Jan 2009 Unit 1 Mark Scheme

7/30/2019 Jan 2009 Unit 1 Mark Scheme

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Mark Scheme (Results)January 2009

GCE

GCE Economics (6EC01) Paper 01

Edexcel Limited. Registered in England and Wales No. 449 6750Registered Office: One90 High Holborn, London WC1V 7BH


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6EC01 GCE Econom ic s 20901

Candidates can be awarded up to 3 marks for explanat ion even if the incorrect keyis used

Candidates can be awarded on maximum of 3 marks for ident if ying and explainingincorrect options

QuestionNumber

Answer Mark

1 A

A posit ive st atem ent i s an assert ion of a fact / can be proved ordisproved / value f ree (1 mark).

St atem ent 1 is posit ive as i t contains somet hing (air quali t y) whi chcan be test ed. (1 mark).

A normat ive st atement is a value j udgement / cannot be t est ed ast rue or f a lse (1 mark) .

Statement 2 is normative as i t contains the value judgement of unfa i r (1 mark) .

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QuestionNumber

Answer Mark

2 C

A general understanding of t he price m echanism e. g. invisible hand /in teract ion of supply and demand / a l locat ion of r esources (1 mark)

An increase in demand for a good wil l lead to a r ise in i ts price ( 1mark) which provides an incent ive for pr oducers t o expand / raisesupply / more prof i t s can be made (1 mark)

Also, a decrease in demand for a good wil l lead to a fal l in i ts price(1 mark) and so producers contr act / reduce supply / less prof i t s canbe made (1 mark) .

Also award: Relevant diagram which shifts the demand curve and shows impact

on price and pr oducer supply (up to 2 marks)

(1)

QuestionNumber

Answer Mark

3 B

Defin i t ion of producer surplus ( t he d i f f erence bet ween t he pr iceproducers are wi l l i ng t o supply a good for and t he actual m arketpr ice) (1 mark).

Annot ati on of diagram whi ch shows t he new area of producersurplus (1 mark)

Original producer surpl us ( in w int er) is P1YZ (1 mark) .New l evel of prod ucer surpl us is P2XZ (1 mark) .

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(3)

Price

S

D

D1

Qe Q1

P1

Pe


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QuestionNumber

Answer Mark

4 A

Defin i t ion of pr ice e last ic i ty of demand or i t sfor mul a (t he responsiveness in dem and for agood due t o a change in i ts price or t hepercent age change in demand divid ed by t hepercentage change in pr ice) or def in i t ion of t ota lrevenue(1 mark) . Note: only award 1 mark f ordef in i t ions.

Original t ot al revenue is 2 mil l ion 25 = 50mi l l ion (1 mark) .

New t ot al revenue is 2.8 m il l ion 20 = 56mi l l ion (1 mark) .

Also award: Demand ri ses by 40% or pr ice f all s by 20% (1

mark) Demand is price elast ic so t ot al revenue wil l

increase i f pr ice f a l ls (1 mark).

Note: Expect t o award full marks if calculationsand correct option selected

(1)

(3)

Question

Number

Answer Mark

5 C

Defin i t ion of income elast ic i ty of demand or i tsfor mul a (t he responsiveness in demand f or a gooddue to a change in income or, t he percent agechange in demand divid ed by t he percent agechange in i ncome) ( 1 mark).

Fizzy drinks are an inf erior good (1 mark) Inferior goods have a negat ive income el ast icit y

of demand (1 mark).

Normal goods have a posit ive income elast icit y ofdemand / appl icat ion of data to normal goods (1mark)

Also award: Numer ical appli cat ion such as a 10% ri se in

incom e wi ll cause a 2. 4% decre ase in dem and forf i zzy drinks (1 mark) .

Diagram depict ing an inferior good (1 mark)

(1)

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QuestionNumber

Answer Mark

6 D

Definit ion of public good (a good which has non-rivalry and non-excludabil i ty characterist ics) Alsoaccept non-re j ectable (1 mark).

