Practise IB Economics HL 4.4.8 by explaining trade diversion, changes in import sourcing and their effects on welfare using marked exam evidence.
With the aid of a diagram, explain the potential trade gains and trade losses arising from the formation of a customs union.
Candidates may include:
- a definition of a customs union
- explanation of potential gains:
- benefits of specialization according to comparative advantage
- more competition
- economies of scale
- lower prices
- improved product quality
- increased efficiency
- trade creation
- increased output and economic growth
- impact on resource allocation
- explanation of potential losses
- unequal distribution of gains
- inferior to global free trade
- lower output and increases in unemployment due to closure of inefficient producers
- trade diversion
- diagram showing elimination of protectionist measures (tariff, quota or subsidy) leading to increased imports
- diagram showing increased protectionist measures (tariff, quota or subsidy) toward non-member countries, leading to a fall in imports
- AD/AS diagram illustrating economic growth arising from trade gains and reflected in an increase in AD
- diagram showing comparative advantage.
Examiners should be aware of the limited time available to candidates when marking responses to this question.
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
0 Completely inappropriate answer. ..... 0
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