Question 19M.1.SL.TZ1.a
| Date | May 2019 | Marks available | [Maximum mark: 10] | Reference code | 19M.1.SL.TZ1.a |
| Level | SL | Paper | 1 | Time zone | TZ1 |
| Command term | Explain | Question number | a | Adapted from | N/A |
Explain why a government might decide to impose a price ceiling on goods and services such as essential foods or rented housing.
[10]
Marks should be allocated according to the paper 1 markbands for May 2013 forward, part A.
Answers may include:
- definition of price ceiling
- diagram to show a price ceiling
- explanation of why a government might place a maximum price below equilibrium price in a particular market eg market power, political considerations, equity issues (making essential goods and services available to those on low incomes),
externality issues - examples of maximum prices being imposed on goods or services in practice in relation to particular economies, or in relation to particular goods/services.
It was encouraging to see how many candidates were able to discuss price ceilings and provide a diagram to illustrate the concept. Usually one reason (for example, to help those earning low incomes) was given but often it was not well-developed. Too many just used the example of “essential foods” or “rented housing” without providing specific and realistic examples. A common mistake was to spend too little time on why price ceilings may be imposed, which was the question, and to spend too much time on the effects of price ceilings, which was not the question. Some confused price ceilings with price floors.
