Practise IB Economics HL 2.8.2 by analysing positive and negative externalities, merit and demerit goods, under-allocation, over-allocation and welfare loss with marked exam evidence.
Using the concept of market failure, explain why a government may try to decrease the use of motor vehicles in city centres.
Candidates may include:
- a definition of market failure
- a definition of negative externalities, consumption or production
- an explanation that this is a case of a negative consumption externality (private use of vehicles) or production externality (commercial use of vehicles) leading to over-use of motor-vehicles
- MSB less than MPB for consumption externality or MSC greater than MPC for production externality
- an explanation of the external costs, e.g. effects on third parties due to congestion or pollution, increase in business costs
- use of a diagram to illustrate the MSB curve lying below the MPB curve or the MPC curve lying below the MSC curve
- an explanation of the impact of negative externalities in terms of inefficient use of scarce resources/over-allocation of resources.
References to methods of reducing use of motor vehicles may be rewarded.
Candidates may be awarded full marks through either the MSB/MPB approach or the MSC/MPC approach.
Candidates who incorrectly label diagrams cannot be rewarded with full marks.
Examiners should be aware that candidates may take a different approach which if appropriate, should be rewarded.
Assessment Criteria
Level Marks
0
Completely inappropriate answer.
1
Little understanding of the specific demands of the question. Very little recognition of relevant economic theory.
Relevant terms not defined.
Significant errors.
1-3
2
Some understanding of the specific demands of the question. Some recognition of relevant economic theory.
Some relevant terms defined.
Some errors.
4-6
3
Understanding of the specific demands of the question.
Relevant economic theory explained and developed.
Relevant economic terms defined.
Few errors.
Where appropriate, diagrams included.
7-8
4
Clear understanding of the specific demands of the question.
Relevant economic theory clearly explained and developed.
Relevant economic terms clearly defined.
No major errors.
Where appropriate, diagrams included and explained.
Where appropriate, examples used.
9-10