Market failure and government intervention - Eduqas A-Level Economics (A520) overview

The market-failure-and-government-intervention module of Eduqas A-Level Economics (specification A520) explains why free markets do not always allocate resources efficiently and what governments can do about it. This page maps the specification statements and how they are examined.

The statements in this module

Externalities and the environment

Positive and negative externalities in production and consumption, private and social costs and benefits, the deadweight welfare loss when marginal social cost differs from marginal social benefit, and environmental market failure.

Public goods and information failure

Non-rivalry and non-excludability, the free-rider problem and the missing market, merit and demerit goods, and asymmetric information, adverse selection and moral hazard.

Monopoly power and inequality

The welfare costs of monopoly power, factor immobility, the distinction between equity and equality, and the measurement of inequality using the Lorenz curve and Gini coefficient.

Government intervention and government failure

Indirect taxes and subsidies, maximum and minimum prices, regulation, tradable pollution permits, state and information provision, and the causes of government failure.

How this module is examined

Eduqas Economics is a two-year linear course with three papers at the end. This content is sampled across all of them: Component 1 uses multiple-choice and short structured questions, Component 2 uses data-response calculations (tax incidence, subsidies, price controls), and Section A of Component 3 offers a choice of microeconomics essays marked by levels of response. Higher-mark questions reward accurate welfare diagrams and balanced evaluation.

How to study this module

1. Master the welfare diagrams. The externality diagram (MSC, MSB, MPC, MPB and the welfare-loss triangle) and the tax, subsidy and price-control diagrams are the core of the marks.
2. Classify the market failure first. Decide whether it is an externality, a public good, information failure, monopoly power or immobility before choosing a diagram and a policy.
3. Link elasticity to incidence. The split of a tax or subsidy between consumers and producers depends on elasticity, a favourite data-response point.
4. Always evaluate with government failure. Weigh the corrective benefit against unintended consequences, information gaps and administrative cost.

Work through the statements

Each statement has its own focused answer page with worked exam questions and cross-links: externalities and the environment; public goods and information failure; monopoly power and inequality; and government intervention and government failure.

For the official specification

Eduqas publishes the full specification (A520), past papers and mark schemes at eduqas.co.uk. Always revise from the current specification and Eduqas's own past papers, because the multiple-choice format of Component 1 and the levels-of-response mark schemes are board-specific.