Question 19M.1.HL.TZ1.4b
| Date | May 2019 | Marks available | [Maximum mark: 15] | Reference code | 19M.1.HL.TZ1.4b |
| Level | HL | Paper | 1 | Time zone | TZ1 |
| Command term | Evaluate | Question number | b | Adapted from | N/A |
Evaluate the view that government policies to promote greater equity will always have a negative effect on efficiency.
[15]
Marks should be allocated according to the paper 1 markbands for May 2013 forward, part B.
Answers may include:
- definitions of efficiency, equity
- an AD/AS diagram to show LRAS shifting to the left (less efficiency) or to the right (greater efficiency), an externalities diagram to show government policies improving allocative efficiency, a supply and demand diagram to show welfare loss due to government policies to promote equity
- explanation of how government spending and taxation might adversely impact efficiency (eg through the disincentive effects of progressive taxation, transfer payments, subsidized goods and services, through the decrease in social surplus due to taxes and price ceilings)
- examples of government policies having either a negative or positive impact on efficiency
- synthesis and evaluation (evaluate).
Evaluation may include: consideration of the hypothetical trade-off between equity and efficiency, consideration of how government spending on socially desirable goods and services (eg health care services, education, sanitation, clean water supplies) might positively impact efficiency in the utilization of the economy’s resources in the long run (eg through poverty reduction and human capital formation) and in the short run (eg through the positive impact of government spending on AD), consideration of how automatic stabilizers might improve efficiency in the utilization of the economy’s resources in the short run (eg through the positive impact on AD during recessions), consideration of how certain kinds of government spending and taxation may increase allocative efficiency (eg through the increased consumption of merit goods and decreased consumption of demerit goods), government provision of merit goods may be less efficient than private provision, consideration of the word “always”, consideration of the meaning of the word “equity” (eg the difference between equity in the distribution of income and equality in the distribution of income, equity as equality of opportunity), consideration of the meaning of the word “efficiency” (eg productive and allocative efficiency in microeconomics, efficiency in the utilization of the economy’s factors of production in macroeconomics).
Examiners should be aware that candidates may take a different approach which, if appropriate, should be rewarded.
Opinions or conclusions should be presented clearly and should be supported by appropriate examples.
NB It should be noted that definitions, theory, and examples that have already been given in part (a), and then referred to in part (b) should be rewarded.
This was a rather broad question and allowed for various valid approaches. There are different possible valid interpretations of the meaning of equity and efficiency in the context of the IB economics syllabus. There are also many government policies and all of them may be reasonably considered to affect equity and/or efficiency in one way or another. Therefore, neither particular definitions of the relevant economic terms nor a particular example of government policy (or set of policies) were required for top marks. However, it was expected that candidates should provide acceptable working definitions of equity and efficiency in the beginning of their responses, then use these definitions to link equity and efficiency to particular government policies and to evaluate these policies. Candidates who ignored efficiency and equity (or only mentioned them in a vague manner) and proceeded to evaluate government policies in general got little credit for their responses to this question item. The best candidates were able to give acceptable definitions of efficiency and equity at the beginning, to use these definitions consistently throughout the response, to identify appropriate government policies to promote equity, and to evaluate both the positive and negative effects of those policies on efficiency.
