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Edexcel A level economics and their incorrect mark scheme but refusal to change it.

Discussion in 'Business studies' started by jfarrier, Jul 16, 2014.

  1. I pointed out to edexcel a few days after the exam the problem with the following question on their A level economics unit 3 paper sat in June 2014.

    Q1 Dairy Crest Group is a British food producer which uses a large amount of milk in

    its production processes to make dairy products. In March 2013, Dairy Crest Group

    bought Proper Welsh Milk, a firm which specialises in selling fresh milk. This takeover could lead to advantages of

    A horizontal integration

    B backward vertical integration

    C forward vertical integration

    D conglomerate integration

    E external economies of scale

    Because of the lack of information about Proper Welsh Milk there is more than one correct answer to this question.

    It could be B if Proper Welsh Milk is farm that sells milk to Dairy Crest for use in making dairy products.

    It could be C if Proper Welsh Milk is a distributor of fresh milk to say Welsh consumers and shops. This would have the advantage of easier access to the Welsh market for Dairy Crest.

    So what does the mark scheme say?

    ''Correct option B (1 mark)

    Vertical – at a different stage of the same industry or

    process of production or same final product (1)

    Backwards - it is previous/earlier/towards raw

    materials/away from consumer (1)

    Reasons or benefits of merger (1+1) e.g. rationalisation

    Application to the dairy industry (1) e.g. Proper Welsh is

    a primary industry. Only award the application marks if

    relevant to backward integration.

    Knock out examples

    It cannot be D because conglomerate integration

    involves merging with a firm in a different industry

    It cannot be C because forward integration is towards

    the consumer''

    Only one answer B is correct. With reasons such as Proper Welsh is a primary industry which can’t be deduced from the evidence in the question.

    I have one potential A* student who put C as the correct answer. She could lose her university place by a couple of marks due to this poorly worded question and a lack of flexibility with the answer.

    I know Colin Leith reads this forum and he did respond to my initial query saying that he will pass on my suggestion but obviously he did not or the examiners did not want to admit an error.

    Furthermore, the mark scheme states for the following question that the correct answer is D when it should be A:

    5 Supermarkets selling freshly baked bread are operating in an oligopoly. They tend to keep prices stable for a popular, frequently compared product, an 800 gram white

    loaf. One reason for this might be

    A supermarkets know that the pricing decisions of one supermarket will impact on

    those of other supermarkets

    B supermarkets are independent and base their prices on costs alone

    C there is heavy regulation in the industry to prevent tacit collusion

    D supermarkets are unable to engage in non-price competition

    E if prices were cut by one supermarket then the others would leave prices unchanged

    Mark scheme states the following, so I hope the examiners do not use the same one that is published on the edexcel website. Does anyone know if they do? This has the wrong answer but the correct reasoning!

    ''Correct Option D (1 mark)

    Definition of oligopoly e.g. a few firms dominate the market (1)

    Supermarkets are interdependent (1)

    Other firms will follow if prices are cut (1)

    Firms will not follow if prices rise or other asymmetric

    reaction comments (1)

    Diagram showing a kinked demand curve with

    annotation or explanation of inelastic section for

    downward moving prices or elastic section for upward

    moving prices (1 +1) – Note kinked demand curve is not


    Pay off matrix correctly showing that the firm will not

    change prices (1 + 1)

    Application – bread is regularly purchased and therefore

    easy to spot price changes (1) or often a loss leader (1)

    Example of a knock out:

    It’s not C as if it is tacit collusion it has not been

    controlled by the regulator/competition authorities

    It’s not D because supermarkets use non price

    competition such as loyalty cards and customer service schemes.''
  2. I agree with you. I've taught and examined for Unit 3 and would have got both of these questions wrong. Q1 assumes students will consider who Proper Welsh Milk are selling their milk to. It is not clear whether they sell to supermarkets, direct to the public (milk rounds?) or, indeed, to food manufacturers. International students may even be more disadvantaged as the word "Dairy" adds more confusion. This seems too complex, nuanced an argument for a question which should take up only 4-5 minutes.

    If Edexcel are testing knowledge of key terms and application of theory, surely C is an acceptable answer if argued logically?

    Choosing option D for question 5 lacks logic too - supermarkets do engage in non-price competition (opening hours, size of stores, loyalty cards, in-store bakeries, etc.). If we are to assume option D means non-price competition for bread only then it should have been stated. But they do if you consider the choice of bread at the larger stores.

    Substituting the word "low" for the word "stable" in the preamble to the question might make more sense if D is the answer Edexcel wanted.

    There are 8 marks at stake here. Very good students are likely to get only 2 marks.
  3. danlee

    danlee New commenter

    Q1 is clearly B. It says in the question that the business is a PRODUCER of DAIRY PRODUCTS i.e. they MAKE products out of milk. This is an example of a business in the secondary sector. Milk is a raw material i.e. a supplier to the producer, therefore it is obviously backward vertical integration.

    The mark scheme is fine.
  4. doomzebra

    doomzebra Occasional commenter

    I agree - it is the only answer that does not rely on making unwarranted assumptions about the target business.
  5. 'Milk is a raw material i.e. a supplier to the producer, therefore it is obviously backward vertical integration'

    Obviously milk is not just a raw material, it is also a final product.

    'I agree - it is the only answer that does not rely on making unwarranted assumptions about the target business.'