Explanat ion of the f ree r ider problem (once apublic good is provided, i t is impossible toprevent people who have not paid i t consuming i t )(1 mark) and fur ther development which mightinclude an example such as street l ighting,pavement, national r iver f lood scheme, seadefences (1 mark)

I t is very hard to quant i fy and at tach monetaryvalues to the quantity of a public good eachindividual consumes (1 mark) .

Also award: Public goods would be under-provided for i f left

to t he market (1 mark).

(1)

(3)


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QuestionNumber

Answer Mark

7 A

Definit ion or understanding of NMW e.g. legalminimum that employers must pay to workers ( 1mark) .

Original unemp loyment / excess supply N1N3 (1mark)

New unemploym ent / excess supply N3N4 (1 mark)The above t wo p oint s may be show n on t he diagram

Employment fa l ls / demand for labour fa l ls f romN1 t o N3 (1 mark)

Supply of labour i ncreases fr om N3 t o N4 (1 mark)Also award: Explanation that an increase in NMW may increase

production costs and also increase incentives towork (up to 2 marks)

Note: Award marks if candidate clearlyunderstands that excess supply /unemployment has increased but appears

confused by the mislabelli ng of t he quant it yaxis of t he diagram.

(1)

(3)

QuestionNumber

Answer Mark

8 B

Explanat ion of asymmet r ic in f ormat ion(consumer s have less market knowl edge thanproducers) (1 mark) .

Applicat ion e.g. consumed m ay not knowappropr iate dental t reatment (1 mark). Anyfur t her development which might inc ludeanot her example (1 mark)

The producer may act in self- interest byconduct ing more t reat ment in order to gain morerevenue / p ro f i ts (1 mark).

Also award: Asymmet r ic in f ormat i on is an example of market

fa i lu re (1 mark)

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QuestionNumber

Answer Mark

9(a) Knowledge, application and analysis (up to 7marks)

Defin i t ion of opportuni ty cost or impl iedunderstanding (the value of the next besta l ternat i ve foregone) (1 mark) .

Development of opportuni ty cost e.g. l imi tedresources / scarcit y (1 mark)

Government contr ibut ion per student to tu i t ionfees is 4,300 per year; the next best alternativefor government could be: low er taxes / morefunds available for other areas of spending such

as prim ary educat ion or healt hcare / possibledecrease in government borrowing. (Up to 3marks) .

Student contr ibut ion to tu i t ion fee a lone is up to3,000 per year; the next best a l ternat ive forst udent s could be: not going into debt / spendingthe tu i t ion fee money on something e lse / gett ing a job and earning income instead ofst udying / increased le isure t ime. (Up to 3marks) .

Also award: Diagrammatic analysis or opportunity cost on a

product ion possib i l i t y f ront ier (2 marks)

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QuestionNumber

Answer Mark

9(b) Knowledge, application and analysis (up to 5marks)

Defin i t ion of product ion possib i l i t ies ( t hemaximum output an economy can achieve whenal l i t s resources are fu l ly / ef f ic ient ly empl oyed)(1 mark) .

Understanding of an increase in output /educat ion is a capi t a l or invest ment good / leadst o h igher sk i l ls / or product iv i t y of workf orce / the economy could become more compet i t ive.(Up to 3 marks) .

Diagram showing outward shift in productionpossibi l i t ies (1 mark) plus relevant labell ing (1mark). For example: capit al / consumer goods,or , ref erence t o educat ion / economy

Note: i f no d iagram, award a maximum of 3marks in t his secti on.

Evaluation (up to 3 marks for one evaluation pointwell developed, or 2+1) Magnit ude of t he expansion of higher educat ion.

Types of expansion in higher education. Is itvocational or science based?

Li t t le impact in short- run and i t could take manyyears before any outward shift in productionpossibilit ies.

