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NCEA Level 3 Economics (90630) 2012 — page 1 of 10
Assessment Schedule – 2012
Economics: Describe an economic problem, allocative efficiency, and market responses to change (90630)
Evidence Statement
The following Economics-specific marking conventions are used in this assessment schedule:
 (I)
means identify
 (E)
means explain
 (Q)
means refer to the question
Question
Evidence
ONE
(a)
Any TWO of:
The frontier illustrates scarcity of resources. The
frontier shows the maximum combination of both
goods that can be produced with limited resources,
and cannot produce beyond the frontier
OR the opportunity cost argument in terms of wine /
wool foregone when making a choice.
(b)
Land will be allocated away from wool production
into relatively more profitable industries like wine.
(c)
See Appendix One.
TWO
(a)
Achievement
There will be an increase in labour required for
building, which will result in a reallocation of labour
away from other industries.
 In (a), scarcity concept
described with reference
to PPF, OR that due to
limited resources, cannot
produce beyond the
frontier
 In (b), idea of land being
reallocated from wool
into wine production
 In (c), decrease in
production of wool and
increase in production of
wine with labels and
both arrows
 In Question Two (a),
idea of reallocation of
labour away from other
industries into the
production of building
materials.
Achievement
with Merit
Achievement
with Excellence
Code
A1
NCEA Level 3 Economics (90630) 2012 — page 2 of 10
Question
Evidence
TWO
(b)
The market for building materials is allocatively
efficient at point E, because it is where total
consumer surplus plus producer surplus is
maximised
OR there is no DWL
OR no one can be made better off without
someone being worse off
OR all resources are fully used and society’s
demand is met.
(c)
After an increase in demand, there is excess
demand (shortage). Consumers will bid up the
price, QD will decrease and QS will increase until
QD=QS, and the market clears at the new
equilibrium E1 (or P1, Q1).
(d)
Before increase in demand total surpluses was
area AEB, after increase in demand total surpluses
is area AE1C, which is an increase of area BEE1C.
Achievement
Achievement
with Merit
Achievement
with Excellence
Code
Any TWO of:
Any ONE OF:
A2
 In (b), any one of
acceptable definitions of
allocative efficiency
 In (c), the idea of excess
demand plus effect on
QD and QS after price
rises until new
equilibrium
OR
 In (c), idea of excess
demand (shortage)
resulting in new
equilibrium
 In (d), idea explained
that there is an increase
in total surpluses.
 In (d), an increase in
total surpluses, either
through new total area
OR increase in total
areas given from graph.
M2
NCEA Level 3 Economics (90630) 2012 — page 3 of 10
Question
Evidence
Achievement
Achievement
with Merit
THREE
Any FIVE of:
Any FOUR of:
Part A
 PED described
 a suitable explanation
of a reason in (b) for the
calculation and
interpretation made. (I
and E)
(Calculation must be
correct and the
interpretation must
match)
 PED calculation correct
(a)
(i) The responsiveness of quantity demanded to a
change in price.
(ii) 0.58 (2 dp).
(iii) Inelastic.
(b)
Examples could include:
I milk is a necessity
E consumers will purchase the good even though price
has risen because it is essential, meaning the
response will be inelastic, OR the drop in QD is
proportionally less than the rise in price
OR
I non-durable
E won’t keep so little or none stocked up and still
needs to be purchased regardless of price increase, or
won’t keep so consumers won’t stock up and increase
in QD will be proportionally less than the fall in price
OR
I small price relative to income
E so a price rise is not such a great impact on QD, or
the drop in QD is proportionally less than the rise in
price
OR
I lack of close substitutes
E no close substitutes so will still purchase when price
rises as nothing they are willing to switch to, or the
drop in QD is proportionally less than the rise in price.
 PED interpretation
correct. (Note: Allow
follow-through from
candidate’s answer in ii)
 A suitable description of a
reason in (b) I or E.
(Note: Allow followthrough from candidate’s
answer in ii)
 XED coefficient described
I or E OR substitutes
defined
 Impact on producer of
subsidy described I or E
 Impact on consumer of
soya milk of subsidy
described I or E
 Impact on consumer of
2L milk of subsidy
described, now buy more
soya milk or less cow’s
milk
 How elasticity affects the
incidence of the subsidy
described.
 XED coefficient
explained I and E
 impact on producer of
subsidy explained I and
E
 Impact on consumer of
soya milk of subsidy
explained I and E
 Impact on consumer of
2 L milk of subsidy
explained
 How elasticity affects
the incidence of the
subsidy explained.
Achievement
with Excellence
The effect of the subsidy
on the participants in the
market fully explained
by:
TWO of:
 impact on producer of
subsidy explained I
and E (must include
correct figures)
 impact on consumer of
soya milk of subsidy
explained I and E
(must include correct
figures)
 Impact on consumer of
2L milk of subsidy
explained I and E with
some reference to
XED
 How elasticity affects
the incidence of the
subsidy fully
explained.
Code
A3
OR
M3
OR
E3
NCEA Level 3 Economics (90630) 2012 — page 4 of 10
(c)
I The relationship between substitute goods is that
when one good such as milk increases in price,
consumers will purchase more of the substitute, eg
soya milk.
