Explain what is meant by a 'consumer's equilibrium position' in indifference curve theory and how it can be used to form a demand curve.

Mark scheme

Marking points from the official mark scheme (May/June 2020). The mark or mark type is shown in brackets.

1. [12] Explanation of consumer equilibrium using indifference curves. Equilibrium position should be determined initially, then for a change in price.
2. [9-12] For a sound explanation of the analysis and a clear comment on how a demand curve is formed. A clear understanding of the principles involved.
3. [7-8] For an accurate reference to the question but with a more limited analysis probably without a good explanation of the construction of a demand curve.
4. [5-6] For a briefer explanation of the analysis and equilibrium position but with no link to the demand curve.
5. [1-4] For an answer that has some basic correct facts but includes irrelevancies and errors of theory.
6. [13] Analysis of income and substitution effects. The first drink could possibly be represented by a shift in the budget line for a price reduction. The consumer might substitute it for the rival drink. But the notion of a more superior drink might result in a negative income effect.
7. [9-13] For a clear analysis of income and substitution effects and a reasoned account of the changes in consumer equilibrium using both effects. Accurate diagrams.
8. [7-8] For a weaker analysis of the two effects or diagrams which contain slight inaccuracies.
9. [5-6] For a poor analysis and weak diagrams confusingly presented.
10. [1-4] For an answer that has some basic correct facts but includes irrelevancies and errors of theory.