Question 1
Evaluate the view that the market failure caused by the consumption of demerit goods is best dealt with through the use of taxation.
Answers may include:
- definitions of demerit goods, market failure and indirect taxation
- diagram(s) to show market failure and use of indirect taxation
- explanations of the market failure caused by the consumption of demerit goods (negative consumption externalities);
taxation policy to reduce consumption of demerit goods;
other market based policies, ie tradable permits and non market-based policies, eg regulation and negative advertising
- examples of demerit goods and examples of where such responses have occurred, or might occur
- synthesis or evaluation.
Evaluation may include: consideration of the positive and negative consequences of the policies used.
Examiners should be aware that candidates may take a different approach which, if appropriate, should be rewarded.
Opinions or conclusions should be presented clearly and should be supported by appropriate examples.
Assessment Criteria
Part (b) 15 marks
Level Marks
0 The work does not reach a standard described by the descriptors below. ..... 0
1 There is little understanding of the specific demands of the question. Relevant economic terms are not defined.
There is very little knowledge of relevant economic theory. There are significant errors. ..... 1-5
2 There is some understanding of the specific demands of the question. Some relevant economic terms are defined.
There is some knowledge of relevant economic theory. There are some errors. ..... 6-9
3 There is understanding of the specific demands of the question.
Relevant economic terms are defined.
Relevant economic theory is explained and applied.
Where appropriate, diagrams are included and applied.
Where appropriate, examples are used.
There is an attempt at synthesis or evaluation.
There are few errors. ..... 10-12
4 There is clear understanding of the specific demands of the question. Relevant economic terms are clearly defined.
Relevant economic theory is clearly explained and applied. Where appropriate, diagrams are included and applied effectively. Where appropriate, examples are used effectively. There is evidence of appropriate synthesis or evaluation. There are no significant errors. ..... 13-15