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

Question

With reference to the concept of excess demand, explain how a decrease in supply of a good would lead to a new market equilibrium.

[10]
a.

A government decides to impose an indirect tax on unhealthy drinks. Discuss the consequences for the stakeholders in these markets.

[15]
b.

Markscheme

Answers may include:

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

a.

Answers may include:

Discussion may include: the importance of price and cross elasticities of demand, equity issues, micro and macro-economic consequences.

Some responses may approach unhealthy food as a demerit good leading to market failure / negative externalities of consumption. This can be credited equally if it leads to a valid discussion.

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.

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 » 1.3 Government intervention » Indirect taxes » Specific (fixed amount) taxes and ad valorem (percentage) taxes and their impact on markets
Last exams 2021 » Section 1: Microeconomics » 1.3 Government intervention » Indirect taxes
First exams 2022 » Unit 2: Microeconomics » 2.7 Role of government in microeconomics » 2.7.2 Main forms of government intervention in markets
First exams 2022 » Unit 2: Microeconomics » 2.7 Role of government in microeconomics » 2.7.3. Consequences of government intervention
Last exams 2021 » Section 1: Microeconomics » 1.3 Government intervention
First exams 2022 » Unit 2: Microeconomics » 2.7 Role of government in microeconomics
Last exams 2021 » Section 1: Microeconomics
First exams 2022 » Unit 2: Microeconomics
First exams 2022
Last exams 2021

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