A-LevelEconomicsThe price system and the microeconomy9708/21 · Oct/Nov 2019 · Q220 Marks

Explain, with the help of a diagram, how a free market would react if a minimum price which had been set above the equilibrium is removed.

(a)Explain, with the help of a diagram, how a free market would react if a minimum price which had been set above the equilibrium is removed.[8]
(b)Discuss, with the use of examples, the extent to which a supermarket could make use of the concept of income elasticity of demand in relation to the different types of goods being sold when there was an increase in consumer incomes.[12]

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 (Oct/Nov 2019). The mark or mark type is shown in brackets.

[1] axes correctly labelled: P/Q
[1] market equilibrium shown
[1] minimum price shown above equilibrium in diagram
[1] reference to the existence of excess supply
[4] explanation in terms of the process whereby a minimum price set above the equilibrium is removed.
[3] analysis in relation to normal goods, using appropriate examples
[3] analysis in relation to inferior goods, using appropriate examples
[3] analysis in relation to necessity goods, using appropriate examples
[3] assessing the extent to which a supermarket could make use of the concept of income elasticity of demand in relation to the different types of goods being sold when there was an increase in consumer incomes
[1] a concluding comment

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