Session 4:

Unit 1 Data Response Questions

Ray Powell

Questions on Markets &Market Failures

Unit 1 data response question papers usually contain 2 questions covering:

Question 26: a market (or markets)

Question 27: market failure(s)

How Data Response Questions are structured in the Unit 1 & Unit 2 exams

[01] Define the term

[02] Compare (or possibly identify)

[03] Explain

[04] Evaluate (or possibly assess, or possibly Do you agree? . .Justify your answer.

Identify two points of comparison between the changes in the price indices for coffeeand tea over the period shown by the data in Extract A. (8 marks)

Extract A

Part [03] of a Data Response Questionon a Market

Part [03] of a question on markets may require candidates to perform 3 tasks:

• Draw an S & D diagram to show an equilibrium

• Identify a factor shifting the S or D curve

• Illustrate and explain the effect of the shift

• Monopoly• Merit goods and Demerit goods• Public goods• Externalities• Income and wealth inequalities

The Data Response Question onMarket Failure

Usually one of the two Data Response Questions in the Unit 1 exam is on a well-defined market failure. The main types of market failure are:

These diagrams can be used to illustrate ‘bad’ and ‘good’ Monopoly

Merit Goods & Demerit Goods

Public goods and private goods

Practise drawing diagrams such as this one:

And this one: Resource misallocation and negative externalities

The effect of consumers possessing imperfect information(information failure)

Returning to the final part of a Unit 1 data response question, three types of format are commonly used

Type 1: Focusing on the role of market forces

Type 2: Focusing on a particular type of government intervention

A variant of Type 2, focusing on methods of government intervention to correct examples of market failure

Type 3: Questions asking for an evaluation of the case for and against government intervention to deal with a problem, but without specifying any particular type(s) of intervention