Quelpr
12 marksMarket Equilibrium

CAPE Economics Unit 1 · 2009 · Paper 2 · Question 1(b)(ii)

Explain how an effective price floor leads to inefficient resource allocation.

The mark scheme is shown once you've answered.

Practise this question

Other parts of this question

  1. 1(a)(i)Define the term 'market'.[2 marks]
  2. 1(a)(ii)a)Using a demand and supply diagram, explain how the market allocates scarce resources in equilibrium.[8 marks]
  3. 1(a)(ii)b)Using the demand and supply diagram, explain how the market allocates scarce resources in disequilibrium.[8 marks]
  4. 1(a)(ii)c)Explain the effect on equilibrium of a fall in the demand for the commodity using a demand and supply diagram.[8 marks]
  5. 1(b)(i)With reference to the market for milk, explain the economic effect of an effective price floor.[6 marks]
  6. 1(c)Justify governments' use of price floors despite their negative effects.[6 marks]

More practice: the rest of this paper · more Market Equilibrium questions · all CAPE Economics Unit 1 past papers