Assessment map
Unit 2.8-2.10+2.12: Market failure
This page provides a map of the various assessments included in the unit, including short answers responses, essays and areas for discussion. I have included a section A and section B blank essay template which will help your classes prepare their paper one essay responses
Unit 2.8: The meaning of market failure
| Syllabus | Assessment |
| Recognise that market failure is a failure to allocate resources efficiently, i.e. a failure of some markets to achieve allocative efficiency, resulting in an over-allocation of resources (over-provision of a good) or an under-allocation of resources (under-provision of a good) | Short answer activities on Unit 2.8: Merit goods |
Socially optimum output: marginal social benefit (MSB) equals marginal social cost (MSC), (MSB = MSC): allocative efficiency; social/community surplus maximized) | Short answer activities on Unit 2.8: Merit goods |
| Describe the meaning of externalities as the failure of the market to achieve a social optimum where MSB = MSC | Beginning activities on Unit 2.8: Merit goods |
Unit 2.8: Positive externalities of production and consumption
| Syllabus | Assessment |
| Explain, using diagrams and examples, the concepts of positive externalities of production and consumption, and the welfare gain associated with the production or consumption of a good or service | Short answer activities 1, Merit goods |
| Explain that merit goods are goods whose consumption creates external benefits | Activity 11, paper one question Merit goods plus short answer questions on the same page |
| Evaluate, using diagrams, the use of government responses, including subsidies, legislation, advertising to influence behaviour, and direct provision of goods and services | Activities 1 - 6, Merit goods |
Unit 2.8: Negative externalities of production and consumption
| Syllabus | Assessment |
Explain, using diagrams and examples, the concepts of negative externalities of production and consumption, and the welfare loss associated with the production or consumption of a good or service Adverse selection and moral hazards | Short answer activities 3 - 7 on Demerit goods |
| Explain that demerit goods are goods whose consumption creates external costs | Activities 3 - 7 on Demerit goods |
| Evaluate, using diagrams, the use of policy responses, including market-based policies (piglovian taxation and tradable permits), education campaigns and government regulations to the problem of negative externalities of production and consumption | Activity 13, paper one style question on Demerit goods |
| Strengths and limitations of government policies to correct externalities and approaches to managing common pool resources including: • challenges involved in measurement of externalities • degree of effectiveness • consequences for stakeholders | Examination questions (activity 13) on page Unit 2.8: Demerit goods |
Unit 2.8: Common access resources and the threat to sustainability
| Syllabus | Assessment |
| Explain, using examples, common access resources | Activities 1 - 5 on Unit 2.9-2.10: Public goods and common access resources |
Apply the concept of sustainability to the problem of common access resources Common pool resources | Activity 6 on Unit 2.9-2.10: Public goods and common access resources Activity 9, paper one question on Unit 2.9-2.10: Public goods and common access resources |
| Examine the consequences of the lack of a pricing mechanism for common access resources in terms of goods being overused/ depleted/degraded as a result of activities of producers and consumers who do not pay for the resources that they use and that this poses a threat to sustainability | Activity 9, paper one question on Unit 2.9-2.10: Public goods and common access resources |
| Discuss, using negative externalities diagrams, the view that economic activity requiring the use of fossil fuels to satisfy demand poses a threat to sustainability | Activities 6,7 on Demerit goods |
| Discuss the view that the existence of poverty in economically less developed countries creates negative externalities through over exploitation of land for agriculture and that this poses a threat to sustainability | Assessed in the development unit, Unit 4: Global economy |
| Evaluate, using diagrams, possible government responses to threats to sustainability, including legislation, carbon taxes, cap and trade schemes and funding for clean technologies | Activities 6,7 on Demerit goods |
Explain, using examples, that government responses to threats to sustainability are limited by the global nature of the problems and the lack of ownership of common access resources and that effective responses require international cooperation, Porter hypothesis | Assessed in the development unit, Unit 4: Global economy |
Unit 2.9: Lack of public goods
| Syllabus | Assessment |
| Using the concepts of rivalry and excludability and providing examples, distinguish between public goods (non-rivalrous and non-excludable) and private goods (rivalrous and excludable) | Activities 1 - 5 on Unit 2.9-2.10: Public goods and common access resources |
| Explain, with reference to the free rider problem, how the lack of public goods indicates market failure, porter hypothesis | Activities 1 - 5 on Unit 2.9-2.10: Public goods and common access resources |
Discuss the implications of the direct provision of public goods by government. Strengths and limitations of approaches to managing common access resources
| Activities 1 - 5 on Unit 2.9-2.10: Public goods and common access resources |
Unit 2.10: Asymmetric information (HL only)
| Syllabus | Assessment |
| Explain, using examples, that market failure may occur when one party in an economic transaction (either the buyer or the seller) possesses more information than the other party | Broken candy game from Imperfect information (HL only) |
Evaluate possible government responses, including legislation, regulation and provision of information Private responses: signalling and screening | Activities 1,2,3 from Imperfect information (HL only) |
Unit 2.12: The market’s inability to achieve equity (HL only)
| Syllabus | Assessment |
Workings of a free market economy may result in an unequal distribution of income, wealth and opportunity | Circular flow model to illustrate why the free market results in inequalities, accssed at: Circular flow of national income Activities on page: Unit 2.13: The market’s inability to achieve equity (HL only) |
Blank essay template available at: 
Section A essay template