Cambridge International (CAIE) · 3 Government microeconomic intervention (AS) · 3.2 Methods and effects of government intervention in markets

Cambridge International (CAIE) Economics past paper questions: Methods and effects of government intervention in markets

Every Cambridge International (CAIE) question on Methods and effects of government intervention in markets from 2023 to 2025: 7 essays, 2 data response questions and 17 multiple choice questions. It covers 2.1 Demand and supply curves, 2.3 Price elasticity of supply, 5.2 Fiscal policy and 2.4 The interaction of demand and supply. Each question links to its paper, mark scheme and examiner report.

Filter these in the tool

Subtopics2.1 Demand and supply curves 42.3 Price elasticity of supply 15.2 Fiscal policy 12.4 The interaction of demand and supply 1

Essay questions on methods and effects of government intervention in markets

AS Paper 2, June 2025, Q2(b)OptionalAssess12 marks

Assess the extent to which a government can ensure that both merit and demerit goods are produced in desirable quantities.

Question paper p.4 Mark scheme p.13 Open in the tool Practise the negative externality diagram

AS Paper 2, March 2025, Q3(b)OptionalAssess12 marks

Assess the extent to which a subsidy is likely to be the best method to increase the consumption of a merit good.

Question paper p.4 Mark scheme p.15 Examiner report p.5 Open in the tool Practise the subsidy diagram

AS Paper 2, November 2024, Q5(a)OptionalExplain8 marks

With the help of examples, explain the difference between the marginal rate of taxation and the average rate of taxation and consider whether a government should decide to increase the rate of indirect tax to raise additional revenue.

Question paper p.4 Mark scheme p.20 Open in the tool Practise the indirect tax diagram

AS Paper 2, June 2024, Q3(b)OptionalAssess12 marks

Assess whether fixing a minimum price is likely to be the best policy to reduce the consumption of a demerit good.

Question paper p.4 Mark scheme p.15 Open in the tool Practise the minimum price diagram Practise the negative externality diagram

AS Paper 2, March 2024, Q2(a)OptionalExplain8 marks

With the help of a demand and supply diagram, explain how the introduction of an indirect tax affects equilibrium in a market and consider the extent to which the incidence of the tax will fall on the consumer.

Question paper p.4 Mark scheme p.10 Open in the tool Draw it: indirect tax diagram

AS Paper 2, June 2023, Q2(b)OptionalAssess12 marks

A government wishes to keep the price of an essential food, such as rice, affordable to help low‑income households. Assess whether a policy of fixing the maximum price for an essential food is likely to be more effective than a policy of making transfer payments to low‑income households.

Question paper p.4 Mark scheme p.11 Examiner report p.10 Open in the tool Practise the maximum price diagram

AS Paper 2, March 2023, Q3(b)OptionalAssess12 marks

With the help of a diagram, assess whether the introduction of a minimum price in a market can be justified.

Question paper p.4 Mark scheme p.14 Examiner report p.4 Open in the tool Draw it: minimum price diagram

Data response questions on methods and effects of government intervention in markets

Case study: How do we make sure cocoa bean farmers get paid a living wage?

Consider whether a buffer stock system controlled by the government of Ivory Coast would be likely to prevent fluctuations in the price of cocoa beans.

Question paper p.3 Mark scheme p.11 Open in the tool

AS Paper 2, November 2025, Q1(d)Assess6 marks

Case study: How do we make sure cocoa bean farmers get paid a living wage?

Assess the extent to which the use of a minimum pricing policy would be the best way to ensure cocoa bean farmers get paid a living wage.

Question paper p.3 Mark scheme p.12 Open in the tool

Multiple choice questions

AS Paper 1, November 2025, Q10
Which type of good is most suitable for a successful buffer stock scheme?
AS Paper 1, November 2025, Q11
The demand for electric vehicle batteries is derived from the demand for electric vehicles. To tackle climate change, a government subsidises producers of electric vehicles. What are the likely effects of this subsidy on the price and…
AS Paper 1, November 2025, Q12
The diagram shows the market for a demerit good. The initial equilibrium is at point X. What will be the new equilibrium if the government imposes a unit tax on this demerit good and successfully informs consumers of its harmful effects?
AS Paper 1, November 2025, Q13
To improve the health of people, a government puts a tax on the sale of drinks that contain sugar. What are the likely effects of this tax on both the prices of the drinks that contain sugar and the price of sugar?
AS Paper 1, June 2025, Q11
An indirect tax is imposed on good X. Which situation is most likely to result in producers bearing a higher burden of the tax?
AS Paper 1, June 2025, Q14
The diagram shows the demand and supply for rice. The market for rice is initially in equilibrium at a price of P1. The government introduces a maximum price of Pmax. At the same time the supply of rice increases. What is the impact of…
AS Paper 1, June 2025, Q15
In the diagram, D is the demand curve of an agricultural commodity and S is the initial supply curve. The government promises to maintain farmers’ incomes at least at this initial level. The harvests in four subsequent years are shown by…
AS Paper 1, March 2025, Q12
A government may use a range of methods to intervene in a market to affect both demand and supply. What is a method which will shift the demand curve for a good?
AS Paper 1, March 2025, Q13
To help achieve price stability, the government in country F operates a buffer stock scheme, with a minimum price of P1 and a maximum price of P2. The current demand and supply in the market is shown. What should the government do to…
AS Paper 1, November 2024, Q12
In the diagram, S1 and S2 are the supply curves for an agricultural product in years 1 and 2 respectively. D is the demand curve in years 1 and 2. In year 1, the government purchased an amount necessary to ensure that the price was OP. The…
AS Paper 1, November 2024, Q14
A product with infinite elasticity of supply has sales of 1000 units a week at a price of $1 per unit. Price elasticity of demand is 1.5 over the relevant range. The government imposes a tax of 10%. What will be the government’s weekly tax…
AS Paper 1, June 2024, Q12
A market is in equilibrium. The government intervenes by creating a price floor below which the market price cannot fall. Which term describes this form of government intervention?
AS Paper 1, June 2024, Q14
The diagram shows an initial market equilibrium for an agricultural product of $6 and 800 units. How much will the government have to spend to increase the market price to $10?
AS Paper 1, November 2023, Q11
The diagrams show the demand for and the supply of houses. In the short run, the stock of houses for sale, S1, is fixed. A government decides to allow some agricultural land to be used for building houses and subsidises lower-income buyers…
AS Paper 1, November 2023, Q16
The government imposes a specific indirect tax of $1 on each unit of a good sold. How does the imposition of the tax shift the demand or supply curve of the good?
AS Paper 1, June 2023, Q10
A specific tax is placed upon each bottle of perfume sold. In the diagram, S is the supply curve before tax, St is the supply curve after tax. Which area represents that part of the tax revenue paid by producers?
AS Paper 1, June 2023, Q16
Which combination of government measures is most likely to increase the consumption of a merit good?

Question text is quoted from the question papers, © Cambridge University Press & Assessment (UCLES), for students’ private study. Open the official papers and mark schemes from the links on each question. Examiner insights are written with AI assistance and moderated by Finn.

Essay questions on methods and effects of government intervention in markets

Data response questions on methods and effects of government intervention in markets

Multiple choice questions

More Cambridge International (CAIE) topics: 3 Government microeconomic intervention (AS)