help to increase the long-run growth rate of an economy. (June 2021)
Extract B (lines 18–19) states: ‘FDI can have many benefits. It should create employment, boost long-run economic growth and increase exports.’ With the help of a suitable diagram, explain how a rise in inward foreign direct investment (FDI) may lead to increased exports. (June 2022)
Extract E (lines 7–9) states: ‘It was hoped that policy measures, including a reduction in tariffs... would help to reduce inflation’. With the help of a diagram, explain how a reduction in tariffs could help to reduce inflation. (June 2022)
Extract C (line 13) states: ‘High economic growth rates allowed Ireland to run a budget surplus in 2018 and 2019.’ With the help of a diagram, explain how high economic growth could help to create a budget surplus. (June 2023)
Extract E (lines 4–5) states: ‘…banks in the UK decreased lending, reducing the availability of credit for households and firms. This damaged the real economy and created high unemployment.’ With the help of a diagram, explain how reduced availability of credit from banks may lead to increased unemployment. (June 2023)
Extract C (lines 4–5) states ‘Energy and food bills had risen dramatically due to shocks to the economy, such as labour shortages, a depreciation of the pound…’ With the help of a diagram, explain how a depreciation of the pound may cause inflation. (June 2024)
Extract E (lines 17–18) states: ‘A low rate of corporation tax has also contributed to both short-run and long-run economic growth.’ With the help of a diagram, explain how a low rate of corporation tax may cause short-run and long-run economic growth. (June 2024)
Extract B (lines 12–13) states ‘The Government last night released research suggesting a US-EU agreement sweeping away trade barriers would particularly benefit the automotive, financial and chemical sectors.’ With the help of a diagram, explain the extent to which the removal of a tariff might affect the volume of imports into the UK. (Specimen)
Extract E (lines 4–6) states ‘the UK may soon be growing at an annual rate of between 3 and 4% and the Bank could not be certain when it might need to tighten policy.’ With the help of a diagram, explain why interest rates may need to rise if growth rates increase. (Specimen)