Economic theory produces a precise equilibrium outcome, often in an idealised market situation, but in reality things are much less certain. Discuss whether this opinion can be applied to the determination of wage rates.

Mark scheme

Marking points from the official mark scheme (May/June 2017). The mark or mark type is shown in brackets.

1. [25] Candidates should comment on the fact that in the factor market there may be a precise outcome in perfect competition but that wages are not solely determined by supply and demand when there is imperfect competition. They should then discuss how the outcome may be changed in the imperfectly competitive model to accommodate trade unions and the government.
2. [25] Level 4 (18-25 marks): for a critique of the statement and a thorough explanation of the analysis of wage determination with a clear comparison of perfect and imperfect markets, mentioning trade unions and the government. There should be a conclusion and a well-structured answer. Must have MRP to reach L4.