Many governments seek to discourage people from smoking cigarettes, whilst encouraging them to eat more fruit, including bananas and apples. The government's ability to influence people's consumption is determined, in part, by the price elasticity of supply and the price elasticity of demand of the products, and by changes in market conditions.

Mark scheme

Marking points from the official mark scheme (May/June 2014). The mark or mark type is shown in brackets.

1. [2] 2 marks for either a measure of the responsiveness of supply to a change in price.
2. Or 1 mark for price influences supply.
3. Or 2 marks for the formula: percentage change in quantity supplied ÷ percentage change in price.
4. [6] Up to 3 marks for identification.
5. 1 mark for each of any three reasons identified, e.g.:
6. a period of bad weather/natural disasters
7. a rise in the costs of production
8. a government tax
9. removal of a subsidy
10. expectations of a change in the market affecting planting bananas
11. change in profitability of other crops
12. availability of land
13. Note: accept any reason which would shift the supply curve for bananas to the left but do not accept a change in price or a change in demand for bananas.
14. Up to 3 marks for explanation.
15. 1 mark for each of three explanations, e.g.:
16. a period of bad weather/natural disaster would decrease the crop
17. an increase in, for example, wages paid to farm workers which would make it more expensive to produce the product
18. a government tax provides a disincentive to firms to produce more
19. the removal of a subsidy will result in less being produced
20. expectations of a change in the market could encourage an increase or decrease in supply
21. change in profitability could either increase supply (if profits rose) or a decrease in supply (if profits fell)
22. more land available would increase supply and vice versa
23. [4] 1 mark for some consumers will switch from buying apples to buying bananas.
24. 1 mark for demand for bananas will increase (this may be shown on a diagram).
25. 1 mark for the price of bananas will rise (this may be shown on a diagram).
26. 1 mark for the supply of bananas will rise (this may be shown on a diagram).
27. Note: accept a diagrammatic approach for 3 marks.
28. Note: accept analysis of supply of bananas decreasing only if the answer makes clear that farmers may be growing both bananas and apples.
29. [8] Up to 6 marks for why it should:
30. Up to 2 marks: the tax may increase government revenue (1), this would enable the government to spend more on (e.g.) education (1).
31. Up to 6 marks: put up price (1) to discourage smoking (1), smoking damages people's health (1) this is both for smokers and non-smokers/passive smoking (1) and so increases spending on health care (1) and reduces labour productivity (1) and reduces life expectancy (1).
32. Up to 3 marks: cigarettes may be imported (1), imports of cigarettes count in trade in goods component (1) and may contribute to a current account deficit (1).
33. Up to 2 marks: smoking causes external costs (1), e.g. air pollution (1).
34. Up to 6 marks for why it should not:
35. Up to 2 marks: demand may be inelastic (1), and so a rise in price will not have much impact on consumption (1).
36. Up to 3 marks: cigarettes may represent a higher proportion of spending for people with lower incomes (1) so tax may be regressive (1) and so fall more heavily on the poor (1).
37. Up to 2 marks: may contribute to inflation (1) as one of the products bought by consumers will rise in price (1).
38. Up to 3 marks: may encourage smuggling of cigarettes (1) if cigarettes are cheaper/less heavily taxed abroad (1) and reduce tax revenue (1).
39. Up to 4 marks: may harm domestic cigarette producers (1), if consumers switch from domestic to foreign cigarettes (1), may be an adverse effect on domestic employment (1), may also harm the balance of payments (1).
40. Maximum of 4 marks for a list or list-like response.
41. Note: a maximum of 8 marks overall.