O-LevelEconomicsThe allocation of resources2281/22 · Oct/Nov 2022 · Q420 Marks

Advances in technology have changed how trees (wood) are cut down, transported and used in the manufacture of furniture, such as tables. Wood is in inelastic supply. Wood can be supplied in all economic systems. However, public goods are not supplied in a market economic system.

(a)Define inelastic supply.[2]
(b)Explain why public goods would not be supplied in a market economic system.[4]
(c)Analyse, using a demand and supply diagram, the effect on the market for furniture of an increase in the price of wood.[6]
(d)Discuss whether or not advances in technology will benefit a country's population.[8]

This question uses a diagram from the original paper, which isn't shown here. Open the full paper from the past papers archive to see it.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2022). The mark or mark type is shown in brackets.

[2] Quantity supplied / supply changes by a smaller percentage change than price (2); Supply changing by less than price / PES less than 1 / PES < 1 / supply unresponsive to change in price (1).
[4] Logical explanation which might include: Public goods are non-excludable (1) it is not possible to stop people who are not prepared to pay for them, from consuming them (1) free rider problem (1); Public goods are non-rival (1) if supplied for one, supplied for everyone and so cannot charge additional consumers (1); Private sector firms are profit motivated (1) they will not produce products if they cannot get revenue from them (1) would make a loss (1).
[6] Up to 4 marks for the diagram: D&S diagram: Axes correctly labelled – price and quantity or p and q (1); Original demand and supply curves correctly labelled (1); New supply curve shifted to the left (1); Equilibriums – shown by lines P1 and Q1 and P2 and Q2 or equilibrium points E1 and E2 (1).
[6] Up to 2 marks for coherent analysis which might include: Would increase costs of production (1) raise price / reduce quantity (traded) (1).
[8] Why it might: • may reduce costs of production; • may increase significance of technical economies of scale; • may lower prices; • may make the country's firms more internationally competitive; • may promote globalisation; • may encourage firms to expand and take on more workers; • economic growth may increase incomes; • may increase quality – less subject to human error; • may create new products; • may improve working conditions; • may extend education through online learning.
[8] Why it might not: • may increase unemployment; • may make products more standardised / not produced to individual needs; • may increase stress; • may be over dependence on technology which can fail; • may increase fraud; • may cause negative externalities e.g. fracking.