    This is A level economics, one is supposed to think critically. It is not unwarranted to assume a dairy producer would want to buy a distributor.
  6. doomzebra

    doomzebra Occasional commenter

    In an examination setting, critical thinking is not about making unsupported assumptions and providing answers based on those assumptions - it is about assessing the information provided and providing the best solution based on that information - otherwise I could argue that "milk" is the name of a music software app and then claim that the corporate acquisition was an example of diversification.
  7. danlee

    danlee New commenter

    Am I missing something here? Dairy Crest is a customer of Proper Welsh Milk, Proper Welsh Milk SUPPLY the milk to Dairy Crest - therefore it is not even arguable that it is backward vertical integration.

    I suppose all I would say to you jfarrier, just make sure that you improve your delivery so that you do not disadvantage your pupils. You could do this by making sure they understand that, yes, it is about what stage of production a firm is at but it is also about the customer - supplier relationship. From this perspective, your argument is flawed.

  8. Doomzebra:

    ' otherwise I could argue that "milk" is the name of a music software app and then claim that the corporate acquisition was an example of diversification'

    No...it clearly states Proper Welsh Milk 'sells fresh milk' in the question.

    And Danlee you are missing something. The question does not state Proper Welsh Milk supply the milk to Dairy Crest. If it did then there would be no problem. Please read the question and from it work out exactly what Proper Welsh Milk does, one can't given the information.

    Why can't Dairy Crest want to but a seller of fresh milk to local shops and consumers, which would make it forward vertical information. In this case Dairy Crest is the supplier and PWM is the customer.

    It is the lack of information about Proper Welsh Milk that leads to more than one correct answer.
  9. doomzebra

    doomzebra Occasional commenter

    It still doesn't define 'milk'

    No, there is only one correct answer based solely on the evidence/information presented in the question.
  10. The only evidence given is Proper Welsh Milk is 'a firm specialising in selling fresh milk'

    How can one deduce from this that it is

    A) a supplier of milk to a producer

    B) a supplier of milk to retail or directly to consumers

    The answer is you can't.

    One of Proper Welsh Milk's roles prior to the takeover was to supply milk to Welsh Marks and Spencer, although of course one would not expect any student to know this. Dairy Crest wanted access to these Welsh markets
  11. doomzebra

    doomzebra Occasional commenter

    Whatever else Proper Welsh Milk may or may not do, they produce a raw material that Dairy Crest uses - buying a business further back in your own supply chain can only be backward vertical information
  12. danlee

    danlee New commenter

    Exactly Jfarrier - whether the milk company is their ACTUAL supplier or not it doesn't matter - it is a supplier business to the producer business - they supply the raw materials which the business then uses to PRODUCE goods. I can't believe that you don't understand it. And you say you were an examiner for this subject?
  13. 'they produce a raw material that Dairy Crest uses - buying a business further back ...'

    Again, there in nothing in the question that states PWM produce a raw material. They may be a distributor of milk, ie towards the consumer. I can't believe you don't accept this is a possibility given the information. It says they sell fresh milk, not make it. If they sell it to the retailer or consumers and not Dairy Crest then it is towards the consumer and is forward vertical integration. This must be a possibility given the wording of the question.

    I did not say I was an examiner, that was Cjwitts, who agreed with me. I have been teaching economics for 24 years and in each of the last 4 years my students achieved ALPS level 2 (in reference to your unnecessary comment re. disadvantaging my students)
  14. doomzebra

    doomzebra Occasional commenter

    You are still making unwarranted assumptions - the only things we KNOW from the information in the question is that Proper Milk provide milk and Dairy Crest use milk - the only possible answer based on th einformation given is that the purchase is backward vertical integration. Any other answer requires the making of assumptions ("they MAY be a distributor of milk"; "IF they sell it to the retailer")
  15. It is not an unwarranted assumption to judge that a dairy producer would want to purchase a seller of milk to access markets. This 'COULD' be a possibility to use the language in the question. (The actual chain of production for both Dairy Crest and PWM is complex and neither fits the straightforward textbook example the questioner tried to test students.)
  16. doomzebra

    doomzebra Occasional commenter

    Dairy Crest make dairy products - there is no information given to say it sells milk, so we should NOT assume it sells milk. Therefore buying a milk seller would NOT be forward vertical integration as milk is a different market to dairy products.

    The 'could' in the question concerns the uncertainty about reaping the possible benefits, not the nature of the integration.
  17. danlee

    danlee New commenter

    Milk IS the RAW MATERIAL that Dairy Crest use to MAKE or PRODUCE their goods. Therefore it is definately backward vertical.
  18. 'Milk IS the RAW MATERIAL that Dairy Crest use to MAKE or PRODUCE their goods.'

    Yes that is not in dispute, but Milk is also a final product. Dairy Crest produce their goods which includes milk and could have bought a distributor to access Welsh markets. This would make it forward vertical. It does not say what PWM does other than sell fresh milk, but who to is not explained. It is that vital missing piece of information that leads to ambiguity and more than one possible answer. We need more information about what PWM actually does to make an informed accurate judgement.

    Surely you can accept that if an examiner and I think there could be more than one correct answer then there should be some scope for the mark scheme to accept this possibility too. Otherwise students who answer forward vertical because they believe PWM is a distributor of milk to consumers bought by Dairy Crest to access their Welsh market and explain it as such, will receive no marks even though their knowledge and understanding is correct.
  19. danlee - nobody is disagreeing with you about the fact that Dairy Crest uses milk. But in my humble opinion there is more than one logical interpretation of question 1 and question 5 on this paper.
  20. doomzebra

    doomzebra Occasional commenter

    COULD - making assumptions

    You are supposed to make informed judgements using the information given.

    Because they made one set of assumptions - another set of assumptions could lead to a different answer - making NO assumptions leads to the right answer (you need make no assumptions whatsoever to conclude that the deal was an example of backward vertical integration - no assumptions needed about who Welsh's customers are, no assumptions needed about Dairy Crest's intentions)

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