Model Answer and Explanation for AQA 12 Mark Question – January

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Jan 2012 - #ECON1
Question 3:
There are two marks available for definitions in the 12 mark question. Those definitions must be
relevant to the question, but ‘relevance’ is a relatively broad term. In this case, according to the
mark scheme, the following definitions are valid:
Demand - Assuming you are using a supply and demand diagram, these terms are relevant
Supply - See above
Excess Demand - As long as you show it on the diagram or refer to it in your answer
Excess Supply - See above
Note - It would not be acceptable to define composite demand, as this was the definition required
for the five mark question on this paper, so would not be credited twice.
Remember, there is one mark for each definition, up to a maximum of two. Don’t do too many, you
won’t be rewarded for more than two.
Supply and demand diagrams are the most frequently asked for by AQA, so make sure you learn
these definitions.
Next comes the diagram, with a maximum of four marks available. There were actually three
acceptable diagrams.
The first was to show a decrease in supply:
The 4 marks allocated for the diagram are as follows:
Labelling of S, D, axes and original equilibrium (P1, Q1) = 1 mark in total
Shifting the supply curve to the left = 2 marks
New Equilibrium (P2, Q2) = 1 mark
Excess Demand = 1 mark
It is possible to get all four marks without labelling the excess demand, but it is also easy to lose a
mark for missing a label, so better to be safe than sorry…
Make sure the diagram is big, so the examiner can see exactly what you have shown.
The second acceptable diagram was one that showed an increase in demand:
The third acceptable diagram was one that showed both of these diagrams together; a reduction
of supply and an increase in demand:
So, after accumulating six of the twelve marks so far, two for definitions, four for the diagram, we
now need to explain what has happened. The best way to do this is to use the extract. Remember
the extracts are written by the exam board, so are there for you to use. Some students will be
‘clever’ and save time by not reading them, better students will make full use of them.
Here is a full answer which will gain all twelve marks:
Demand is the amount of a good or service that consumers are willing and able to buy at each and
every price at a point in time (1 mark). Supply is the amount of a good or service that producers
are willing to offer for sale at each and every price at a point in time (1 mark).
As wheat is used as biofuel, and there is more demand for biofuel, this is a derived demand and as
such, there will be an increase in the demand for wheat, causing a shift of the demand curve from
D1 to D2, causing excess demand at P1, and therefore causing the price of wheat to rise from P1
to P2.
At the same time there was also an increase in demand for wheat as animal feed, as some
economies, such as China and India, had a greater demand for meat as their incomes grew. This,
again, saw more upwards pressure on the demand for wheat, pushing the price upwards.
Along with this, Russia, one of the major exporters of wheat stopped exporting wheat after a third
of their crop was destroyed due to floods and fire, further reducing the world supply of wheat and
causing more upwards pressure on the price of wheat.
The key to gaining the marks came from relating my economic theory, not only to the diagram, but
also to the case study. Combining these three elements meant that I easily gain up to ten marks for
my explanation.
The real key, however, is knowing the theory. There are no short cuts
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