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

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Question 10

Extract C: The Helium Dilemma and High-Tech Survival

There are currently no international treaties or conventions to regulate Helium-4 extraction, atmospheric venting, or global distribution. Critics argue that the international community needs to treat global helium deposits as a critical, finite resource, on a par with deep-sea mineral reserves, to ensure long-term scientific and medical security.

In high-income nations, supply chain vulnerabilities have led to calls for strict regulations on helium recovery. In the United States, the historic sell-off of the Federal Helium Reserve artificially depressed global helium prices for decades, delaying private investment in recovery systems. Following the reserve's privatization, global helium prices spiked, prompting hospitals to look for alternative technologies. However, venting of helium remains common in major exporting countries. In Qatar and Russia, domestic energy priorities dictate natural gas extraction rates, and helium is often treated as an expensive-to-capture byproduct, leading to significant wasted supply.

Substitutes and alternative practices do exist. Researchers are developing "low-boil-off" or helium-free MRI cryostats, and scientific laboratories can install localized helium recovery and liquefaction loops. In several advanced scientific institutions, a transition to these circular systems is already under way as market prices for raw liquid helium rise. In Germany, some state-funded research facilities are already mandated to recover and recycle at least 90% of their helium. Rising helium prices will eventually force high-tech and medical sectors worldwide to adopt alternative cryogenics. However, without robust regulatory frameworks, high prices also make unregulated extraction more lucrative, potentially leading to safety compromises or localized supply hoarding.

Extract C states that: 'Rising helium prices will eventually force high-tech and medical sectors worldwide to adopt alternative cryogenics.'

Use the extracts and your knowledge of economics to assess the view that the increasing scarcity of helium is a problem best solved by market forces, rather than through government intervention.

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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.

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