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Date November 2021 Marks available 15 Reference code 21N.1.SL.TZ0.2
Level Standard level Paper Paper 1 Time zone Time zone 0
Command term Evaluate Question number 2 Adapted from N/A

Question

Explain the impact on consumers, producers and the government of a price floor being introduced in an agricultural market.

[10]
a.

Evaluate the view that a price ceiling is an ineffective policy to protect low-income consumers.

[15]
b.

Markscheme

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

Answers may include:

A maximum of [6] should be awarded if a candidate has only considered one stakeholder. A maximum of [8] should be awarded if a candidate has only considered two stakeholders. All three stakeholders are needed to reach level 4.

a.

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

Answers may include:

Evaluation may include: the benefits a price ceiling might bring to low-income consumers if the ceiling is managed through an effective alternative rationing system and how some consumers will gain significantly through a price ceiling even if others lose.

b.

Examiners report

This question was generally well answered by students with a clear explanation of how producers gain from a minimum price and consumers and the government lose out. The best answers used clear, accurate diagrams, showing changes in consumer and producer surpluses. Effective answers also showed the cost to governments of intervention buying and surplus stock management. The very best answer used effective real-world examples such as intervention buying in agricultural markets.

a.

There were many good answers to this question with the strongest responses clearly explaining how a price ceiling can benefit low-income consumers in markets for goods such as housing, basic food, and energy. Many candidates evaluated the policy well by considering how maximum prices can lead to parallel markets, shortages and corruption. The best answers used effective diagrams and well-developed real-world examples.

b.

Syllabus sections

First exams 2022 » Unit 2: Microeconomics » 2.7 Role of government in microeconomics » 2.7.3. Consequences of government intervention
First exams 2022 » Unit 2: Microeconomics » 2.7 Role of government in microeconomics
First exams 2022 » Unit 2: Microeconomics
First exams 2022

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