Impact may not be that s igni f icant i f o thereconomies invest even more in higher educationt han the UK.

Where did government obtain funds for highereducation expansion was it from cutt inginvestment elsewhere or did taxes have toincrease? Award for an understanding of acurrent sacr i f ice.

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QuestionNumber

Answer Mark

9(c) Knowledge, application and analysis (up to 8marks)

Defin i t ion of external benef i ts (benef i ts externalt o an exchange / benef i t s ignored by the pr i cemechanism / posi t ive th i rd part y ef fect s / d i f f erence between pr ivat e and social benef i t s / posit ive spi l l over eff ect s) (1+1 marks).

Ident i f icat ion and explanat ion of two externalbenef i ts f rom higher educat ion (2+2 marks) .These include:

Increased competit iveness for UK economysuggested by Figure 1 on academic research.

Innovation and invention is more l ikely,developing new products. UK has two universit iesin Top 10 and tw ent y-nine in Top 200.

Increased profi ts for f irms since: higherproductivity of graduates mean higher revenue.Also there could be lower training costs for f irmsif graduat es alr eady possess vocat ional skil ls.

Improved government f inances since: increase intax revenue from higher earnings of graduate /increase in business tax revenue as firms makemore prof i t s / less l ike l ihood of graduat escla iming unemployment benef i t s.

Ind i rect employment / income e f fec ts fo r f i rm swhi ch cater for st udent s e.g. b ookshops, b ars andproperty renta l . These are not part of the in i t ia lexchange.

Note: Do not award for increased national output.

Diagram (External benefits identified in between

pri vate and social benefi ts up t o 4 marks)

MSB

MPB

Quantity of educational services

Price

ExternalBenefits

MPC=MSC

P2

Pe

Qe Q2


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MPC = MPB (1 mark) Add o n MSB curv e (1 mark) Ident i fy market equi l ibr ium and socia l opt imum

(1 mark) Ident i f y wel f are gain (1 mark)Note: If no diagram, award up to 6 marks in thissection.

Evaluation (up to 4 marks for one well-developedpoint or 2+2 marks) Explanation of tr iangle of welfare gain as an

evaluative point, where social benefits exceedsocial cost s for an increm ent al output .

The increase in profi ts for f irms may not be sosignif icant since graduates are paid more thannon-graduates. I t depends on the differencebetw een the ext ra revenue and extr a cost s f romempl oying graduates.

The improvement in government f inances mayoccur only in the long run since it is st i l l fundinga s igni f icant proport ion of tu i t ion fees forgraduates; also, repayment of student loans onlyoccur after graduates are in employment above acerta in income level .

The indirect employment and income ef fectsfrom higher educat ion may be speci f ic t o certa inareas and industr ies, for example, universitytowns and bookshops. Also, there would beindirect ef fects i f people d id not study in h ighereducation so the net difference should beconsidered.

Prior i t ize bet ween the t wo external benef i t s.

Magnitude of external benefits.

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Level Mark Descri pt or

Level 1 1-2 Def in i t ion or ident i f icat ion of t wo external benef i t s. No diagramor explanation.

Level 2 3-4 Def in i t ion or ident i f icat ion of t wo external benef i t s. No diagramor explanation.

Level 3 5-8 Def in i t ion and explanat ion of t wo external benef i ts wi t h d iagram.(Mark cap 8 i f no evaluation)

Level 4 9-12 Convincing explanation of t wo ext ernal benefit s wi t h diagram;one evaluat ion point (w el l developed) or t wo or more point s.


