2022 H2 Economics Paper 2 Essay 3: 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 two different reasons for the market failure associated with the provision of street lighting, then asks the extent to which a government should intervene to secure the benefits of street lighting while minimising the negative impacts.
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Explain two different reasons for the market failure associated with the provision of street lighting.
Market failure occurs when the free market allocates resources inefficiently, leading to a net social welfare loss. Street lighting fails in two ways: it is a public good, and its provision generates negative externalities.
Street lighting as a public good. Street lighting is non excludable, since once it is provided it is not feasible to stop anyone benefiting from it. Anyone walking near a street light can use it for safety and navigation, whether or not they have paid. It is also non rival in consumption, as one person's use does not reduce the light available to others. Because it is non excludable, street lighting suffers the free rider problem: people can choose not to pay and rely on others, so demand is not revealed and firms find it unprofitable to supply a good they cannot charge for. Because it is non rival, the marginal cost of serving an extra user is zero, so the allocatively efficient price equals that zero marginal cost, but no private producer will supply at no charge. The result is underprovision, or no provision at all, by the free market.
Negative externalities of light pollution. A negative externality arises when production or consumption imposes costs on third parties not involved in the transaction. Street lights generate light pollution. When planning provision, authorities may weigh only the private costs of production and the private benefits of safety and guidance, neglecting the marginal external cost. Light pollution can harm nearby residents' health and disrupt local ecosystems. The socially optimal output is where marginal social cost, which includes the marginal external cost, equals marginal social benefit. If the external cost is ignored, output exceeds the social optimum Qs, the market produces too much relative to Qs, and this overprovision is a source of market failure.
Develop two distinct reasons, the public good characteristics with the free rider and pricing problems, and the negative externality of light pollution with the MSC equals MSB optimum.
Discuss the extent to which a government should intervene in the market to ensure that the benefits of street lighting can be obtained while minimising the negative impacts.
- Separate the two problems to be addressed, the public good underprovision and the negative externality, as the basis for judging how far to intervene.
- Set out strong intervention to correct the underprovision, then note the limits of full public control and a way to mitigate them.
- Set out targeted measures to minimise the externality and the mechanism of each, then note their limitations.
- Bring in cost benefit analysis and opportunity cost to argue that the extent of intervention should vary by context.
- Distinguish the appropriate extent of intervention for the public good problem from that for the externality problem.
- Conclude with a judgment on the overall extent, including how the government's role can shift over time.
This part is gated. The full model answer with the worked 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.
Questions students ask
Where can I get the full worked answers to the 2022 H2 Economics paper 2 essay 3?
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 2022 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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