Edexcel IGCSEEconomicsGeneral Applications24 Marks

The table shows the quantity demanded and quantity supplied of coffee at different prices.

(a)Define the term 'equilibrium price'.[2]
(b)Using the information in Table 1, state the equilibrium price and quantity for coffee.[2]
(c)Draw a demand and supply diagram to show the market for coffee. Label the axes, demand curve (D), supply curve (S), and the equilibrium price (Pe) and quantity (Qe).[4]
(d)Explain two factors that could cause the demand for coffee to increase.[6]
(e)Discuss the possible effects on consumers and producers if the government imposes a maximum price below the equilibrium price in the coffee market.[10]

This question uses a diagram from the original paper, which isn't shown here. Open the full paper from the past papers archive to see it.

Mark scheme

Marking points from the official mark scheme. The mark or mark type is shown in brackets.

**(a) Define the term 'equilibrium price'. (2 marks)**
Level 1 (1 mark): Partial definition, e.g., 'where demand meets supply' or 'where there is no shortage or surplus'.
Level 2 (2 marks): Clear and accurate definition, e.g., 'The price at which the quantity demanded is equal to the quantity supplied' (1 mark for equality, 1 mark for linking to price/quantity).
**(b) Using the information in Table 1, state the equilibrium price and quantity for coffee. (2 marks)**
B1 for correctly stating the equilibrium price (e.g., $6).
B1 for correctly stating the equilibrium quantity (e.g., 500 units).
**(c) Draw a demand and supply diagram to show the market for coffee. Label the axes, demand curve (D), supply curve (S), and the equilibrium price (Pe) and quantity (Qe). (4 marks)**
B1 for correctly labelled axes (Price/P on vertical, Quantity/Q on horizontal).
B1 for correctly drawn and labelled demand curve (D).
B1 for correctly drawn and labelled supply curve (S).
B1 for correctly marking and labelling equilibrium price (Pe) and quantity (Qe) at the intersection.
**(d) Explain two factors that could cause the demand for coffee to increase. (6 marks)**
Up to 2 factors can be credited.
For each factor (3 marks):
P1 for identification of a relevant factor (e.g., 'increase in consumer income', 'successful advertising campaign', 'decrease in the price of a complementary good', 'increase in the price of a substitute good', 'change in tastes/preferences').
C1 for development/explanation of how the factor leads to an increase in demand (e.g., 'higher income means consumers have more disposable income to spend on coffee').
C1 for further development/explanation or linking to a shift in the demand curve (e.g., 'leading to a rightward shift of the demand curve').
**(e) Discuss the possible effects on consumers and producers if the government imposes a maximum price below the equilibrium price in the coffee market. (10 marks)**
Level 1 (1–2 marks): Limited understanding of maximum price or basic description of one effect.
Level 2 (3–4 marks): Basic explanation of effects on consumers or producers, with limited analysis.
Level 3 (5–7 marks): Developed analysis of effects on both consumers and producers. Some attempt at evaluation or balance.
Level 4 (8–10 marks): Comprehensive and balanced discussion, with clear analysis of effects on both consumers and producers, and well-supported evaluation. May consider short-run vs. long-run or different groups.
Indicative content may include:
Knowledge: Definition of maximum price, diagram showing maximum price below equilibrium leading to shortage.
Analysis of effects on consumers: Some consumers benefit from lower price, but others face shortages/rationing, potential for black markets, reduced quality.
Analysis of effects on producers: Reduced revenue/profit, disincentive to produce/invest, potential for illegal sales, decreased supply in the long run.
Evaluation: Who benefits/loses? Effectiveness of policy, potential for unintended consequences (black markets, queues), difficulty in administration, short-run vs. long-run impacts.