E The positive coefficient implies that there is a
positive / direct relationship between milk and soya
milk in that when the price of milk increases demand
for soya milk increases too OR this is because soya
milk is relatively cheaper so more is demanded.
OR
I Milk and soya milk are substitutes, which means
that one can be used in place of the other.
E The positive 0.3 means that when the price of one
increases, the demand for the other also increases
(but the 0.3 suggests that milk and soya milk are not
strong substitutes).
NCEA Level 3 Economics (90630) 2012 — page 5 of 10
(d)
I Producers sell more soya milk 200 000 L instead of
100 000 L and receive a higher price of $3 per litre
with the subsidy.
E this will mean their revenue will increase (from
$250 000 to $600 000) OR Producer surplus
increases (by $75 000).
I Price consumers pay for soya milk decreases from
$2.50 down to $1.50 and the quantity consumed
increases from 100 000 L to 200 000 L.
E Total spending on soya milk increases (from $250
000 to $300 000) OR Consumer surplus increases
(by $150 000).
I Some consumers of 2 L bottles of milk will switch to
buying soya milk.
E because milk and soya milk are substitutes, but
not many because the cross elasticity coefficient 0.3
indicates they are not strong substitutes.
Consumers benefit more from greater fall in price
from $2.50 to $1.50 compared to producers’ benefit
of price increase from $2.50 to $3, so incidence falls
greater on consumers, therefore inelastic demand.
THREE
1/3 of areas correctly
shaded in Q3 PART B (e)
Part B
(e)
See Appendix Two.
Deadweight loss and one
other area correctly
shaded in Q3 PART B (e)
A2
OR
M2
NCEA Level 3 Economics (90630) 2012 — page 6 of 10
Question
Evidence
FOUR
(a)
(b)
(c)
(d)
Real wages are the purchasing power of wages (or wages
adjusted for inflation).
The real wages have increased (by 0.2%).
See Appendix Three.
I At a higher minimum wage, employment will fall from Q0 to
QDL.
E This is because at a higher minimum wage the quantity of
labour demanded by firms decreases.
Q meaning that 5 000 job losses could occur.
I There is involuntary unemployment, which is the excess
supply of (surplus) labour, where QSL is greater than QDL at
W(min).
E A movement upwards to W(min) causes an increase in QSL
and a decrease in QDL, which increases the excess supply of
labour which is an increase in involuntary unemployment.
I An increased minimum wage will increase the cost of
production for restaurant meals.
E causing a decrease in supply. This will result in an increase
in price of restaurant meals OR decrease in quantity
demanded OR any acceptable flow-on effect, eg employ
fewer waiters, restaurant downsize, profits decrease.
Example of another market affected could include:
 Market for fresh vegetables: as fewer restaurant meals
produced, fewer fresh vegetables would be demanded as
Achievement
Achievement
with Merit
Any THREE OF:
Any TWO OF:
 in (a), real wages
defined
 the effect on
employment for a
correct graph
explained, I and E but
may contain minor
errors/omissions
 in (b), increase
 in (c), QSL OR QDL
correctly identified
 in (d):
- effect on employment
described I or E
- concept of involuntary
unemployment
described with
reference to graph in
(c) I OR E (carry
through for graph
error)
- effect of the higher
minimum wage on the
supply of restaurant
meals described I or
E
- effect on another
market described with
suitable example.
 involuntary
unemployment
explained with
reference to correct
graph in (c) I AND E,
but may contain minor
errors / omissions
 effect of the higher
minimum wage on the
supply of restaurant
meals explained, I and
E but may contain
minor errors/
omissions
 effect on another
market explained with
suitable example
(includes derived
demand OR idea).
Achievement
with Excellence
Effect of the higher
minimum wage is fully
explained on markets:
THREE of:
 the effect on
employment for a
correct graph explained,
I and E and Q
 involuntary
unemployment
explained with
reference to correct
graph in (c), I and E
 effect of the higher
minimum wage on the
supply of restaurant
meals explained, I and
E
 effect on another
market explained using
the derived demand
concept with suitable
example and flow-on
effect.
Code
A3
OR
M3
OR
E3
NCEA Level 3 Economics (90630) 2012 — page 7 of 10
the demand for vegetables is derived from the demand for
restaurant meals (derived demand or idea)
 Market for capital goods (ovens, utensils etc): as fewer
restaurant meals produced, fewer ovens would be
demanded
 Market for services (electricity, marketing, financial etc): as
fewer restaurant meals produced, less electricity would be
demanded
AND
 So, producers of the related market may have decreased
profits OR hire fewer workers (OR any acceptable flow-on
effect).
NCEA Level 3 Economics (90630) 2012 — page 8 of 10
Appendix One – Question One (c)
Appendix Two – Question Three (e)
NCEA Level 3 Economics (90630) 2012 — page 9 of 10
Appendix Three – Question Four (c)
NCEA Level 3 Economics (90630) 2012 — page 10 of 10
Judgement Statement
Achievement
Achievement with Merit
Achievement with Excellence
Minimum of:
Minimum of:
Minimum of:
1 A1
1 A1
1 A1
1 A2
1 M2
1 M2
1 A3
1 M3
1 E3
90630 Codes
A1 refers to the first criterion.
A2 and M2 refer to the second criterion.
A3, M3, and E3 refer to the third criterion.
I means identify.
E means explain.
Q means refer to the question.