A-LevelEconomicsGovernment microeconomic intervention9708/21 · Oct/Nov 2019 · Q320 Marks

Explain, with the help of a diagram, the effect and incidence of a subsidy in a market for essential transport.

(a)Explain, with the help of a diagram, the effect and incidence of a subsidy in a market for essential transport.[8]
(b)Discuss, with the use of examples, whether a government should directly provide certain goods and services in an economy.[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] shift of supply curve to the right
[1] lower price and higher quantity shown
[2] explanation in terms of incidence in relation to the impact of different elasticities
[2] explanation in terms of incidence in a market for essential transport where demand is likely to be relatively inelastic
[4] analysis of reasons for a government to directly provide certain goods and services in an economy, using appropriate examples
[4] analysis of reasons for a government not to directly provide certain goods and services in an economy, using appropriate examples
[3] assessing whether a government is justified in directly providing certain goods and services in an economy – public goods have to be provided by the government as these otherwise would not be provided at all
[1] a concluding comment

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