Question 19M.3.HL.TZ0.1d
| Date | May 2019 | Marks available | [Maximum mark: 2] | Reference code | 19M.3.HL.TZ0.1d |
| Level | HL | Paper | 3 | Time zone | TZ0 |
| Command term | Outline | Question number | d | Adapted from | N/A |
Note that widgets are an imaginary product.
In Country X, the supply and demand for widgets are given by the functions
Qs = − 45 + 4.5P
Qd = 180 − 3P
where P is the price per widget in dollars ($), Qs is the quantity of widgets supplied (thousands per year) and Qd is the quantity of widgets demanded (thousands per year).
The supply (S) and demand (D) functions are represented in Figure 1.
An increase in costs of production has resulted in a new supply function:
Qs1 = − 60 + 3P
Using your answer to part (c), outline the reason why an increase in costs of production has resulted in a new supply function.
[2]
NB Responses which make reference to producers being “less able to afford” resources should not be rewarded.
Reference to the need to cut costs may be rewarded at level 1, but if the candidate refers to producers being unable to afford to supply, this should not be rewarded.
An accurate numerical example, referring explicitly to data in the graph, should be rewarded.
Few candidates demonstrated an understanding of the underlying concepts relating to supply theory. Although the vast majority stated that “the costs of production” is a determinant of supply, few were able to explain why a new supply function arises with reference to incentives or profitability.
