Firms should be allowed to produce in the manner they wish and consumers allowed to buy what they believe they want. Discuss whether this is the best means of ensuring an efficient use of an economy's resources.

Mark scheme

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

1. [25] Explanation of meaning of efficient allocation and explanation of the analysis which ensures an efficient optimum may be reached. Distinction between productive and allocative efficiency. Individual actions are not always best for society as a whole. Discussion of reasons for market failure and necessity/desirability of government intervention to achieve efficiency. This could be by persuasion (nudge theory) rather than by enforcement. Nudge theory, originally an ethical idea not a government manipulative tool, involves designing choices to encourage decision making in wider positive interests of society. But it can be used in government context. Level 4 (18-25 marks): for a thorough explanation and a reasoned discussion dealing with both aspects of efficiency and possible reasons for market failure/government intervention. A conclusion should be drawn.