Practise IB Economics HL 2.5.8 by evaluating how YED informs decisions for firms and producers across economic sectors using comparative evidence.
Explain the importance of income elasticity of demand (YED) for the primary, manufacturing and service sectors of the economy when real incomes are rising.
Answers may include:
- Terminology: YED, primary, manufacturing and service sectors, real incomes.
- Explanation: of how YED (income elastic and income inelastic/ high and low YEDs) affects the rate at which the demand for different goods and services increases as real incomes rise, and thus the relative sizes and composition of the primary, manufacturing (secondary) and service (tertiary) sectors of the economy;
of how negative YED results in a decrease in demand for inferior goods and services as real incomes rise.
- Diagram: showing income elastic, income inelastic and inferior goods on an Engel curve and/or a demand and supply diagram showing relevant shifts of the demand curve.
| Marks | Level descriptor |
|---|---|
| 0 | - The work does not reach a standard described by the descriptors below. |
| 1-2 | - The response indicates little understanding of the specific demands of the question. - Economic theory is stated but it is not relevant. - Economic terms are stated but they are not relevant. |
| 3-4 | - The response indicates some understanding of the specific demands of the question. - Relevant economic theory is described. - Some relevant economic terms are included. |
| 5-6 | - The response indicates understanding of the specific demands of the question, but these demands are only partially addressed. - Relevant economic theory is partly explained. - Some relevant economic terms are used appropriately. - Where appropriate, relevant diagram(s) are included. |
| 7-8 | - The specific demands of the question are understood and addressed. - Relevant economic theory is explained. - Relevant economic terms are used mostly appropriately. - Where appropriate, relevant diagram(s) are included and explained. |
| 9-10 | - The specific demands of the question are understood and addressed. - Relevant economic theory is fully explained. - Relevant economic terms are used appropriately throughout the response. - Where appropriate, relevant diagram(s) are included and fully explained. |