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Question 19N.1.SL.TZ0.1b

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Date November 2019 Marks available [Maximum mark: 15] Reference code 19N.1.SL.TZ0.1b
Level SL Paper 1 Time zone TZ0
Command term Evaluate Question number b Adapted from N/A
b.
[Maximum mark: 15]
19N.1.SL.TZ0.1b
(b)

Evaluate the importance of cross price elasticity of demand for a business selling a good if the price of a related good increases.

[15]

Markscheme

PLEASE NOTE: This question part is not on the syllabus for first teaching 2020/first exams 2022.

 

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

Answers may include:

  • definition of cross price elasticity of demand (XED)
  • diagram to show the significance of XED on the shift in demand that results from any change in price
  • explanation of the impact of XED on businesses if the price of complements and substitutes for a good they produce changes in terms of price, quantity, revenue and profit
  • examples of products that have substitutes and complements
  • synthesis or evaluation.

Evaluation may include: the relative size of XED and the extent to which the revenue and profit will rise or fall; the assumption that other factors affecting demand remain constant and that XED is difficult to predict and measure.

Syllabus sections