Edexcel IGCSE Economics 1.2.6 government intervention
Use intervention questions to connect fines, subsidies, competition regulation and minimum wages to incentives and stakeholder outcomes.
- Syllabus
- First assessment 2019
- Course
- Economics 4EC1
Exam points
- Explain how fines, subsidies, regulation or taxes change incentives and outcomes.
- Evaluate intervention using effectiveness, opportunity cost and stakeholder impacts.
- Apply minimum wages or competition rules to wages, firms, consumers and employment.
Covered syllabus points
1.2.6 Government intervention question 1
[Maximum number: 1]
Define the term fine.
AO1 1 mark
Award 1 mark for a correct definition
A financial penalty
Accept any other appropriate response
(1)
1.2.6 Government intervention question 2
[Maximum number: 9]
A ban on single-use plastic bags has been in place in Kenya for more than five years. It has led to a cleaner environment, as plastic bags were causing visual pollution and endangering the lives of livestock that consumed them. However, the ban has not been effective in totally removing the problem.
With reference to the data above and your knowledge of economics, assess the effectiveness of government regulation when dealing with externalities such as pollution.
Question
number
With reference to the data above and your knowledge of economics, assess the effectiveness of government regulation when dealing with externalities such as pollution.
Indicative content
2(g)
AO2 (3 marks)/AO3 (3 marks)/AO4 (3 marks)
AO2 and AO3
- Negative externalities are spillover effects on third parties due to consumption/production
- Pollution is an example of a negative externality because its effects are felt by those not producing or using the plastic bags
- One method of government intervention to reduce negative externalities is the use of regulation
- Regulation, such as the ban on single-use plastic bags, will limit the amount of pollution produced and reduce the externalities due to penalties if it is not followed
- The ban in Kenya has led to a cleaner environment as the reduced consumption means the visual pollution and danger to livestock is less of a problem
- Therefore, the regulation has been quite effective in reducing the negative externality
A04
- However, the regulation has not solved the problem of pollution in Kenya
- It costs money and takes time to monitor any illegal activity, causing an opportunity cost
- The effectiveness of the regulation depends on the level of enforcement by the government and cooperation from the public
- There are likely to be other problems, aside from plastic bags causing pollution in Kenya, which may need to be addressed by other methods than regulation
- Other methods of government intervention may be more effective, such as fines or taxation
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).
1.2.6 Government intervention question 3
[Maximum number: 3]
When a firm increased its prices, many consumers stopped buying its products.
In April 2023, the Competition and Markets Authority (CMA), the competition regulator in the UK, prevented the purchase of Activision by Microsoft. Microsoft already controlled about 60-70% of the market for online video gaming.
Explain one reason why the CMA may have made this decision.
AO2 3 marks
Award 1 mark for identifying a relevant reason
Award 1 mark for developing the reason
Award 1 mark for the response being in context
- In order to prevent monopoly power (1) and so promote competition (1) as a firm with over 60% of the market may be less likely to innovate (1)
Accept any other appropriate response
(3)
Question
number
With reference to the data above and your knowledge of economics, analyse how an increase in demand for furniture made of wood may affect the demand for woodcutters.
Indicative content
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