Oxford Cambridge And RSA A Level Economics

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Oxford Cambridge and RSAA Level EconomicsH460/01 MicroeconomicsTuesday 5 June 2018 – AfternoonTime allowed: 2 hours* 6 9 0 4 0 3 0 0 1 1 *You may use: a scientific or graphical calculator*H46001*First nameLast nameCentrenumberCandidatenumberINSTRUCTIONS Use black ink. You may use an HB pencil for graphs and diagrams. Complete the boxes above with your name, centre number and candidate number. Read each question carefully before you start to write your answer. Section A: Answer all questions in this section. Sections B and C: Answer one question in each of these sections. Write your answer to each question in the space provided. If additional space isrequired, you should use the lined page(s) at the end of this booklet. The questionnumber(s) must be clearly shown. Do not write in the barcodes.INFORMATION The total mark for this paper is 80. The marks for each question are shown in brackets [ ]. Quality of extended responses will be assessed in questions marked with anasterisk (*). This document consists of 20 pages. OCR 2018 [601/4799/4]DC (NF/TP) 162923/3OCR is an exempt CharityTurn over

2SECTION ARead the following stimulus material and answer all parts of Question 1 which follow in this section.Who should pay for students to study at university?5The proportion of university education provided by the public sector and the private sector variesthroughout the world. Most UK universities are generally considered to be in the public sector.In 2017, there were only five private sector universities in the country. The difference betweenpublic sector and private sector universities, however, is changing. This is the result of a shift inthe funding of higher education, particularly in England. Universities are obtaining less of theirincome from government financed teaching grants and an increasing proportion from tuition fees.Fig. 1 shows how the amount of government spending on higher education has fallen in recentyears.Higher education government grant(indexed to 100 in 2010–11)Fig. 1 – Spending on higher education government 13Financial year2013–142014–15Note: Figure for 2014–15 was a predicted figure. Figures are in real terms, adjusted forinflation using the GDP deflator.101520Tuition fees were introduced in 1998 at a maximum of 1,000 a year. By 2017, these had risento a maximum of 9,250 for UK and EU students studying in England. Most universities chargethis maximum annual fee. In October 2017, the government announced that it was freezingtuition fees at 9,250 instead of increasing them in line with inflation and raising the studentloan repayment threshold from 21,000 to 25,000. Most students would like the government tomaintain the freeze for some time or even scrap tuition fees altogether.Some A Level students do not gain the grades needed to take up university places. In othercases, however, it is tuition fees which discourage them from applying to university. Thesestudents are concerned about future debt levels and value for money. The average pay foruniversity graduates is higher than that for non-graduates. Future earnings, however, varyaccording to the subject studied, university attended and job gained after graduation. Currentlythe highest earning post graduates tend to have been students of medicine, veterinary science,economics and engineering. While the lowest earners are found to be former students of EnglishLiterature, communication, agriculture and creative arts. A Level pupils are also aware thatthe learning experience varies between courses and universities, with some undergraduatescomplaining about lack of contact hours and high numbers of students in seminar groups. OCR 2018

32530While a limit on tuition fees may be welcome to many students, universities are concerned aboutthe measure. They are worried that if they are not able to charge higher tuition fees and if theydo not get more funding from the government, they will struggle to cover their costs. Universities’operating costs vary with the number of students they teach. Fig. 2 shows a breakdown of thetotal cost of 31.2 billion incurred by UK universities in 2014–2015 when they were educating2.2 million students.Fig. 2 – The composition of the total cost of UK universities 2014–2015Costs (%)6.3%1.4%37.5%54.8%Operating (staff costs)Other operating costsDepreciationInterest and other overheadsThe cost of providing degree courses varies between subjects and universities. It is, for example,more expensive to provide engineering courses than English Literature courses. The Universityof Cambridge, for instance, spends more per student than the University of Bedfordshire.35The amount spent on education for people above school age (tertiary education), includesspending on degree courses and vocational courses. Such education provides a range ofbenefits not only to those who undertake the courses but also to others. Tertiary educationincreases a country’s output and the productivity of its workers. UK universities are also creatingan increasing number of spin-off companies which create new jobs. OCR 2018Turn over

4Fig. 3 shows how the proportion of people of two different age ranges who had completed tertiaryeducation varied in selected countries in 2016, as well as average income in those countries.Fig. 3 – The proportion of people who had completed tertiary education in selectedcountries in 2016Country25–34 year oldswho completedtertiary education55–64 year oldswho completedtertiary educationAverage income(GDP per head inUS ) 2016Canada60.646.242 200Germany30.526.342 000Japan60.139.739 100New Zealand43.428.239 400South Korea70.019.727 600United Kingdom52.037.639 900United States ofAmerica47.541.957 500 OCR 2018

5Answer all the questions.1(a) Explain, using evidence from the stimulus material, why higher education is a private good. [2](b) Calculate, using information from the stimulus material, the average fixed cost of educating auniversity student in 2014–2015. [3](c) (i)Explain whether the information in Fig. 3 about average income and about 25–34 yearolds who had completed tertiary education shows the expected relationship between thetwo. [2] OCR 2018Turn over

6(ii)Explain, using information in Fig. 3, which country is likely to have experienced thelowest relative increase in occupational mobility over the last thirty to forty years. [3](d) Evaluate whether students will benefit from the government freezing the maximum annualtuition fee for some time. OCR 2018