Practise IB Economics SL 2.1.5 by explaining how income, tastes, prices of related goods and expectations shift demand using marked exam evidence.
Evaluate the importance of cross price elasticity of demand for a business selling a good if the price of a related good increases.
Answers may include:
- definition of cross price elasticity of demand (XED)
- diagram to show the significance of XED on the shift in demand that results from any change in price
- explanation of the impact of XED on businesses if the price of complements and substitutes for a good they produce changes in terms of price, quantity, revenue and profit
- examples of products that have substitutes and complements
- synthesis or evaluation.
Evaluation may include: the relative size of XED and the extent to which the revenue and profit will rise or fall;
the assumption that other factors affecting demand remain constant and that XED is difficult to predict and measure.
Assessment Criteria
Level 0 (0 marks): The work does not meet a standard described by the descriptors below.
Level 1 (1-5 marks): 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.
Level 2 (6-9 marks): 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.
Level 3 (10-12 marks): 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.
Level 4 (13-15 marks): There is 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.