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GCE JAN 2007 : (AS 1) The Market Mechanism, Market Failure and Government Response

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ADVANCED SUBSIDIARY (AS) General Certificate of Education 2007 Economics assessing Module 1: The Market Mechanism, Market Failure and Government Response ASE11 Assessment Unit AS 1 (Data Response) [ASE11] THURSDAY 18 JANUARY, MORNING TIME 45 minutes. INSTRUCTIONS TO CANDIDATES Write your Centre Number and Candidate Number on the Answer Booklet provided. Answer all six questions. INFORMATION FOR CANDIDATES The total mark for this paper is 40. Quality of written communication will be assessed in questions 2, 3, 4 and 6. Figures in brackets printed down the right-hand side of pages indicate the marks awarded to each question or part question. ADVICE TO CANDIDATES You are advised to take account of the marks for each part question in allocating the available examination time. ASE1W7 2855 Study the information below and answer the questions which follow. Rising Minimum Wage Table 1 UK National Minimum Hourly Wage Rates Date 16 17 Year Olds Development Rate 18 21 Year Olds Adult Rate Age 22 and Over OCT 2003 N.A. 3.80 4.50 OCT 2004 3.00 4.10 4.85 OCT 2005 3.00 4.25 5.05 OCT 2006 3.30 4.45 5.35 Elimination of the extremes of inequality and poverty which markets often create has become a major policy objective of the present government. A significant rise in the National Minimum Wage is one of the government policies which has been adopted to deal with these issues. With inflation at 2.4% per annum in 2005 the most recent increases in the National Minimum Wage provided a significant boost to the real earnings of low paid workers and provoked a predictable outcry from employers organisations. Sir Digby Jones, Director General of the Confederation of British Industry (CBI), said: The minimum wage jumped by 12 per cent between 2003 and 2005 far in excess of average earnings growth. More and more companies are finding it difficult to absorb the rise so another 6 per cent is the last thing they need . When first introduced in April 1999, the National Minimum Wage led the CBI to predict widespread job losses and the closure of many small firms. So far this has not happened, leading the Observer newspaper to accuse the CBI of constantly producing a kneejerk reaction: All regulation bad; free market good; leave business alone to get on with the business of making profits . The paper argued that sensible government regulation was no handicap to growth or jobs and indeed provided an incentive for firms to innovate. However some support for the CBI view of the negative impact of government-enforced minimum wages came from across the channel. Youth unemployment in France is currently at 23% and many economists attribute this to the high minimum wage which is applied equally to all workers, irrespective of age. Indeed, poor employment prospects have led many young French people to move to the UK. The French Consulate in London estimates that there are around 350 000 French citizens currently residing in the UK, and two thirds of these are under 35. ASE1W7 2855 2 The French experience has tended to support the employers view that high levels of government regulation are ultimately bad for consumers, workers and the economy in general. Adapted from the Observer March 5, 2006, author Simon Caulkin Answer all six questions. 1 Using the information in Table 1 and paragraph 2, explain why the real earnings of low paid 16/17 year old workers have been boosted by the most recent increases in the National Minimum Wage. [4] 2 The National Minimum Wage is an example of a price floor . With the assistance of a demand and supply diagram, explain the likely impact of such a floor upon a market. [8] 3 Explain why a high minimum wage might lead to a fall in job creation or even job losses. [6] 4 Explain why the National Minimum Wage does not appear to have had a negative impact upon employment in the UK. [8] 5 Explain briefly why markets often generate extremes of inequality in the distribution of income. 6 Evaluate the view that government regulation of industry is bad for the economy. THIS IS THE END OF THE QUESTION PAPER ASE1W7 2855 3 [4] [10] Permission to reproduce all copyright material has been applied for. In some cases, efforts to contact copyright holders may have been unsuccessful and CCEA will be happy to rectify any omissions of acknowledgement in future if notified. SP (NF) T34817/1

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Additional Info : Gce Economics January 2007 Assessment Unit AS 1 Module 1: The Market Mechanism, Market Failure and Government Response
Tags : General Certificate of Education, A Level and AS Level, uk, council for the curriculum examinations and assessment, gce exam papers, gce a level and as level exam papers , gce past questions and answer, gce past question papers, ccea gce past papers, gce ccea past papers

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