Assessment Schedule 2009 Economics: Describe an economic problem, allocative efficiency, and market responses to change (90630)

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1 NCEA Level 3 Economics (90630) 2009 page 1 of 6 Assessment Schedule 2009 Economics: Describe an economic problem, allocative efficiency, and market responses to change (90630) Evidence Statement Q Evidence Code Achievement Merit Excellence ONE (a) See Appendix 1. A1 New position to the left, labelled Y, showing decreased dairy output. (b) See Appendix 1. A1 Opportunity cost labelled clearly and consistent with the choice of point Y. TWO (a) If the real wage is above the equilibrium real wage: an excess supply (or surplus / QS > QD of workers / involuntary unemployment) will exist A2 M2 TWO of the ideas. All THREE ideas. so the workers will offer to work for lower nominal wages to secure work producers / employers can lower wages (idea that wages will come down and which party causes it) as wages fall, the quantity demanded rises (or quantity supplied decreases) until the equilibrium real wage is achieved. (b) (i) (ii) (iii) (iv) See Appendix 2. Any TWO of: decrease in demand for labour (D L1 or D 1 labelled, or arrow used). Any THREE of: decrease in demand for labour (D L1 or D 1 labelled, or arrow used) no change in real wage no change in real wage quantity employed correct quantity employed correct IU correct. IU correct.

2 NCEA Level 3 Economics (90630) 2009 page 2 of 6 Q Evidence Code Achievement Merit Excellence TWO (c) (i) (I) The demand for labour that produces the clothing will decrease. (E) The decreased demand for clothing has meant that less labour is needed for the lower levels of output because the workers are a derived demand. I or E (Idea that D for labour fell decrease in demand accepted if shift of D L1 is correct on graph). I or Q, and E (AND explanation is in context). THREE from (c) (Q) meaning demand fell from D L to D L1. (c) (ii) The New Zealand government will: receive less (income) tax or direct tax as less workers (Q 0 to Q 1 ) are working have to pay more in (unemployment) benefits or transfer payments as (involuntary) unemployment has increased (from 0 to IU) since less people Q 0 to Q 1 are now employed, households will have less income so will spend less, meaning GST or indirect tax receipts will fall receive less company / profits tax as clothing manufacturers sales fall, thus profits fall. ONE effect, reasoning. TWO effects, reasoning ONE effect, reasoning and the effect is linked to the graph (with reference to points on the graph) ONE effect, reasoning and a valid consequence fully explained. (c) (iii) (I) the demand for the output of fabric importers will fall. (E) since fewer fabrics are needed for production of clothing (or because of derived demand). Consequence on fabric importer: I or E Consequence points. I or E AND Consequence. So fabric importers will import fewer textiles or their sales / revenue / profit will fall / may have to lay off workers. E3

3 NCEA Level 3 Economics (90630) 2009 page 3 of 6 Q Evidence Code Achievement Merit Excellence THREE Part A See Appendix 3. TWO correct. (a) $15 (i) $8 (ii) (iii) (b) (i) (ii) (iii) $ $ $ (or $ # ONE correct. All THREE correct. or $ decrease) (b) (iv) $ A2 Correct. (b) (v) $ (or $ or $ decrease) M2 Correct. (c) (i) The responsiveness of Quantity Demanded to changes in price of the product. Correct definition. (c) (ii) (I) Alcohol is a necessity to people s lifestyle, so consumers will not willingly stop consuming it when the price of alcohol increases I I and Q (or similar answer for no close substitutes or small % of budget / income, habitual / addictive.) (Q) meaning that alcohol will not be very responsive to price changes that the change in QD is proportionally / relatively smaller than the price change. (c) (iii) Consumers Correct answer. (c) (iv) Alcohol is price inelastic any increase in price will see a relatively / proportionally small decrease in quantity demanded, meaning that producers are better able to pass on the tax to consumers so incidence falls mainly on consumers. # Partial answer covering the key idea that producers can pass on the tax easier but not clearly linking it to price elasticity of demand. Answer covering the key idea that producers can pass on the tax easier and clearly linking it to price elasticity of demand. E3 # from bi, ii, iii and from (c) (iv)

4 NCEA Level 3 Economics (90630) 2009 page 4 of 6 THREE Part B (a) A situation where the total Consumer + Producer surplus is maximised. A situation where production is at full capacity (best technical use) and consumers / society s demand is met. A situation where no one can be made better off without someone else being worse off. A2 A correct definition. (b) (i) See Appendix 3. M2 Correct shading. (b) (ii) The DWL represents loss of welfare or consumer and producer surplus that is not transferred to the government in tax. A2 M2 Idea that loss of welfare or consumer surplus and producer surplus not gained by another party. Loss of consumer surplus and producer surplus not gained by the government in tax (must mention government in context). Judgement Statement Achievement Achievement with Merit Achievement with Excellence 1 A1 1 A2 1 5 other A or M 1 A1 1 M2 1 2 other M or E 6 other A, M or E 1 A1 2 M2 1 E3 4 other M or E 6 other A, M or E Codes: A1 refers to the first criterion. A2 and M2 refer to the second criterion.,, and E3 refer to the third criterion. The following Economics-specific marking conventions have also been used when marking this paper: (I) identify (E) explain (Q) refer to the question

5 Appendix 1 NCEA Level 3 Economics (90630) 2009 page 5 of 6 Production Possibility Frontier for New Zealand Farmers Appendix 2 Labour Market for Workers making clothing in New Zealand

6 Appendix 3 NCEA Level 3 Economics (90630) 2009 page 6 of 6 Market for Ready to Drink Alcoholic Drinks (RTDs)

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