Shifts in tobacco production and consumption may create both microeconomic and macroeconomic consequences. Tobacco plants are cultivated in at least $124$ countries at varied stages of development. A larger share of the poor than of the rich use tobacco products. The cigarette market, which uses tobacco, is changing, and demand for cigarettes and some other demerit goods is falling in many countries.
(a)[2]
Define microeconomics
(b)[4]
Explain two reasons for differences in economic development between countries.
(c)[6]
Analyse how a cut in the interest rate could reduce poverty.
(d)[8]
Discuss whether government intervention will, or will not, correct the market failure caused by a demerit good.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “Analysis of separate markets or of economic agents such as individuals, households and firms” …