Theme 1
Discuss whether chocolate manufacturers consider
the demand for chocolate to be price elastic or
inelastic (Q9 IAL JAN 2016)
P1
KN:
- price elastic is when a change in price leads to a
proportionately greater change in quantity
demanded
- chocolate can be argued to be price elastic due to
its large number of substitutes in the market
AP:
-for example, in the chocolate market, consumers
have access to similar products such as Twix,
Snickers, and Mars Bars
AN:
- following an increase in the price of a particular
chocolate bar, such as Mars Bars, a consumer who
typically purchases Mars Bars is likely to switch to
another make, such as Snickers
- this is because the goods are (almost)
homogenous, and since consumers aim to
maximise utility, purchasing from a cheaper brand
will increase their consumer surplus
(consumer surplus diagram)
- this can be seen on the graph
- assuming P1 is the price of Mars, and P2 is the
price of snickers, consumers are likely to switch as
there is an increase in consumer surplus by area
P1AP2B, making chocolate a price elastic good
EV1
- however, price elasticity may also depend on
brand loyalty
- for loyal Twix consumers, a marginal price
increase may not nudge them to switch to Snickers
as they are satisfied with the product and therefore
are willing to sacrifice some consumer surplus in
order to purchase the product
- it can be concluded that the price elasticity of
chocolate may not only depend on the availability
of substitutes, but also brand loyalty, which may
vary between customers
P2
- Another factor contributing to the price elasticity
Theme 1
Discuss the impact of an increase in incomes on the
demand for clothing (Q10 IAL JAN 2016)
P1
- rise in incomes mean high purchasing power
means higher marginal propensity to consume as
clothes make up a lower percentage of their new
income
- therefore, the demand for clothes is likely to rise
as consumers are able to buy the same amount of
clothes for a lower percentage of their incomes
- this means that demand shifts right from D1 TO
D2
EV1
- however, a rise in consumer incomes doesn’t
necessarily lead to a rise in demand for clothing
- consumers may have different preferences and
tastes, and may instead save the additional income,
or spend it in other areas of the economy, such as
travel
-therefore, the extent to which an increase in
incomes leads to an increase in the demand for
clothes depends on an individual consumers needs
and preferences
P2
- increase in incomes means higher purchasing
power
- marginal propensity to consume increases
- consumers are likely to purchase more clothes
- demand for clothes shifts out as they make up a
lower percentage of income
EV2
- increase in incomes mean change in taste from
cheaper, lower quality clothes, to more expensive,
luxury goods
- although demand for higher-end, more expensive
clothes increase, the demand for lower quality,
cheap clothes decreases as it is an inferior good
- inferior goods are goods for which demand falls
when income rises
- therefore, if incomes rise, consumers are able to
purchase better quality, more expensive clothing,
reducing the demand for cheaper clothing
Theme 1
of chocolate is its percentage of income for
consumers
- For high-income earners, chocolate makes up only
a fraction of their income, meaning that it is
relatively price inelastic.
- This means that a change in price would result in
a proportionately smaller change in quantity
demanded
- For example, for those in the higher tax bands in
the UK (45%), an increase in the price of chocolate
from 80p to 1 pound would likely not have an effect
on its quantity demanded, but for low-income
households, who on average earn 42 pounds a day,
the price of chocolate rising may cause a larger
proportional decrease in demand as chocolate
makes up a larger percentage of their income

- However, chocolate contains sugar, which is an

addictive substance
- Lower-income consumers, for whom chocolate
makes up a larger percentage of their income, may
still choose to make the irrational decision of
continuing to purchase chocolate despite an
increase in price, perhaps sacrificing other
purchases due to habitual consumption and the
addictive nature of chocolate.
- Therefore, although chocolate may be more price
elastic for lower-income earners, the degree of
elasticity may be smaller due to the fact that
chocolate is addictive and consumers may choose
to purchase it regardless of its price

Theme 1
Theme 1
Examine the likely effects of a fall in the price of
cocoa on the producers of chocolate products such
as Cadbury’s dairy milk bar and Nestle’s kit Kat bar
(Q9 JUNE 2013)
Theme 1
Using the concept of cross elasticity of demand,
assess the likely relationship between the demand
for cigarettes and the price of nicotine replacement
products (Q10 JAN 2009)
Theme 1
Using price elasticity of demand calculations,
assess the likely impact on student applications of
an increase in tuition fees from £3290 to £7000.
(Q9 JUN 2012)
Theme 1
Using the concept of cross elasticity of demand and
referring to the information provided, assess
whether train travel is an effective substitute for air
travel. (Q10 JAN 2013)
Theme 1
Assess whether the demand for bottled water is Discuss whether the demand for tobacco products
likely to be price elastic or price inelastic (Q10 JUN is likely to be price inelastic or price elastic (Q10
2014) June 2014)

Theme 1
Theme 1
Referring to XED, assess the likely relationship Discuss the factors that are likely to influence the
between the price of gas and the demand for coal price elasticity of supply of cotton (Q10 JAN 2014)
(Q10 JAN 2014)

Theme 1
Theme 1
Discuss the possible effects of falling house prices Examine two factors which might account for house
on first time buyers (Q9 JUN 2012) price differences between any two regions (Q9 JUN
2009)

