What students need to learn:
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Content
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Students should be able to:
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Additional Guidance Notes
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Market failure
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Define and understand different types of market failure.
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Students should understand that market failure is when the price mechanism
causes an inefficient allocation of resources.
The types of market failure considered at AS level are externalities,
public goods, imperfect market information, labour immobility and unstable commodity
markets.
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Externalities
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Illustrate external costs and external benefits using marginal analysis,
distinguishing between the market and social optimum positions. The welfare
loss or gain areas are required.
Understand the impact of externalities and government intervention in
various markets, for example, transport, health
care, education, environment, waste disposal and recycling.
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Students are required only to illustrate the external costs from production
and external benefits from consumption.
Students should assess the costs and benefits from major investment
projects such as sporting events and transport infrastructure improvements.
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Public goods
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Explain why public goods may not be provided by the market.
Distinguish between public and private goods.
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Students should understand the free rider and valuation problems.
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Imperfect market information
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Distinguish between symmetric and asymmetric information.
Understand how imperfect market information may lead to a
misallocation of resources, for example, health care, education, pensions,
tobacco and alcohol.
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Labour immobility
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Understand geographical and occupational immobility of labour may
result in structural unemployment.
Assess government measures to reduce factor immobility such as
training programmes and relocation subsidies.
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Students should understand the significance of house prices for
restricting the geographical mobility of labour and the skills shortage for
restricting the occupational mobility of labour.
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Unstable
commodity markets
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Understand the causes and effects of fluctuating commodity prices on
consumers and producers.
Assess the impact of government intervention in the form of minimum
prices and buffer stocks. Use diagrammatic analysis for minimum prices and buffer
stocks.
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Students should understand how uncertainty in production (for
example, climatic) and time lags may affect supply and the significance of
price and income elasticity of demand.
Students are not expected to use diagrammatic analysis of the cobweb
model.
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Post by Oscar Maldives.