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QuestionNumber

Answer Mark

9(d)(i) Percent age change in t uit ion fees from 2005 to2006 is:

3,000 - 1,175 100 = 155.3%---- - - - - - - - - - - - - - - - -1,175

Note: correct answer (accept 155%) (2 marks) Note: correct w ork ings but incorrect answer (1

mark)

(2)


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QuestionNumber

Answer Mark

9(d)(ii ) Knowledge, analysis and appli cat ion (up to 4marks)

I t has become m ore expensive t o aff ord highereducat ion / at end of t hree year course st udentswi l l be in a lo t o f debt (1+1 marks)

Demand for higher education may fal l (1 mark) Data applicat ion: dem and fel l by 3% fr om

522,155 to 506,304 (up to 2 marks)

Anot her signif i cant incr ease in tui t ion fees ispredicted in 2010 according to t he extract ( f rom3,000 a year t o 6,000 a year - a doubl ing in

fees) (1 mark).

Appl icat ion of pr ice e last ic i t y of demand (1mark)

Evaluation (up to 3 marks for one evaluation pointwell developed, or 2+1) Figure 1 indicat es t hat only a t emporar y drop in

st udent appl icat ions for 2006 / t he t rend depictsmore grow t h fr om 476,467 in 2003 t o 540,108 in2008 (13.3%) (1+1 marks) .

I t suggest s t hat hi gher education st i l l represent sgood value for money / t he government is st i l lsubsidising t uit ion f ees / by 4,300 per year /graduat es st i l l earn wel l over 100,000 more overa l i f e t ime t han non-graduat es (2 marks).

Tuit ion fees are only part of t he tot a l cost ofh igher educat ion for st udents

Discussion of t he expected doubl ing of t uit ionfees in 2010. This could have a sim ilar ef fect t o

t hat of 2006 but not r educe the underl yingt rend of growing appl icat ion numbers.Alter natel y, perhaps t his large increase wi l l havea signif icant impact on reducing applicationssince it im plies a doubling of st udent d ebt ( 2marks).

Dif f erent i mpact on d i f ferent income groups e.g.low i ncome groups may suff er mor e t han highincome groups. It depends on addit ional grantsavailable.

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QuestionNumber

Answer Mark

9(e) Knowledge, Applicat ion & Analysis: (up to 6marks).It may do more good since: (2+2+2)

Students Students might take their educat ion more

seriously and work harder / since t hey makesigni f icant f inancial contr ibut i on. (1+1 marks) .

St udent s learn t o manage thei r f inances (1 mark) Improved qual i ty of educat ion for st udents / for

example, lower teacher-student rat io, moresupport services, more IT funding per student(1+1 marks).

Lower student drop-out rat e f rom universi t y / soless l ikel y t hat a year is wast ed (1+1 marks).

Students might select courses which wil lgenerate earnings potent ia l in fut ure / forexample, science based courses or vocationalcour ses (1+1 marks).

According to the research in Extract One,students st i l l gain more income over theirl i fe t ime wi th a degree compared to A Levels

(160,000) / so can af ford t o pay more in tu i t ionf ees / especial ly as back loaded so only payonce in employment (1+1 marks) .

Universities Increase total funds for universit ies to improve

qual i ty of educat ion / resources / st af f pay / t eacher-st udent rat io (1+1 marks) .

Universi t ies might become more innovat ive / forexample, more research proj ect s or use of new

t echnology (1+1 marks) .

Universit ies might increase eff iciency sincest udent cust omers pay more / universi t iesdirect l y responsib le t o t heir cust omers / providemor e learni ng support services (1+1 marks) .

Fal l in st udent numbers / st af f ing impl icat ionsNote: I f only students considered and notunivers i t ies, award a maximum of 4 marks in th issection (vice-versa).

Evaluat ion: (2+2+2 marks)


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NB Arguments for and against an increase intuition fees can be regarded as evaluation, and sono cap applied here.

Problems (harm) could arise since: Increase inequali ty as fewer low income students

enrol f or universi t y .

University revenue is inf luenced by priceelast ic i t y of demand for tu i t ion

Increase student debt levels: signif icantincreases in student contr ibutions are l ikely extract ment ions i t wi l l have to increase to atleast 6000 per year b y 2010.

