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Question 18N.1.SL.TZ0.1

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Date November 2018 Marks available [Maximum mark: 25] Reference code 18N.1.SL.TZ0.1
Level SL Paper 1 Time zone TZ0
Command term Explain, To what extent Question number 1 Adapted from N/A
1.
[Maximum mark: 25]
18N.1.SL.TZ0.1
(a)

Explain how the price mechanism reallocates resources when there is an increase in demand for a good or service.

[10]

Markscheme

Answers may include:

  • definitions of price mechanism, resources, demand
  • diagram to show how an increase in demand leads to a reallocation of resources
  • explanation of how the signalling and incentive functions of price lead to a reallocation of resources when demand increases for a good or service
  • examples of goods and services where the price mechanism has reallocated resources because of an increase in demand.

Marks should be allocated according to the paper 1 markbands for May 2013 forward, part A.

(b)

To what extent is advertising the most effective way of increasing the consumption of merit goods?

[15]

Markscheme

Answers may include:

  • definition of merit good
  • diagram showing positive externalities to illustrate how advertising can be used to deal with the market failure associated with merit goods
  • explanation of the positive externalities associated with merit goods and how advertising can increase the demand and consumption of merit goods
  • examples of the advertising of merit goods to increase consumption
  • synthesis or evaluation (to what extent).

Evaluation may include: the cost of advertising, the effectiveness of advertising and reference to alternative ways to increase the consumption of merit goods.

Examiners should be aware that candidates may take a different approach which, if appropriate, should be rewarded.

Marks should be allocated according to the paper 1 markbands for May 2013 forward, part B.

Syllabus sections