2021 H2 Economics Paper 2 Essay 2: Suggested Answers
How to use these essay answers. The responses below, including the part (a) answer, are structured guides to the requirements of the question, the content, analysis and evaluation a strong answer must cover, rather than full essay prose with a written introduction and conclusion. Use them to see what to include and how to build the argument, then write it up in your own continuous prose, adding your own introduction and conclusion.
This essay explains, with a diagram, what is meant by consumer surplus and producer surplus, then asks whether all economic agents in the US economy will lose from the introduction of tariffs on imported goods from China.
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With the aid of a diagram, explain what is meant by consumer surplus and producer surplus.
Consumer surplus. Consumer surplus is the difference between the maximum price consumers are willing to pay and the price they actually pay. Consumer preferences are shown by the downward sloping demand curve, which indicates both that more is demanded as price falls and that different consumers are willing to pay different prices for the same good. At the market equilibrium, where demand equals supply, the price is Pe and the quantity is Qe. Consumer surplus is the area above the price and below the demand curve, up to the transacted output. It exists because some consumers would have been willing to pay more than Pe, and the gap between their willingness to pay and the lower price they actually pay is the surplus satisfaction they enjoy.
Producer surplus. Producer surplus is the difference between the minimum price producers are willing to accept and the price they actually receive. Producers' willingness to sell is shown by the upward sloping supply curve, which indicates both that more is supplied as price rises and that different producers are willing to sell at different prices for the same good. At the equilibrium price Pe and quantity Qe, producer surplus is the area below the price and above the supply curve, up to the transacted output. It exists because some producers would have been willing to sell for less than Pe, and the gap between the higher price they actually receive and their minimum acceptable price is the surplus they gain.
On a single demand and supply diagram, consumer surplus is the triangle above Pe bounded by the demand curve, and producer surplus is the triangle below Pe bounded by the supply curve, the two together forming the total welfare gained from the market at equilibrium.
Define both surpluses against willingness to pay and willingness to accept, and locate each correctly as an area on a demand and supply diagram.
Discuss the view that all economic agents in the US economy will lose from the introduction of tariffs on imported goods from China.
- Set up the tariff on a trade diagram and define the welfare areas the analysis will track.
- Identify the agents that gain from the tariff and the mechanism behind each gain.
- Identify the agents that lose and the deadweight loss the tariff creates.
- Develop the wider implications, including retaliation and industries dependent on imported inputs.
- Weigh the gains against the losses to test the claim that all agents lose.
- Reach an evaluative judgment on the net welfare effect.
This part is gated. The full model answer with the worked tariff welfare diagram and the evaluation, with the diagrams and the full evaluation, is in the ETG TYS Answers book from SAP and is worked live in the TYS Crashcourse. ETG students also get the AI TYS coach that guides them through this exact question. Message the team to find out more.
Tests: Protectionism, Allocative efficiency
Questions students ask
Where can I get the full worked answers to the 2021 H2 Economics paper 2 essay 2?
The full model answers, with the diagrams and the higher mark evaluation, are in the ETG TYS Answers book published by SAP and sold at Popular, and are worked live in the TYS Crashcourse. Every ETG student also gets the AI TYS coach on our learning management system, which guides you through how to tackle every essay and every case study question from the last ten years.
Are these the official 2021 A Level Economics answers?
No. SEAB sets and marks the A Level paper. These are suggested answers by Mr Eugene Toh, author of the H1 and H2 A Level Economics TYS answer keys, published by SAP and sold at Popular.
How should I use these suggested essay answers?
Treat them as a guide to the requirements of the question, the content, analysis and evaluation a strong answer must cover, not as full essay prose. Write the essay up in your own continuous prose, with your own introduction and conclusion.
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