Edexcel IGCSE Economics 1.1.6 externalities
Use this externalities set to define third-party effects, classify examples and apply social cost or benefit formulas in context.
- Syllabus
- First assessment 2019
- Course
- Economics 4EC1
Exam points
- Classify third-party effects as external costs or external benefits from the context.
- Apply social cost and social benefit formulas in short definition questions.
- Explain how externalities create inefficient resource allocation in data extracts.
Covered syllabus points
1.1.6 Externalities question 1
[Maximum number: 3]
Question (a)
(a)
What is meant by the term external benefit?
[ 2 ]
AO1 2 marks
Award up to 2 marks for a correct definition
A positive effect (1) enjoyed by a third party (1)
Accept any other appropriate response
(2)
Question (b)
(b)
State one example of an external cost.
[ 1 ]
AO1 1 mark
Award 1 mark for a correct example
- Pollution
- Congestion
- Environmental damage
Accept any other appropriate response
(1)
1.1.6 Externalities question 2
[Maximum number: 11]
Question (a)
(a)
Describe one reason why congestion is an example of an external cost.
Who should have the flu injection?
Flu is an unpredictable virus that can cause mild or unpleasant illness in most people. It can cause severe illness and even death among vulnerable groups, including older people, pregnant women and people with other health problems. These groups may, therefore, receive a free vaccination in the UK, to ensure they are protected against the virus. Although most people receive their vaccination from a public sector doctor, the UK Government has to pay private sector pharmacies to also provide this service. The cost to the UK Government of funding these vaccinations is over £100 m per year.
[ 2 ]
AO1 2 marks
Award 1 mark for reference to the reason and 1 mark for development of the reason
Congestion causes pollution (1) which harms the health of third parties such as pedestrians (1)
Accept any other appropriate response
(2)
Question (b)
(b)
With reference to the data in 'Who should have the flu injection?' and your knowledge of economics, assess whether the cost to the UK Government of
funding the flu vaccination can be justified.
[ 9 ]
AO2 and AO3
- Private benefits + external benefits = social benefits
- The flu injection is given to the most vulnerable groups because they are more likely to require further healthcare if they became ill from flu
- This further healthcare would also be a cost to the UK Government, and so it may be cheaper to prevent the problem with the vaccination in the first place
- By reducing the number of people who become ill from the flu, further health care costs may be avoided as there is less risk of the illness spreading
- By keeping people healthy, they are more likely to be able to continue working and contribute to the output of the economy
AO4
- The money spent on the vaccinations could be used for other healthcare needs
- It may be difficult to distinguish between the groups most in need of the vaccination, so not everyone receives the injection
- The vaccination may not work so health care costs may still rise
- It is difficult to quantify the costs and external benefits
- It depends on other factors whether people become ill
Level
Mark
Descriptor
0
No rewardable material.
Level 1
1-3
- Demonstrates basic knowledge and understanding by developing relevant points. Limited application of economic terms, concepts, theories and calculations (AO2).
- Information presented will lack selectivity and organisation. Interpretation of economic information will be limited, with a lack of analysis of issues (AO3).
- Only offers one viewpoint, meaning there is an unbalanced and incomplete evaluation, showing limited understanding and awareness (AO4).
Level 2
4-6
- Demonstrates partial knowledge and understanding by developing relevant points. Partial application of economic terms, concepts, theories and calculations (AO2).
- Information presented will demonstrate some selectivity and organisation. Interpretation of economic information will be good, with some analysis of issues (AO3).
- Offers more than one viewpoint but the argument may lack balance, leading to an evaluation that may not demonstrate full understanding and awareness (AO4).
Level 3
7-9
- Demonstrates clear knowledge and understanding by developing relevant points. Appropriate application of economic terms, concepts, theories and calculations (AO2).
- Information presented will demonstrate excellent selectivity and organisation. Interpretation of economic information will be excellent, with a thorough analysis of issues (AO3).
- Offers more than one viewpoint. The argument is well balanced and coherent, leading to an evaluation that demonstrates full understanding and awareness (AO4).
All question bank results loaded