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Understanding Market Forces and Failures: Data Response Strategies for Unit 1 Exam

This guide outlines the structure and strategies for tackling Data Response Questions in Unit 1 and Unit 2 economics exams, focusing on markets and market failures. It explains common question formats, such as defining key terms, providing comparisons, and evaluating market mechanisms. The guide highlights essential types of market failures including monopoly, public goods, externalities, and income inequalities. Additionally, it offers tips for diagramming supply and demand shifts alongside relevant examples, aiming to enhance exam preparation and understanding of economic principles.

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Understanding Market Forces and Failures: Data Response Strategies for Unit 1 Exam

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  1. Session 4:Unit 1 Data Response QuestionsRay Powell

  2. 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)

  3. 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.

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

  5. 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

  6. The Data Response Question on Market 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: • Monopoly • Merit goods and Demerit goods • Public goods • Externalities • Income and wealth inequalities

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

  8. Merit Goods & Demerit Goods

  9. Public goods and private goods

  10. Practise drawing diagrams such as this one:

  11. And this one: Resource misallocation and negative externalities

  12. The effect of consumers possessing imperfect information (information failure)

  13. 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

  14. Type 2: Focusing on a particular type of government intervention

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

  16. 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

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