Sample 12 mark question (from past examiners report)

Question:

During music festivals and sporting events, such as football matches, higher numbers of
security staff are employed at stadiums than at other times. At supermarkets, more
employees are needed to sell an increased amount of groceries ahead of special holidays
and national celebrations. Technological advances mean that machines are increasingly
used in many industries, especially where it leads to greater productivity. These can range
from waiters being replaced by robots in restaurants, to automated services dealing with
online customer issues, to the more traditional machinery used in manufacturing. (c) With
reference to the data above and your knowledge of economics, evaluate the extent to
which derived demand affects the demand for labour. (12

Answer:

Derived demand is the demand for a good or service due to another good or service.

The demand for labour is affected by derived demand because if the demand for a product
increases, the product has to be produced more. This means that more labour is needed to
provide this increase in demand for a specific good. During a football match, more security
guards are needed. However, it could be argued that machinery could also replace certain
labour.

Another factor that affects the demand for labour is productivity. If workers can output
more, companies would want to hire them. Even though derived demand and skill exist, but
if a worker has a high rate of productivity, no extra workers are needed. But even if
productivity is high, extra machines and labour is needed.

Another factor that affects the demand for labour are the other employment costs. For
example, if a minimum wage is input into the system, the demand for labour would
decrease. This could lead to a higher investment of technology, from waiters being replaced
by robots, to automated services dealing with online customer issues. However, if the
demand for a product is extremely high and producers can still make more profit, then
labourers could still be hired.

Derived demand is the main reason for demand of labour, but the most important
consideration is if the company can afford all the extra labour. It might lead to diseconomies
of scale as the firm becomes too big. This means that average costs rise.

This answer scored 11 out of 12

Polluted air is said to cause over 1,000 deaths each year in Greater Manchester, UK. To
reduce the problem, an 800 km2 ‘Clean Air Zone’ (CAZ) has been proposed, where drivers
of certain vehicles would have to pay between £7.50 and £60.00 each day they drive on
roads in the region. All lorries, buses, taxis and vans that do not meet the emission
standards will be affected. It is hoped the tax will encourage vehicle owners to drive
vehicles that are more environmentally friendly. However, small business owners in
particular will be affected by the proposals. An ice-cream business, established over 100
years ago, stated costs would increase by £29 000 a year for its vans to use roads in the
region. It cannot afford to replace them and like many other firms risks going out of
business. (c) With reference to the data above and your knowledge of economics, evaluate
the effectiveness of government regulations in dealing with externalities such as air
pollution in Greater Manchester

The Government regulation is effective at dealing with externalities such as air pollution
because car owners would be encouraged to buy electric cars or switch to other methods
such as cycling. This could reduce the amount of deaths caused. The figure of 8,100 deaths
per year could decrease. Because the amount of money spent can reach up to £600.00 per
day, which would increase costs for businesses such as the ice cream business, whose costs
would increase by £29,000.

Another reason why it’s effective is that less people would be affected by the air pollution,
which can cause major health problems. This, which as a result would put a massive strain
on medical services such as the NHS, as they have to treat more health issues related to the
air pollution. So new technology maynhave to be used. However, the tax would disincentive
people from driving within the 800km² Clean Air Zone. And as a result, less people in Greater
Manchester would be victims to health issues related to the air pollution. Furthermore,
medical health services can be released of the strain.

On the other hand, the tax may have more negative effects for the government as more
small businesses would be affected by it as they aren’t able to switch all their vehicles to be
more environmentally friendly because they lack the funds. So instead, subsidies should be
used to help support small firms to make the switch to electric cars, for example, because in
the long run it could help maintain competition within the economy and as a result, there
would be less air pollution in the air, which would decrease the death toll that Greater
Manchester face.

Another reason why the government’s resolution may not be as effective is the firms or
small businesses such as the ice cream business, more benefit/unemployment benefits are
going to have to be paid as the businesses wouldn’t be able to handle the taxation for a long
period of time. Thus the unemployment benefits having to be paid could have been spent on
improving healthcare instead. Therefore, the government should place pollution permits
instead, because this would still reduce the amount of air pollution, but it doesn’t lead to
higher production costs for firms, therefore their businesses wouldn’t have to fail.

In conclusion, I think the government’s resolution of taxation is only effective in the short
term, as it depends upon how many small businesses are in the area compared to large. So
other techniques such as pollution permits and subsidies should be in use instead, because
it would help reduce the amount of air pollution but wouldn’t risk businesses going out of
business and becoming unemployed.

This answer scored 10 out of 12