How to Provide Effective Feedback on Economics Exam Scripts

Question 1 – Errors, Corrections, and Serious Issues

Major error: This misunderstanding shows confusion about how relative prices affect the slope of the budget line. The student confuses income tax and quantity tax and tries to make them act like they produce the same effect on the line of the budget. This is not the case since an income tax will bring about a parallel inward movement, whereas a quantity tax will increase the effective price of whatever is taxed and generate a rotation. Such a misconception indicates that there is an obscurity in the influence of relative price on the slope of the budget line.

Important omission: The answer does not give the reason as to why a rational consumer would solely prefer the income tax. Since quantity taxes disequilibrium marginal rates of substitution, the diminution of welfare they produce is more formidable than the diminution of a pure income. The diagram below does not feature the rotation, hence it cannot be used to support the argument.

Correction: State that a quantity tax changes the slope pᵧ, but an income tax leaves the slope  constant. A right-angled line and a parallel shifted line ought to be depicted in the correct diagram. The income tax likes to have tangency in a higher indifference curve, ascertaining the preference.

Consequence: The welfare ranking of the student, and the reasoning based on the consequences, is nullified by the false assumption that the taxes are the same.

Question 2 – Errors, Corrections, and Serious Issues

Major error: The student incorrectly derives the MRS and misapplies the tangency condition. The marginal utilities must be computed and then divided to obtain ,  the correct MRS is y/x. The student also writes the budget equation incorrectly, swapping prices.

Correct method: Write MRS = y/x and set it equal to . Combine this with the budget constraint to solve for x and y. The correct Marshallian demand for y is y = ½(m/pᵧ). With we obtain. The diagram should show a smooth convex curve tangent to the budget line at this point.

Perfect complements: The student incorrectly attempts to use tangency for Leontief preferences. Instead, impose x = y (or the appropriate fixed ratio) and insert into the budget constraint. With  →

Consequence: Because MRS and the budget line were wrong, the entire derived demand is invalid.

Question 3 – Errors, Corrections, and Serious Issues

Major error: The student incorrectly draws the contract curve and miscomputes equilibrium prices because they use the wrong MRS expression. With identical Cobb–Douglas preferences, the contract curve is the diagonal of the Edgeworth box, not a curved line.

Corrections:

·      Compute utilities correctly: .

·      Total resources:

·      Normalise  and let pₓ be unknown.

·      Individual incomes: m_

·      With Cobb–Douglas,

·       Market clearing gives pₓ=1.

·      Final allocation: both with utility 25.

Consequence: The incorrect contract curve and price calculations invalidate the student’s conclusions about welfare and whether trade occurs.

Question 4 – Errors, Corrections, and Serious Issues

Major error: The student wrongly assumes that rationality means “choosing the cheaper bundle.”WARP, not expenditure minimisation, defines rationality.

Correct reasoning:

·      At  chosen bundle  costs 19.

·      At  chosen bundle  costs 57.

·       At p₂, x₁ is affordable (costs 17), but the consumer still chooses x₂ → consistent with preference.

·      At  costs  → not affordable → no reversal.
Thus, no WARP violation.

Consequence: The student’s conclusion is reversed; choices are rational.