In 2020, the largest Thai commercial bank merged with a smaller commercial Thai bank. It was expected that the merger would affect the price charged for bank services and the amount that would be lent. Thai commercial banks operate in the private sector. A growing private sector can move an economy towards a market economic system.

Mark scheme

Marking points from the official mark scheme (May/June 2023). The mark or mark type is shown in brackets.

1. [1] Services provided;
2. [1] amount willing to lend;
3. [1] size of bank;
4. [1] online facilities;
5. [1] location;
6. [1] interest paid or charged;
7. [1] where family banks;
8. [1] advertising;
9. [1] green investments;
10. [1] community involvement;
11. [1] reputation;
12. [1] confidence in the bank / reliability / safety;
13. [1] relationship with staff;
14. [1] whether foreign currency can be exchanged.
15. [1] More market power / less competition / monopoly power / may become a monopoly; [1] can raise price as consumers will not be able to switch to other firms / demand may become more inelastic / can control price / become a price maker.
16. [1] May experience diseconomies of scale / example of a diseconomy of scale that may be experienced; [1] raise prices due to higher (average) costs.
17. [1] Carrying out the merger may be expensive; [1] price raised to cover the cost of e.g. retraining staff / making some staff redundant.
18. [1] It could increase consumer expenditure; [1] increase total demand; [1] raise employment /reduce unemployment; [1] reduce deflation.
19. [1] It could increase investment / increase spending on capital goods; [1] benefit from advances in technology / innovation / better quality capital goods; [1] increase productivity; [1] raise the quality of products; [1] lower price; [1] increase exports; [1] lower imports; [1] improve the current account balance; [1] cause economic growth / increase GDP / increase output / encourage firms to expand / new firms to set up.
20. [1] May enable the people to improve skills / to set up small business / buy basic necessities / reduce poverty.
21. [1] Lend to firms in financial difficulties; [1] stop them going out of business.
22. [1] Why it might (allocate resources well): price moves to reflect changes in demand and supply.
23. [1] Why it might (allocate resources well): resources move from products falling in demand towards those rising in demand.
24. [1] Why it might (allocate resources well): profit incentive for firms to produce what consumers demand / consumer sovereignty.
25. [1] Why it might (allocate resources well): competition results in efficiency which drives down costs and prices.
26. [1] Why it might (allocate resources well): changes in wages move labour to those jobs most in demand.
27. [1] Why it might not (allocate resources well): merit goods are under-consumed so not enough resources are devoted to their production.
28. [1] Why it might not (allocate resources well): demerit goods are overconsumed so too many resources are devoted to their production.
29. [1] Why it might not (allocate resources well): no resources are devoted to public goods as there is no incentive to produce them.
30. [1] Why it might not (allocate resources well): there may be factor immobility.
31. [1] Why it might not (allocate resources well): monopolies may restrict output.
32. [1] Why it might not (allocate resources well): external costs and benefits will not be taken into account when deciding on the allocation of resources.