IB Economics HL 2.8.6 Evaluating Policy Responses Questions

Answers may include:
- definition of demerit goods
- negative externalities diagram showing reduced consumption of demerit goods
- explanation that government regulations may restrict the demand for, or the supply of, demerit goods, resulting in lower equilibrium quantity
- examples of demerit goods and/or cases where government regulations on demerit goods have been imposed (eg ban on smoking and drinking in public places, age limits, warnings on packaging, ban on the consumption of certain drugs)
- synthesis or evaluation.

Evaluation may include: consideration of the strengths of government regulations: do not increase tax burden;
relatively simple to implement (compared to market-based policies), addressing directly the consumption of demerit goods, complete bans may be very effective in preventing the use of highly addictive demerit goods;
consideration of the limitations of government regulations: difficulties/cost of enforcement and lack of government revenue, may be politically unpopular;
decrease the revenues of producers of demerit goods and the income of workers in these industries;
complete bans may lead to underground parallel markets;
consideration of the strengths and limitations of alternative (market-based) policies.

Examiners should be aware that candidates may take a different approach which, if appropriate, should be rewarded.

Assessment Criteria

Part (b) 15 marks

Level ..... Marks
0 The work does not meet 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