Question 1
Discuss the significance of price elasticity of demand for government intervention in markets.
s may include:
- definition of PED
- diagram to illustrate the impact of PED on government intervention
- theory to explain the relevance of PED for government in terms of decision making regarding taxes, subsidies and price controls
- examples of use of the concept of PED in practice
- synthesis or evaluation (discuss) to show the implications.
Discussion may include: the relative importance of PED and the difficulties of obtaining an accurate measure in reality;
a consideration of the impact on different stakeholders, producers, consumers, taxpayers, etc.
Level 4 can be awarded if there has been a consideration of just one of taxes, subsidies or price controls providing there is a comparison of elastic and inelastic demand.
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 0 (0 marks): The work does not reach 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 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.