Question 21M.3.HL.TZ0.1l
| Date | May 2021 | Marks available | [Maximum mark: 2] | Reference code | 21M.3.HL.TZ0.1l |
| Level | HL | Paper | 3 | Time zone | TZ0 |
| Command term | Explain | Question number | l | 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.
Explain one reason, apart from the possible creation of a parallel market, why the imposition of a maximum price for rice in Islandia might not enable low-income households to buy enough rice to meet their needs.
[2]
Generally well-answered. Most candidates suggested that the shortage would impact all consumers, including those on lower incomes. Stronger responses provided suggestions as to why those on lower incomes might be impacted disproportionately.
