Question 1
Question (a)
Explain one possible advantage and one possible disadvantage of governments setting a price floor in agricultural markets.
For providing a limited explanation of one advantage or one disadvantage, award a maximum of [1].
For an accurate explanation of one advantage or one disadvantage or a limited explanation of both, award a maximum of [2].
For providing an accurate explanation of one advantage or one disadvantage and a limited explanation of one disadvantage or one advantage, award a maximum of [3].
For providing two accurate explanations, award a maximum of [4].
Level
Marks
0
The work does not meet a standard described by the descriptors below.
1
The written response is limited.
1-2
Advantages may include:
- supporting farmers' incomes/increasing producer surplus
- decreasing income inequality
- reducing rural-urban migration
- decreasing price instability in agricultural markets.
Disadvantages may include:
- higher prices for consumers
- overproduction of farm products (surplus) / misallocation of resources / allocative inefficiency
- increased government expenditure
- opportunity cost of financing the scheme
Any other valid response.
2
The written response is accurate.
3-4
Accurate explanations of advantages may include:
- supporting farmers' incomes, because farmers may have low and/or unstable incomes
- decreasing income inequality, because rural areas have lower incomes than urban areas
- reducing rural-urban migration, because urban areas have high unemployment and lower living standards due to population density
- decreasing price instability in agricultural markets, which may occur because of weather and other random factors.
Accurate explanations of disadvantages may include:
- consumers will pay higher prices for food, which is a necessity
- overproduction of farm products / misallocation of resources, because too much land is used for agriculture
- increased government expenditure, which requires higher taxes or (increased) government borrowing
- opportunity cost of financing the scheme, because spending on other needs will have to be foregone.
Any other valid and explained response.
Question (b)
State one measure that the government of Nissos might take to deal with this corn surplus, following the imposition of the price floor.
Marking guidance:
Award [1] for one accurate possible measure.
Measures may include:
- destroying the surplus
- storing for future use (possible future drought)
- exporting abroad at a lower price
- overseas food aid
- purchasing the surplus
- providing foodbanks or low-income families with (rationed) surplus
- any other valid measure.