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NCEA Level 3 Economics (90630) 2011 — page 1 of 11
Assessment Schedule – 2011
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
Code
Question
Evidence
A1
ONE
See Appendix One for (a)
and (b).
(a)
(b)
TWO
(e)
(f)
THREE
(e)
The law of diminishing
returns. As variable
resources are shifted from
dairy to forestry, the output
of forestry increases, but at
a diminishing rate –
meaning the curve is
concave to the origin.
Achievement
Merit
Excellence
TWO of:
 Increase in dairy production shown on graph (upward
arrow on y-axis or 2010 identified and labelled on curve)
 Opportunity cost clearly labelled with arrow
 Law of diminishing returns OR principle of increasing
costs OR resources not equally suited to the production
of dairy and forestry described.
 Decreased demand for labour in Graph Three of
Question Two (e) DL1 OR arrow.
 Derived demand idea described in relation to teachers in
Question Two (f).
 Derived demand idea described in relation to farmland in
Question Three (e).
NCEA Level 3 Economics (90630) 2011 — page 2 of 11
Code
Question
A2 /
TWO
M2
(b)
(c)
Evidence
Achievement
Merit
ONE of:
Producer Surplus occurs in
the market for early
childhood education as
suppliers are willing to
supply each ‘unit’ for a
lower price than they
receive in the market.
With the removal of
subsidy, an excess demand
(shortage) will now exist at
the current price of $100.
Consumers will bid the
price up. As the price rises,
the quantity demanded will
fall, and the quantity
supplied will increase until
equilibrium is reached.
(b) Correct description of
what Producer Surplus
means (in the early
childhood education market).
(c) Full description of market
forces given – excess
demand (shortage) and price
rises, and:
QS increases
OR
(c) Partial description of
market forces given – Price
rises and one of:

Shortage (excess
demand)

QD falls

QS increases.
QD falls.
NCEA Level 3 Economics (90630) 2011 — page 3 of 11
Code
Question
A3
TWO
M3
(a)
Evidence
See Appendix Two.
E3
(d)
(e)
 Real wages
measure the
purchasing power of
the wage
 The (nominal) wage
adjusted for inflation
 The wage measured
in constant dollars.
See Appendix Three
NB answer to this may
provide A1 evidence
(f)
 I with the removal of
the subsidy, the
ECE centres will
receive $25 less per
child
 E this will mean
supply will
decrease, as
supplying at each
price is less
profitable. With the
decrease in supply
to S1 in Graph Two,
the price of
childcare will
increase to P1, and
less childcare
places will be filled
 I since less
childcare places are
filled due to the
higher price, the
demand for qualified
ECT to provide the
childcare service in
the centres will
decrease (as shown
in Graph Three)
 E as the demand for
Achievement
TWO of:
 Supply curve
shifted up by
$25, new price
and quantity
correct in
Graph Two
 Correct
definition of
real wage
 Demand for
qualified ECT
decreased in
Graph Three
 Correct
quantity
employed in
Graph Three
OR Q1 labelled
OR involuntary
unemployment
labelled.
Merit
TWO of:
 Explanation of
why Graph Two
changed
 Explanation of
why Graph
Three changed
(derived
demand idea)
 Explanation of
involuntary
unemployment
in this labour
market
 Explanation of
effect on the
allocation of
teachers in
ECE sector
 Explanation of
effect on other
labour markets
– recognition of
childcare as
cost of
supplying
labour for some
people.
Excellence
The effects on all
markets are fully
explained by
THREE of:
 Effect of the
subsidy on the
market for
childcare fully
explained with
reference to
Graph Two
 Effect of the
subsidy on the
market for
qualified ECT
fully explained
with reference
to Graph Three
 Effect on the
allocation of
teachers in
ECE sector
fully explained
 Effect on other
labour markets
fully explained.
NCEA Level 3 Economics (90630) 2011 — page 4 of 11






