NCEA Level 1 Economics (90986) 2016 — page 1 of 4
Assessment Schedule– 2016
Economics: Demonstrate understanding of how consumer, producer and/or government choices affect society, using market equilibrium(90986)
Assessment Criteria
Achievement / Achievement with Merit / Achievement with ExcellenceDemonstrate understanding involves:
- identifying, describing, or providing an explanation of how producer, consumer, and/or government choices affect market equilibrium
- identifying, describing, or providing an explanation of how changes in market equilibrium affect different sectors
- clearly illustrating changes using the supply and demand model.
- providing a detailed explanation, using the supply and demand model, of how producer, consumer and/or government choices affect market equilibrium
- providing a detailed explanation, using the supply and demand model, of how changes in market equilibrium affect different sectors.
- linking detailed explanations of how producer, consumer, and/or government choices affect market equilibrium, with detailed explanations of how those changes affect different sectors
- integrating changes in supply and demand into detailed explanations.
Grade Score Descriptors
N / N1 / N2 / A3 / A4 / M5 / M6 / E7 / E8No response;
no relevant evidence. / Very little Achievement evidence. / Some Achievement evidence, partial explanations. / Most Achievement evidence, at least one explanation. / Nearly all Achievement evidence. / Some Merit evidence. / Most Merit evidence. / Excellence evidence. One part may be weaker. / All points covered.
NB: Each question should be read as a whole before awarding a grade.
QuestionOne / Sample answers/Evidence
(a)
(b) / Market demand for laptop computers in New Zealand (monthly)
Price ($) / North Island / South Island / Market demand
500 / 3500 / 6000 / 9500
600 / 4500 / 4500 / 9000
700 / 4100 / 3900 / 8000
800 / 3800 / 3200 / 7000
900 / 3000 / 3000 / 6000
1000 / 2100 / 1900 / 4000
1100 / 1700 / 1300 / 3000
/ Market for laptop computers in New Zealand (monthly)
(c) / At $900, there is a surplus of 1500 laptop computers, as there are 7500 laptops supplied but only 6000 laptops demanded. Producers of laptops will lower the price of laptop computers, as they wish to clear excess stock. As the price falls, quantity demanded will increase (from 6000 to 7000 laptops) as laptops become more affordable. Meanwhile, the producers of laptops will decrease the quantity supplied (from 7500 to 7000 laptops), as laptops are now less profitable. The price of laptops will stop falling when the price reaches $800, at which the quantity demanded will equal quantity supplied of 7000 laptop computers.
Achievement / Achievement with Merit / Achievement with Excellence
Demonstrates understanding by:
- completing table accurately
- plotting points correctly
- identifying equilibrium
- identifying a surplus
- explaining a surplus
- explaining the fall in price.
- using data to identify a surplus
- explaining the surplus, ie QsQd
- fully explaining why price will fall (i.e. producers will reduce the price in order to clear excess stock) by referring to the surplus
- using the law of demand OR law of supply to fully explain the restoration of equilibrium.
- fully explaining surplus, using correct data
- integrating law of demand (i.e.P decrease,
Qd increase) and law of supply (i.e.P decrease, Qs decrease), as well as data, into full explanation of the price decrease (producers will reduce the price in order to clear excess stock), and the equilibrium being restored at a price of $800 and quantity of 7000.
Question
Two / Sample answers/Evidence
(a)
(b) / New Zealand market for laptop computers (annually)
/ Before BYOD policy / After BYOD policy
Quantity consumers buy annually / 50000 computers / 60000 computers
Equilibrium price / $800 / $900
Producer revenue / $800 × 50000
= $40000000 / $900 × 60000
= $54000000
(c) / The introduction of BYOD in schools will increase consumers’ demand for laptop computers, as students require more laptops for school work/students are part of the consumers group. This will shift the demand curve to the right, from D to D1.
This means that more laptops will be demanded at each and every price. This will cause a shortage of laptop computers at the original equilibrium price, where Qd is greater than Qs.
As a result, consumers will bid up the price, in order to obtain stock. Consumers will now be paying a higher price and purchasing a higher quantity, thus consumer spending has increased (from $40000000 to $54000000).
(Candidates are not expected to use their calculations when explaining consumer spending. Those who do should not be penalised if calculations are wrong.)
(d) / Producer revenue is calculated by price × quantity. At the original equilibrium, Pe×Qe = $800 x 50000 = $40000000. At the new equilibrium,
Pe1×Qe1 = $900 × 60000 = $54000000. This is an increase in producer revenue of $14000000.
Achievement / Achievement with Merit / Achievement with Excellence
Demonstrates understanding by:
- labelling new equilibrium point
- labelling shortage at original price
- identifying some quantities/prices before/after BYOD
- explaining that market demand increases
- explaining the price increases
- explaining that consumer spending increases
- states increase in revenue.
- labelling the new equilibrium
- identifying most quantities/prices before/after BYOD
- calculating producer revenue
- AND explaining:
-the increase in revenue (P×Q).
-consumers now pay higher price and purchase a higher quantity, therefore consumer spending increases
Candidate uses detailed explanations, mostly uses correct data, and in context. / Comprehensive explanation, which includes:
- linking reasons for increased market demand to shift of demand curve to right
- linking rise in price to shortage at Pe and consumers bidding up the price, in order to obtain stock
- explaining the increase in revenue with calculations.
Question
Three / Sample answers/Evidence
(a)
(b) / New Zealand market for imported digital media (annually)
(c) / Charging a tax on imported digital media will decrease the supply of imported digital media, as costs of production will increase/imported digital media becomes less profitable. The decreased supply will shift the supply curve to the left (S to S1). This means that less imported digital media will be supplied at each and every price. There will be a shortage at Pe.
The equilibrium price increases from Pe to Pe1, and equilibrium quantity decreases from Qe to Qe1.
Charging a tax on imported digital media will mean that consumers now pay a higher price (Pe to Pe1), as they are now paying part of the tax to the government.
Overseas sellers of digital media will now receive a lower price (Pe to Pp), as they have to pass on the tax to the government.
Consumers will now be paying more for imported digital media, and the overseas sellers will receive less per unit (with the difference going to the government).
(d) / New Zealand retailers are likely to benefit from the introduction of a tax on imported digital media. The imported digital media will now be relatively less affordable, which effectively decreases the number of competitors and, therefore, increases the sales of New Zealand retailers.
Candidates may also describe the relationship of New Zealand digital media and imported digital media as substitutes.
Achievement / Achievement with Merit / Achievement with Excellence
Demonstrates understanding by:
- shifting supply curve to the left
- labelling the new equilibrium point
- labelling price overseas sellers receive
- explaining that market supply will decrease
- identifying that equilibrium quantity decreases
- explaining that consumers pay a higher price
- explaining that overseas sellers of digital media will receive a lower price
- shifting supply curve to the left and labelling the new equilibrium
-the decrease in market supply –increased cost of production/decreased profitability
-that consumers pay a higher price and overseas sellers receive a lower price
-the effect on New Zealand retailers of digital media.
Candidate gives detailed explanations, makes some reference to the graph. / Comprehensive explanation, which includes:
- linking reasons for decreased market supply to shift of supply curve to left, linking increase in price to shortage at Pe
- fully explaining the increased price paid by consumers and decrease in price received by overseas sellers
- fully explaining the effect on New Zealand retailers of digital media.