Question 19M.1.HL.TZ1.a
| Date | May 2019 | Marks available | [Maximum mark: 10] | Reference code | 19M.1.HL.TZ1.a |
| Level | HL | Paper | 1 | Time zone | TZ1 |
| Command term | Explain | Question number | a | Adapted from | N/A |
Explain why price elasticity of demand varies along the length of a straight-line demand curve.
[10]
Marks should be allocated according to the paper 1 markbands for May 2013 forward, part A.
Answers may include:
- definitions of demand curve, price elasticity of demand
- diagram to show differing price elasticities of demand along a straight-line demand curve
- explanation why the price elasticity of demand varies along the length of the demand curve, using the diagram, the elasticity formula and an economic rationale (eg when the price is higher the proportion of income spent on the good is higher)
- examples (hypothetical numerical example to support the explanation or a hypothetical example of a single good or service sold at different prices and having different price elasticities of demand).
There were many candidates who were able to explain price elasticity of demand in principle but were not able to apply the economic theory to answer this particular question. A common mistake was to correctly explain why different products have different price elasticities of demand and/or to show the different elasticities on two separate diagrams. However, in this question part it is stated explicitly that elasticity “along… a straight-line demand curve” should be explored. Some candidates needlessly drew a supply curve on the diagram for this question and incorrectly assumed that at the intersection of the supply and demand curves the price elasticity of demand is necessarily equal to one. Some candidates were able to provide excellent numerical examples and/or technical (mathematical) explanations to demonstrate how the coefficient of the price elasticity of demand should vary along a straight-line demand curve but did not link the mathematical calculations to relevant economic theory.
