2.3 BACKGROUND KNOWLEDGE Nature, effects and measurement of economic activity

Source: VCE 2018 Economics, Section B, Q1 © VCAA a. Distinguish between allocative efficiency and dynamic efficiency. b. Explain how a decrease in the price of a complement can affect the demand for a good. Construct fully labelled demand and supply curves to illustrate your explanation.

(3 marks)

(4 marks)

c. Describe the difference between a movement along the supply curve and a shift of the supply curve. Construct fully labelled demand and supply curves to illustrate your description. (4 marks) d. Explain how either externalities OR asymmetric information would result in market failure. (3 marks) e. Explain one government action that might be taken to address the market failure explained in part d.(3 marks)UNCORRECTED PAGE PROOFS

Source: Adapted from VCE 2020 Economics, Section B, Q1 © VCAA

Residential property prices, weighted average of eight capital cities, quarterly percentage change 3.9

3.9 1.6 –1.8

0.8 0.8 5.4

6.7 6.7

5

5 4.7 a. Referring to the graph above, describe the trend in the growth of Australia’s housing prices during (2019–20). (2 marks) b. Describe one likely effect of the trend in the growth of housing prices (during 2019–20) described in part (a) on Australian living standards. (3 marks) c. Explain whether the demand for buying a house is likely to be price elastic or price inelastic. (3 marks) Question 5 (8 marks) Source: VCE 2017 Economics, Section B, Q1 © VCAA a. Explain one effect of competitive markets on the efficiency of resource allocation. (2 marks) b. Distinguish between public goods and common access resources. (3 marks) c. Identify one recent example of government intervention in markets and explain how it unintentionally led to a decrease in the efficiency of resource allocation. (3 marks) Question 6 (13 marks) Source: VCE 2021 Economics, Section B, Q3 © VCAA 3 1. In the period 1961–2017, the average annual growth rate of total food fish consumption increased at 3.1 per cent, outpacing annual population growth rate (1.6 per cent). 2. The [percentage] of fish stocks that are within biologically sustainable levels decreased from 90 percent in 1974 to 65.8 percent in 2017. Source: Food and Agriculture Organization of the United Nations (FAO), The State of World Fisheries and Aquaculture: Sustainability in Action. Rome, 2020, pp. 13 (quote 2) and 15 (quote 1). 3 UNCORRECTED PAGE PROOFS a. Outline one -1.8 demand factor or one supply factor that might explain the increase in total fish consumption over the stated period. (2 marks)Dec-19 Dec-20 Dec-21 b. With reference to the (above) quotes provided and to the characteristics of common access resources, explain RPPI 8 Caps % change why there may be an inefficient allocation of resources in the fish market. (3 marks)

c. Explain one example of government intervention that could be utilised to reduce the degree of market failure associated with common access resources. (3 marks) d. With reference to one example, explain how the consumption of a good or service may be associated with positive externalities. (2 marks) e. Explain one factor that would affect the price elasticity of supply of fish. (3 marks)

Question 7 (14 marks)

Source: VCE 2016 Economics, Section B, Q2 © VCAA a. Outline two characteristics of a perfectly competitive market. (2 marks) b. Explain why a perfectly competitive market is more likely to achieve an efficient allocation of resources than an oligopolistic market. (4 marks) c. Outline one reason for government intervention in the market in order to stabilise the level of economic activity. (2 marks) d. Referring to a specific example of a market in Australia (such as an agricultural market, a commodity market, a retail market), describe one economic factor influencing the operation of this market and discuss the extent to which this market operates freely in Australia. (6 marks) Hey students! Access past VCAA examinations in learnON

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