Theme 1
Theme 1
Examine the likely economic effects on airlines of Discuss the functions of the price mechanism in
rising oil prices (Q9 JAN 2010) allocating housing (JUN 2016 NP)

Theme 1
Theme 1
Evaluate the impact of the proposed increase in the
minimum price for cotton on producers and
consumers in India (Q10 IAL JAN 2016)
Theme 1
Evaluate the likely economic effects of a guaranteed
minimum price scheme, such as that introduced by
the Ivory Coast for cocoa. Illustrate you answer
with a S and D diagram (Q9 JUN 2013)
Theme 1
Examine the possible impact on the production
possibility frontier for the UK economy if the
Servern Estuary tidal barrage is constructed.
Illustrate your answer with an appropriate diagram
(Q9 JUN 2014)
Theme 1
Examine the likely impact on the production
possibility frontier for the economy of ‘increased
government investment in higher education’.
Illustrate your answer with an appropriate diagram
(Q9 JAN 2009)
Theme 1
Discuss the likely economic effects of a ‘30% cut in Evaluate the likely economic effects of an increase
government subsidies for new build affordable in the tax on petrol in the UK. (Q10 JAN 12)
homes’. Use an appropriate diagram in your answer
(Q10 JAN 12)

Theme 1
Theme 1
Evaluate the likely economic effects of an increase Assess the likely economic effects of subsidies being
in indirect tax on bottled water. Use a supply and given to Alitalia by the Italian government (Q9 JAN
demand diagram in your answer (Q10 JUN 14) 10)

Theme 1
Theme 1
Discuss the possible economic effects of the
government providing subsidies to support
sustainable development projects such as those
referred to in extract 2 (Q9 JAN 12)
Theme 1
Evaluate the likely impact of the planned
introduction of indirect taxes on sugar-sweetened
drinks in countries such as Ireland. Use an
appropriate diagram in your answer. (Q9 IAL JAN
2016)
Theme 1
Evaluate two measures, other than supporting the
Severn Estuary tidal barrage, by which the
government could promote the generation of
renewable energy (Q9 JUN 14)
To what exte3nt might regulations on the sale of
cigarettes and high taxes on tobacco result in
government failure?

Theme 1
Theme 1
Examine the likely economic effects on air travel of
the increase in Air Passenger Duty (APD). Use an
appropriate demand and supply diagram in your
answer (Q10 JAN 13)
Theme 1
Examine the effectiveness of indirect taxation as a
means of cigarette and tobacco consumption. Use a
demand and supply diagram in your answer. (Q10
JAN 2009)
Theme 1
“Tradable permits are less effective than taxation in
reducing carbon emissions.” To what extent do you
agree with this statement? (2015 NP)
Theme 1
Using examples, evaluate the likely private costs
and external costs of this house-building
programme. Illustrate your answer with a diagram
(Q9 JUN 09)
Theme 1
Using the concept of external costs, examine the Assess the possible problems of the fluctuation
possible economic effects of producing cotton t- prices for producers of potash. (Q9 JUN 14)
shirts. Use an appropriate diagram in your answer
(Q10 IAL JAN 16)

Theme 1
Theme 1
With reference to the information provided and Evaluate the likely consequence of fluctuating
your own knowledge, discuss the likely benefits to prices for cocoa producers (Q9 JUN 13)
consumers and the government of a decrease in
tobacco smoking (Q10 JUN 14)

Theme 1
Theme 1
With reference to the concept of external costs,
discuss the possible economic effects of an increase
in the production and consumption of bottled
water. (Q10 JUN 14)
Discuss the case for allowing the potash mining
project to go ahead in the North Yorkshire Moors
National Park (Q9 JUN 14)

Theme 1
Theme 1
Evaluate the possible benefits and external benefits To what extent is market failure likely to be a result
resulting from consumers switching from coffee to of fracking (Q10 JAN 14)
tea. Use a diagram (Q9 JAN 14)

Theme 1
Theme 1
Evaluate the two possible government measures to Evaluate the case for building a third runway at
reduce the possible external costs of extracting gas Heathrow Airport (Q10 JAN 13)
from underground rock (Q10 JAN 14)

Theme 1
Theme 1
Examine the economic benefits of a reduction in Evaluate the likely private benefits and external
cigarette and tobacco consumption (Q10 JAN 09) benefits of university education. Illustrate your
answer with an appropriate diagram. (Q9 JUN 12)

Theme 1
Theme 1
Discuss the possible economic effects of an increase
in university tuition fees on the market for higher
education. (Q9 JUN 12)
Apart from a shift in the production possibility
frontier, examine two likely external benefits of
higher education. Illustrate your answer with an
appropriate diagram. (Q9 JAN 09)

Theme 1
Theme 1
Evaluate the likely impact of an increase in tuition To what extent will ‘further increases in student
fees on applications to higher education (Q9 JAN contributions to tuition fees do more good than
09) harm’ to students and universities (Q9 Jan 09)

Theme 1
Theme 1
To what extent might restrictions on rice exports
lead to government failure. (Q10 JUN 09)
With reference to the concepts of private costs and
external costs, assess the possible economic effects
of ‘the use of genetically modified cotton seed’. Use
an appropriate diagram in your answer. (Q10 JUN
12)

Theme 1
Theme 1
To what extent might asymmetric information exist
in the tobacco market? (Q10 JAN 09)

Theme 1
Theme 1

Theme 1