A-Level Economics Model Answers
The building of wind turbines may lead to a “negative externality of ‘eyesore’ or visual pollution”.
With the use of a diagram, explain how the building of wind turbines may affect house prices in the area in which the wind turbines are located
Here is a question and answer from the externalities section of the A-level Economics syllabus.
This question is an ‘explain’ question - the type of question students need to where you need to demonstrate your knowledge of economics with theory and diagrams. This is usually an applied question, so you also have to apply your knowledge in context.
I have seen so many capable students drop a few marks on these sorts of questions simply because they don’t apply their knowledge to the question.
THE FREE ESSAY PLAN BELOW CAN BE USED AS A GUIDE TO HELP YOU WRITE YOUR RESPONSE.
The building of wind turbines may lead to a “negative externality of ‘eyesore’ or visual pollution”.
With the use of a diagram, explain how the building of wind turbines may affect house prices in the area in which the wind turbines are located.
The question asks you to explain how wind turbines may affect house prices within the local area. You can add some background knowledge if you want to, but it may not get you marks. If you want the maximum marks in the shortest amount of time, you must try and stick to the question. You can get full marks on this question within 1 page of writing.
FREE Model Answer Guide
Possible Definitions
Definition of market failure - the inability of the free market to generate maximum social welfare given scarce resources
Definition of negative externality - an external cost to society from economic activity
How wind turbines affect house prices
Arguments For Free Market
The negative effect the building of wind farms would have on the housing market
Lower desirability for houses might occur due to lack of demand
Draw a diagram and label axes
Explain the movement towards the new equilibrium price
You could argue that there might be more demanded for housing as there would be more jobs created in the area
Another option would be to draw a negative externality diagram and focus on overproduction of wind turbines (but this is a less direct answer to the question)
Price mechanism - how might the price mechanism dictate a movement towards a new equilibrium price