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Date May 2018 Marks available 15 Reference code 18M.1.SL.TZ1.2
Level Standard level Paper Paper 1 Time zone Time zone 1
Command term Discuss Question number 2 Adapted from N/A

Question

Explain two factors that would lead to an increase in the demand for a product.

[10]
a.

Discuss the view that competitive markets will always achieve allocative efficiency.

[15]
b.

Markscheme

Answers may include:

NB If only one non-price factor is explained, a maximum of Level 2 can be achieved.
Also, be aware of confusion between price and non-price factors and the difference between an increase in demand and an increase in the quantity demanded.

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

a.

Answers may include:

Discussion may include: the difference between private and social optimality; challenges to the view expressed in the question in terms of such market failures as positive and negative externalities, merit goods and demerit goods, lack of provision of public goods, lack of information.

NB If candidates go straight into an evaluation of the view without sufficient explanation of how competitive markets achieve allocative efficiency, a maximum of mid L3 should be awarded.

N.B.: 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.

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

b.

Examiners report

[N/A]
a.
[N/A]
b.

Syllabus sections

Last exams 2021 » Section 1: Microeconomics » 1.4 Market failure » The meaning of market failure » Market failure as a failure to allocate resources efficiently
Last exams 2021 » Section 1: Microeconomics » 1.1 Competitive markets: Demand and supply » Market efficiency » Allocative efficiency
Last exams 2021 » Section 1: Microeconomics » 1.4 Market failure » The meaning of market failure
First exams 2022 » Unit 2: Microeconomics » 2.8 Market failure—externalities and common pool or common access resources » 2.8.1 Socially optimum output
Last exams 2021 » Section 1: Microeconomics » 1.1 Competitive markets: Demand and supply » Market efficiency
First exams 2022 » Unit 2: Microeconomics » 2.11 Market failure—market power (HL only) » 2.11.5 Degrees of market power
First exams 2022 » Unit 2: Microeconomics » 2.11 Market failure—market power (HL only) » 2.11.6 Monopoly
First exams 2022 » Unit 2: Microeconomics » 2.3 Competitive market equilibrium » 2.3.6 Allocative efficiency at the competitive market equilibrium
Last exams 2021 » Section 1: Microeconomics » 1.1 Competitive markets: Demand and supply
First exams 2022 » Unit 2: Microeconomics » 2.3 Competitive market equilibrium
Last exams 2021 » Section 1: Microeconomics » 1.4 Market failure
First exams 2022 » Unit 2: Microeconomics » 2.8 Market failure—externalities and common pool or common access resources
First exams 2022 » Unit 2: Microeconomics » 2.11 Market failure—market power (HL only)
Last exams 2021 » Section 1: Microeconomics
First exams 2022 » Unit 2: Microeconomics
First exams 2022
Last exams 2021

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