Skip to content

Course home

Sign up

1.8 The market mechanism, market failure and government intervention in markets

EasyMediumHard
123456789101112131415161718192021222324252627282930313233343536373839404142434445464748495051525354555657585960616263646566676869707172737475767778798081828384858687888990919293949596979899100101102103104105106107108109110111112113114115116117118119
Question 87

Context 1: THE ORBITAL COMMONS

Extract B: Congestion in the Orbital Commons

In recent years, the rapid commercialisation of space has led to an exponential increase in the number of satellites launched into Low Earth Orbit (LEO). While mega-constellations promise global high-speed internet, they have placed unprecedented pressure on the orbital environment. Historically, space exploration was dominated by a few national agencies, but the entry of private commercial operators has created a highly competitive 'space race' for optimal orbital altitudes.

This surge in activity has raised alarm bells over space debris and orbital congestion. Spent rocket boosters, defunct satellites, and fragments from collisions remain in orbit for decades, travelling at hypervelocities and endangering active missions. Economists point out that the orbital environment represents a global commons. Because no nation holds sovereign property rights over outer space, outer space is treated as a free resource. Operators have little financial incentive to voluntarily invest in active debris removal or to de-orbit satellites immediately at the end of their operational lives, as the private cost of leaving debris in orbit is virtually zero. At the same time, operators face a powerful incentive to deploy as many satellites as possible to secure prime orbital slots before they are occupied by competitors. Without clearly defined and globally enforceable rights, the risk of a 'Kessler syndrome'—where a cascade of collisions renders LEO completely unusable—highlights a severe market failure.

Explain what is meant by 'property rights' (Extract B) and analyse how an absence of property rights can worsen the market failures of both orbital pollution (space debris) and the rapid congestion of orbital space.

[10]
Markscheme

1.8 The market mechanism, market failure and government intervention in markets Questions

  1. A Level
  2. /Economics
  3. /1.8 The market mechanism, market failure and government intervention in markets

378 exam-style questions on AQA A Level Economics 1.8 The market mechanism, market failure and government intervention in markets, covering 1.8.1 How markets and prices allocate resources, 1.8.2 The meaning of market failure, 1.8.3 Public goods, private goods and quasi-public goods, 1.8.4 Positive and negative externalities in consumption and production, 1.8.5 Merit and demerit goods, 1.8.6 Market imperfections, 1.8.7 Competition policy (A-level only), 1.8.8 Public ownership, privatisation, regulation and deregulation of markets (A-level only), 1.8.9 Government intervention in markets, and 1.8.10 Government failure. Each one has a worked solution and a mark scheme showing where the marks go.

Question bank