Problem of non-payment of student loans fortuit ion fees extract indicates almost at 1bi l l ion.

Time lag between student loan for tu i t ion feesand repayment in work. Meanwhile governmentfinances could worsen. Less funds made availablefor uni versit ies?

Insuff icient high ski l led jobs available forgraduates compared to less ski l led jobs for non-graduates. Unemployment may r ise forgraduates.

Government may not achieve target of 50% ofyoung people in higher education by 2010.Discussion of t his target as being arbit rary.

Government might be tempted to reduce i ts owncontr ibutions and so no extra funds foruniversit ies.

Univers i ty income from tu i t ion fees st i l l too low(7,400) to compete with US higher education

system (11,500). Figure 1 reveals that UK is wellbehind the US in terms of academic research(however, i t is in f r ont of other countr ies) .

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Level 1 1-2 Ident i f icat ion of one or more re levant points but no explanat ion

Level 2 3-4 Explanat ion of t wo or more re levant points but no evaluat ionoffered. (Mark cap to 6 i f no evaluat ion).

Level 3 5-8 Explanat ion of t wo or more re levant points wi t h l im i t edevaluation.

Level 4 9-12 Convincing explanation wi t h t wo or more evaluation point s.


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QuestionNumber

Answer Mark

10(a)(i) 67.5 bi l l ion 81.5 bi l l ion---------- ---------- --------- -- 100 = -17.18%81.5 b i l l ion

Note: c orr ect answ er ( accept -17% or 17. 2%,wi t hout mi nus sign) (2 marks)

Note: correct w ork ings but incorrect answer (1mark)

(2)

QuestionNumber

Answer Mark

10(a)(ii) Knowledge, Applicat ion & Analysis: (up to 6marks).NOTE: Focus should be on tobacco retailers

Ident i f icat ion of two ef fects (1+1 marks)This could include impact on revenue, profi ts,employment, invest ment , d iversi f icat ion andeff ic iency.

Development of t he tw o ef fect s (up to 4 marks) Fal l ing revenue / prof i t s: t h is could lead t o the

ret ai lers exit ing (especial ly t obacconist s) t hemarket and sacking st aff .

Accept diagrammat ic analysis which shows aninward shi f t of demand curve (1 mark) andfal l ing pr ice (1 mark)

Diversi f icat ion int o of f er ing other products,especial ly i f m ore shelf space is now available f ort hings l ike sweet s and drink.

Cut cost s in order t o maint ain profi t s. Forexample, t his mi ght involve sacking st aff ,reducing pay or changing opening hours.

Less funds available f or invest ment , f or exampl e,improving shop front or layout of store.

Idea of l i t t le im pact since the decl ine is over along per iod of t i me / ret a i lers sel l many otherproducts than j ust t obacco.

Demand i s price-i nelast ic so ret ai lers may r aisepr ice to main ta in revenue / p ro f i ts

Appl icat ion of t he data, ref err ing to 17% fa l l int obacco consumpt ion / 14 b i l l ion c igaret t es (1mark)

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QuestionNumber

Answer Mark

10(a)(iii ) Knowledge, Appli cat ion & Analysis: (up to 6marks)

Definit ion or formula of cross elasticity ofdemand (1 mark)

Use of extr act , e.g. l ines 10/ 11 refer to n icot i nepatches and gum m ay reduce dependency ontobacco (1 mark)

Cigarettes and nicotine replacement products aresubst it ut es / wi t h a posit ive cross elast icit y ofdemand (1+1 marks) .

Complementary goals have a negative crosselast ic i t y of demand (1 mark).

Appl icat ion: a r ise in pr ice of n icot ine gum w i l lcause a r ise in demand f or cigarett es or a fa l l inpr ice of n icot i ne gum w i l l cause a fa l l in demandfor c igaret tes (2 marks). Al ternat i vely, award 1mark i f candidate ref ers t o a change in price oft obacco on the demand for n icot ine replacementproducts.

