Practise locating effective maximum and minimum prices around equilibrium, measuring shortages or surpluses and evaluating controls in food, housing and labour markets.
With the help of a diagram, assess whether the introduction of a minimum price in a market can be justified.
Use Table A: AO1 Knowledge and understanding and AO2 Analysis and Table B: AO3 Evaluation to mark candidate responses to this question.
AO1 and AO2 out of 8 marks. AO3 out of 4 marks.
Indicative content
Responses may include:
AO1 Knowledge and understanding and AO2 Analysis
Diagram of a minimum price in a market, correctly labelled with an equilibrium price and an equilibrium quantity and showing the existence of a minimum price above what would be the case with no government intervention.
Explanation of the potential advantages and benefits of a minimum price, such as making the prices of demerit goods more expensive to discourage consumption and protecting the incomes of producers in that market.
Explanation of the potential disadvantages and limitations of a minimum price, such as the creation of excess supply and the greater likelihood of producers becoming less efficient, and of why the introduction of a minimum price might be ineffective.
Note: Omission of a diagram/inaccurate diagram can only achieve a maximum of Level 2.
A one-sided response can only gain a maximum of Level 2 .
AO3 Evaluation
- Evaluation of the potential effectiveness of the introduction of a minimum price in a market.
- Evaluation may contain an assessment of alternative policies but may only be rewarded if the advantages and disadvantages of minimum pricing policy have been discussed.
- In conclusion, whether the introduction of a minimum price in a market can be justified.
A one-sided response cannot gain any marks for evaluation.
Marking guidance:
Accept all valid responses.
AO1 Knowledge and understanding and AO2 Analysis
AO3 Evaluation
EITHER