Question 18M.1.HL.TZ1.1
| Date | May 2018 | Marks available | [Maximum mark: 25] | Reference code | 18M.1.HL.TZ1.1 |
| Level | HL | Paper | 1 | Time zone | TZ1 |
| Command term | Discuss, Explain | Question number | 1 | Adapted from | N/A |
With reference to the concept of excess demand, explain how a decrease in supply of a good would lead to a new market equilibrium.
[10]
Answers may include:
- definitions of demand, supply, excess demand, market equilibrium
- diagrams to show a leftward shift of supply with excess demand and an increase in price
- explanation of adjustments to a new market equilibrium in the case of a leftward shift of supply
- examples of decreases in supply affecting market equilibrium.
Marks should be allocated according to the Paper 1 markbands for May 2013 forward, part A.
A government decides to impose an indirect tax on unhealthy drinks. Discuss the consequences for the stakeholders in these markets.
[15]
Answers may include:
- definitions of indirect tax and stakeholders
- diagram to show the impact of an indirect tax
- explanation of how an indirect tax might affect consumers, producers and the government
- examples of unhealthy drinks and taxes on such products
- synthesis or evaluation (discussion) of the consequences for the different stakeholders.
Discussion may include: the importance of price and cross elasticities of demand, equity issues, micro and macro-economic consequences.
Some responses may approach unhealthy food as a demerit good leading to market failure / negative externalities of consumption. This can be credited equally if it leads to a valid discussion.
Examiners should be aware that candidates may take a different approach which, if appropriate, should be rewarded.
Opinions or conclusions should be presented clearly and should be supported by appropriate examples.
Marks should be allocated according to the Paper 1 markbands for May 2013 forward, part B.