Diagram depict ing the relationship (1 mark).Candidates do not need diagram f or complet emarks.

Evaluation (2+2 marks or 3+1 marks).

Weak / low posi t ive re lat i onship since n icot inereplacement product s are poor subst i t ut es /some replacement products are m ore ef f ect ivethan others.

Weak / low posit ive relat ionship since t obacco ishighly addict ive.

Nicotine replacement products may even beoff ered f ree on NHS yet many people st i l lsmoke cigarett es.

Some smokers do not want t o give up so l i t t leim pact here / XED = 0.

Nicot ine r eplacement products are unl ike ly t oimpact on people j ust st ar t ing t o smoke or whosm oke f or social r easons.

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QuestionNumber

Answer Mark

10(b) Knowledge, Applicat ion & Analysis: (up to 7marks)

Defin i t ion of indirect t ax (a government levy orcharge on t obacco) (1 mark) .

Ident i f icat ion or reference to d i f f erent t ypes oftax (1 mark).

Tax has eff ect of i ncreasing cost s t o producerswho t ry and pass on to consumer s in t he form ofhigher pri ces (1+1 mark).

Also reference to f a l l ing prof i t s which lead t oless output and hence less consumption (1mark).

Explanat ion of d iagram / ef f ect in t erms ofincreasing price and reducing quant it y demand (1

mark) . Data appl icat ion e. g. UK has 4.03 tax per packet

of c igaret t es (1 mark).

Diagram (4 marks) Inward shif t in supply curve (accept paral l el or

p ivota l shi f t ) (1) Tax incidence f or consumer s and producers (1) Overall t ax area (1) Orig inal and new equi l ibr ium pr ice / quant i t y

shown (1)

Demand curve drawn relatively price inelastic(1)

Price perunit

Quantity per time period

S1

S2

D

Q1 Q20

P2

P1P0

X

Y

Z


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Note: Accept MPB / MPC / MSC approach for adiagram, but they need to show the imposit ion ofa tax on MPC curveNote: If no diagram award a maximum of fivemarks for this section

Evaluation (3+2 marks for two well developedpoint s or 2+2+1 marks) Cigarett es are addict ive and so demand i s l ikel y

t o be pr ice inelast ic . This impl ies t axat ion maybe ineff ect ive in reducing smoking and a veryhigh tax is requir ed to have an im pact.

Magnit ude of t he t axes on cigaret t es: t his is verylarge and so must have a signif i cant ef fect onreducing smoking.

Taxat ion may be inef fect ive for social lydisadvantaged groups as m any st il l smok e.Poorer smokers may l ack access t o t reat ment sfor qu i t t ing.

Dif f icu l t t o determine im pact of h igh taxes oncigaret t es fr om ot her f actors causing a decreasein demand (demand est imat ion problem).

The high taxes have encouraged tobaccosmuggling. This may repr esent a governmentfai l ure since considerable loss of t ax revenue

according to HMRC.

The Tobacco Manufacturers Association estimatet hat 27% of al l ci garet t es consumed in 2006 werenon-UK dut y paid. This im plies t hat many wer ebreaking the law .

(12)


Level 1 1-2 Def in i t ion of indirect t ax and/ or recogni t i on of increasing pr ice oftobacco.

Level 2 3-4 Diagrammat ic analysis whi ch accurately depict s a decrease in

supply and t ax incidence or area. (Mark cap t o 7 i f no evaluati onoffered).

Level 3 5-8 Diagrammat ic analysis whi ch accurately depict s a decrease insupply and tax incidence or area. Limited evaluation offered.

Level 4 9-12 Convincing diagrammat ic analysis wi t h t wo or more evaluationpoints.


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QuestionNumber

Answer Mark

10(c) Knowledge, analysis and appli cat ion (up to 7marks)

At least two benefits required for awarding theseven marks available in this section. (4+3 or3+2+2 marks).

