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A-Level Microeconomic Policies
What the A-Level syllabus expects for Microeconomic Policies, and how to practise it.
What the syllabus expects
- The microeconomic policy actions governments take to reach their efficiency and equity aims.
- The set of measures on hand - public education, regulations and rules, direct and joint provision, tradeable permits and quotas, together with subsidies and taxes - is deployed to pursue both efficiency and equity.
- How effective such measures are, and the possibility of government failure.
Scope: Government intervention may still fall short of efficiency and equity. Students should be aware that, in nudging the choices economic agents make, governments can apply an understanding of cognitive biases such as salience bias, loss aversion or the sunk cost fallacy.
How it's examined
Questions on this topic most often ask you to explain, identify. About 11% of the past-paper style questions in Rae's bank for this subject sit in this topic.
Worked examples
Example 1 (2 marks)
Extract 1 describes how unaffordable fertiliser wiped out demand from farmers and deepened global food insecurity. Drawing on this, identify one microeconomic objective that is not being met and explain why.
Show the worked answer
A microeconomic objective concerns individual markets rather than the whole economy. When unaffordable fertiliser wipes out demand from farmers, food output falls and food insecurity deepens, so the objective of equity / ensuring everyone can meet a basic minimum standard of living (access to a basic necessity, food) is not being met. Explanation: Food is a basic necessity. Because fertiliser has become unaffordable, farmers cut back, food supply falls and food prices rise. The poorest households can no longer afford enough food, so scarce resources are distributed inequitably and the vulnerable are pushed below a basic standard of living. (Equally acceptable: allocative efficiency is not met, because food, a necessity/merit good, is now under-produced and under-consumed relative to the socially optimal level, creating a welfare loss.)
More A-Level H2 Economics topics
Scarcity, Choice and How Resources Get Allocated · How Economic Agents Reach Decisions · The Price Mechanism and What It Does · Applying Demand and Supply Analysis · Government Intervention in Markets · What Firms Aim For · all of A-Level H2 Economics