Question 21M.1.SL.TZ1.b
| Date | May 2021 | Marks available | [Maximum mark: 15] | Reference code | 21M.1.SL.TZ1.b |
| Level | SL | Paper | 1 | Time zone | TZ1 |
| Command term | Discuss | Question number | b | Adapted from | N/A |
Discuss the view that price floors are more effective than subsidies in providing assistance to producers in the agricultural sector.
[15]
Marks should be allocated according to the paper 1 markbands for May 2013 forward, part B.
Answers may include:
- definitions of price floors, subsidies
- diagrams to illustrate the use of a price floor and a subsidy
- explanation of how price floors and subsidies can both provide assistance to producers in the agricultural sector
- examples of the use of price floors and/or subsidies in practice
- synthesis or evaluation (discuss).
Discussion may include: the possible consequences of price floors, e.g. surpluses, inefficient allocation of resources and welfare impacts; the possible consequences of subsidies, e.g. on consumers, producers or the government; consideration of “more effective”.
A maximum of [12] should be awarded if there is evaluation but no consideration of “more effective”.
This question required an explanation of how price floors could provide assistance to agricultural producers and how subsidies also could, with an evaluation of one against the other. Often candidates explained one policy fully and not the other or went straight into evaluating the view without providing the necessary underpinning explanation, and so this question was generally not very well answered. The question was problematic for candidates who were not able to diagram price floors or who confused price floors with price ceilings, as several candidates did. Often a guaranteed higher price for producers was explained but without showing how this could provide greater revenues. Most did not mention the purchasing of excess supply by the government. The concept of subsidies seemed to be reasonably well understood by candidates and, while most were able to diagram a rightward shift of the supply curve, again the impact on producers' revenues was not always shown. Definitions of subsidies and price floors were usually fairly accurate. Many candidates were able to evaluate the consequences of subsidies on the different stakeholder but were often less effective in evaluating the consequences of price floors.
