A rising share of people in both market and mixed economies are becoming overweight. In 2013 the Dubai Government gave residents a gram of gold for each kilogram of weight lost over a 30-day period. This policy step was intended to cut the external costs created by overeating, including eating too much chocolate. To lessen market failure, governments provide subsidies to consumers and producers.
(a)[2]
Define the term ‘market economy’.
(b)[4]
Explain two external costs that might result from people overeating.
(c)[6]
Analyse three reasons why demand for chocolate may increase in the future.
(d)[8]
Discuss whether a government subsidy to producers will lessen market failure.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “consumers decide what is produced/consumers are sovereign” …