Increase in heal th of w orkforce / lessabsenteeism from work: th is could lead togreater productivity means more revenue,prof i t s and lower cost s of pr oduct ion for f i r ms.

Reduction in demand for smoking relatedhealthcare services: this could mean areallocation of resources to other areas of

healthcare. Perhaps a real location of resourcesto other areas of government spending, forexample, educat ion and t ra in ing.

Improved government f inances: greater incomet ax revenue col lected f rom heal t h ier workf orce / less government spending on NHS. It may enablethe government to cut taxat ion or reduce i tsdebt .

Increase in l i fe expectancy for people: this raisesquali ty of l i fe. Also, i t means higher earnings

pot ent ial over a l i fe span for households.

Also accept reduction in external costs: less airpol lut ion / less passive smoking / drop in cancerrates / less l i t t er / less r isk of f i re in bui ld ings.

Note that candidates may refer to pr ivate andexternal benefits here this is total ly acceptable.Some candidates may i l lustrate by diagram whereMSB is t o t he lef t of MPB (2 marks)

Evaluation (3+2 marks for two well developedpoint s or 2+2+1 marks).

Increase in health of the workforce is more of along term trend. Also, some people may not beable to work proper ly wi t hout c igaret t es!

Reduction in demand for smoking relatedhealthcare services is l ikely to be offset by anincrease in other il lnesses as people live longer,for exam ple, art hri t is and Alzheimer s disease.

Government f inances may worsen since lesstobacco tax revenue and more spending on state


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pensions as peopl e li ve longer.

Loss of trade in pubs, clubs and restaurants assmokers st ay at home. Tobacco companies suff erfrom fal l ing sales and profi ts. Unemploymentmay r ise in the l eisure indust ry.

Magnitude and pr ior i t isat ion of the benef i ts / short run versus long run.

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Level 1 1-2 Ident i f icat ion of one or t wo benef i t s wi t h no explanat ion.

Level 2 3-4 Explanati on of t wo or mor e benefit s but no evaluation. (Mark capt o 7 i f no evaluat ion of f ered).

Level 3 5-8 Explanat ion of t wo or more benef i t s wi t h l imi t ed evaluat ion.

Level 4 9-12 Convincing explanat ion of t wo or more benef i ts wi t h t wo or more

evaluation points.


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6EC01 GCE E i 21

QuestionNumber

Answer Mark

10(d) Knowledge, analysis and appli cat ion (up to 4marks)

Defin i t ion of asymmetr ic in format ion (when oneparty has less market knowledge than the otherparty usually consumers have less knowledget han producers) (1 mark).

Explanati on w hy one part y (consumer s) have l essmarket knowledge than producers (up to 3marks for one point well developed or 2+1 fortwo or more points) .

Some consumers may not be ful ly aware of thedangers from tobacco smoking to their healthand so conti nue t o smoke.

Consumers may be less aware of low t ar / hight ar t obacco brands.

Some consumers simply do not believegovernment healt h warni ngs / see some heavysmok ers reach old age.

Many consumers lack medical knowledge whereas producers can employ medicalspecial ists and scient ists.

Some consumers may not be aware of dangers ofpassive smoking.

Some consumers may withhold information aboutt heir smoking e. g. f or insurance purposes.

Asymmetr ic in format ion may vary betweencountries, for example less developed countr iesare l ike ly to suf fer f rom lack of marketknowl edge on smoking.

Evaluation (up to 2 marks for any one point) Asymmetric information does not exist here since

most consumers are aware of dangers fromsmoking but are addict ed.

Most consumers l ikely to be aware of dangersfrom smoking due to public health campaignse.g., education in schools and adverts andwarni ngs & pict ures on cigaret t e packets.

Time span smokers believe they may not getcancer unt i l la ter in l i f e / do not consider the

issue unti l the long term.

(6)

Documents

Jan 2009 Unit 1 Mark Scheme