A-LevelEconomicsGovernment microeconomic intervention9708/12 · May/June 2011 · Q141 Mark
The consumption of a good generates external benefits. Its market equilibrium is E. Which diagram shows the change in the equilibrium (E to E₁) necessary to reflect the correct value of the good to society?
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.
ADiagram showing demand curve shifting right (D to D1), leading to a new equilibrium E1 at a higher price and quantity on the original supply curve.
BDiagram showing supply curve shifting left (S to S1), leading to a new equilibrium E1 at a higher price and lower quantity on the original demand curve.
CDiagram showing supply curve shifting right (S to S1), leading to a new equilibrium E1 at a lower price and higher quantity on the original demand curve.
DDiagram showing demand curve shifting left (D to D1), leading to a new equilibrium E1 at a lower price and quantity on the original supply curve.
✓ Correct answer
A: Diagram showing demand curve shifting right (D to D1), leading to a new equilibrium E1 at a higher price and quantity on the original supply curve.
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