the qualified ECT
comes from the
demand for the
service (derived
demand idea)
NB answer to this
bullet point may
provide A1
evidence
I with the real wage
unchanged due to
qualified ECT being
under collective
employment
contracts, and fewer
qualified ECT
demanded, Q0 to Q1
in Graph Three –
and qualified ECT –
will become
involuntarily
unemployed from
these centres
E as centres switch
to the relatively
cheaper ECT, fewer
qualified ECT will be
employed
I since demand for
workers in early
childhood centres
with over 80%
qualified staff falls,
this will mean more
qualified ECT are
available
E this will mean that
more qualified
teachers will be
available for other
centres in the sector
that currently cannot
get qualified
teachers
OR
E this will not affect
teacher allocation in
the ECE sector
because if the
market was in
equilibrium before
the change, then
other centres will
not want any more
expensive fullyqualified ECT, as
they already have
the resource mix
that maximises their
profit
Other labour
markets may be
affected, as the
NCEA Level 3 Economics (90630) 2011 — page 5 of 11
higher cost of
childcare may mean
that some workers
will supply less to
other labour
markets because it
isn’t worth working
many hours, due to
the higher cost of
childcare (cost of
supplying to those
markets).
OR
The surplus of
labour in ECE may
create a surplus in
other labour
markets (as they
look for work
somewhere else).
Code
Question
A3
M3
THREE
Part A
E3
(a)
(b)
Evidence
THREE of:
See Appendix Four
 I with higher
incomes in China
and India, world
demand for dairy
products will
increase
 E with higher
incomes these
countries are able to
demand more
so world price will
rise.
(c)
See Appendix Four
(d)
0.32
(e)
Achievement
 I PES will be more
elastic next year
 E as over time
farmers can adjust
all resources. This
year they can only
adjust variable
resources (labour –
cow numbers), but
in the future they
can also adjust fixed
resources – convert
more farms to dairy,
expand factory
 Increase
demand for
dairy in Graph
Five means
higher price
 Partial answer
to (b) I or E –
may have slight
economic error
 Higher price in
Graph Four
 X correct
 PES correct.
Merit
TWO of:
 Full answer to
(b) I and E
 Explanation of
why PES is
more elastic
next year
 Explanation
that price in
New Zealand
equals the
world price
 Explanation of
the effect on
price of
farmland
 Explanation of
how other
producers may
benefit – at
least one
example.
Excellence
The effect on all
markets is fully
explained by
THREE of:
 Effect on
supply over
time using PES
fully explained
(must include
the idea of LR
all inputs can
vary and QS
changes
proportionally
more (more
responsive)
than price
 Effect of New
Zealand being
a price taker
fully explained
 Effect on the
market for
farmland fully
explained
 Effect on other
producers fully
explained.
NCEA Level 3 Economics (90630) 2011 — page 6 of 11
capacity
 Q next year the
quantity supplied
can be more
responsive to price
changes
 I New Zealand is a
price taker:
so the world will buy
all New Zealand
output at the one
price OR
because NZ is small
relative to the rest of
world so we cannot
influence the price
 E dairy supply in
New Zealand will
increase next year,
but the world will
buy it without any
change in the world
price of P1
 Q so the price of
dairy in New
Zealand will match
that of the world
price (P1)
 I demand for
farmland in New
Zealand will
increase (derived
demand idea)
 NB: answer to this
bullet point may
provide A1
evidence
 E with higher profits
to be made in dairy,
more farmland will
be wanted to
convert to dairy
 Q the price of
farmland in New
Zealand will
increase
 I producers who are
involved in
supporting the dairy
industry will benefit
(e.g. farm advisors)
 E with more
demand for dairy,
more of their
services will be
demanded
 Q they will receive
higher prices and
make more sales,
thus being more
profitable
Other suitable
NCEA Level 3 Economics (90630) 2011 — page 7 of 11
examples could be
producers in service
towns like petrol
stations or
supermarkets.
NCEA Level 3 Economics (90630) 2011 — page 8 of 11
Code
Question
A2
M2
Part B
(f)
Evidence
Achievement
Allocative efficiency
occurs when:
ONE of:
 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.
 Correct definition of
allocative efficiency
 Correct shaded area
of deadweight loss
 Description of why
DWL occurs – loss of
PS/CS not gained by
another party (loss of
PS greater than gain
in CS).
Merit
TWO of:
 Correct definition of
allocative efficiency
 Correct shaded area of
deadweight loss
 Description of why DWL
occurs – loss of PS/CS not
gained by another party
(loss of PS greater than gain
in CS).
(g)
(i)
See Appendix Five
(ii)
The deadweight loss
occurs because:
the loss of surplus to the
producer (by the price
falling below P0) is
greater than the gain in
surplus that the
consumer makes.
OR
Loss of welfare by
producers (and/or
consumers) not gained
by another party.
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
Codes:
A1 refers to the first criterion.
A2 and M2 refer to the second criterion.
A3, M3, and E3 refer to the third criterion.
NCEA Level 3 Economics (90630) 2011 — page 9 of 11
Appendix One – Question One (a) and (b)
Graph One: Production Possibility Frontier for Land Use
Appendix Two – Question Two (a)
Graph Two: The Market for Fulltime Childcare per week in Early Childhood Education Centres Affected by
the Decrease in the Subsidy
NCEA Level 3 Economics (90630) 2011 — page 10 of 11
Appendix Three – Question Two (e)
Graph Three: The Labour Market for Qualified Early Childhood Teachers in Centres Affected by the Decrease
the in Subsidy
Appendix Four – Question Three (a) and (c)
Graph Four: NZ Market for Dairy Products
Graph Five: World Market for Dairy Products
NCEA Level 3 Economics (90630) 2011 — page 11 of 11
Appendix Five – Question Three (g) (i)
Graph Six: New Zealand Domestic Market for 2-litre Bottles of Milk