A fall in income leads to a fall in demand for a good. Explain this relationship between the demand for the good and consumer income.

Evaluate the consequences of rising incomes on service sector producers (such as hotels) and primary sector producers (such as rice farmers).

Answers may include:

• definitions of demand, income, income elasticity of demand, normal good
• diagram to show how a fall in income leads to a fall in demand for a normal good
• explanation that the positive income elasticity of demand means the good is a normal good
• examples of normal goods, necessities.

Award a maximum of level 2 if there is no mention of normal goods and/or income elasticity.

Marks should be allocated according to the Paper 1 markbands for May 2013 forward, part A.

Answers may include:

• definitions of service sector, primary sector good
• diagrams to show changes in the demand for goods produced by the service sector and primary sector as income rises
• explanation that a rise in income leads to a rise in demand for normal goods produced by the service sector like hotels and how a rise in income leads to a less significant rise in demand for necessity goods produced in the primary sector like rice (other examples could be used as long as reference is made to the correct sector)
• examples of how demand for normal goods and necessity goods changes as incomes change
• synthesis or evaluation.

Award a maximum of level 2 if the focus is only on supply as this is a poor interpretation of the question.

Both the primary and the service sectors need to be covered accurately to go beyond the mid-point of level 2.

Evaluation may include: consideration that there are some types of service sector goods, such as budget hotels that might experience a fall in demand as incomes rise; that some low income consumers may increase their demand significantly for rice as their incomes rise.

Marks should be allocated according to the Paper 1 markbands for May 2013 forward, part B.