Question 21M.3.HL.TZ0.1k
| Date | May 2021 | Marks available | [Maximum mark: 2] | Reference code | 21M.3.HL.TZ0.1k |
| Level | HL | Paper | 3 | Time zone | TZ0 |
| Command term | Outline | Question number | k | Adapted from | N/A |
Figure 2 illustrates Islandia’s demand (D) for and supply (S) of rice.
Figure 2
The government of Islandia wants to reduce the price of rice by 40 % in order to enable low-income households to buy enough rice to meet their needs. The government decides to achieve this by imposing a maximum price.
The government of Islandia realises that when a maximum price is set below the equilibrium price, a method of non-price rationing is necessary. Critics of the maximum price policy argue that it might result in the creation of a parallel market.
With reference to Figure 2, outline why the imposition of a maximum price might lead to the creation of a parallel market.
[2]
Many candidates generally referred to the creation of an "alternative" market arising to meet unsatisfied demand without referring to Figure 2 or explaining why consumers and/or producers would be willing to exchange at a price higher than that of the official market.
