With the help of an indifference curve diagram, assess the extent to which a rise in price would affect the demand for a normal good differently from the demand for a Giffen good.

With the help of an indifference curve diagram, assess the extent to which a rise in price would affect the demand for a normal good differently from the demand for a Giffen good.

Use Table A: AO1 Knowledge and understanding and AO2 Analysis and Table B: AO3 Evaluation to mark candidate responses to this question.

AO1 and AO2 out of 14 marks.
AO3 out of 6 marks.
Indicative content
Responses may include:
AO1 Knowledge and understanding and AO2 Analysis
- Diagram showing Indifference curves, budget lines and price lines.
- \(\quad\) Changes in budget lines representing a rise in price.
- Diagrams of resultant path of consumption showing differences in substitution and income effects for normal and Giffen goods.
- Comment on changes in overall demand based on changes in income and substitution effects.
- Up to Level 2 only if no diagram.

AO3 Evaluation (max 6 marks)
- Comment on extent of changes would vary depending on the price elasticity of demand a
- It would also depend on the slope of the indifference curve and the marginal rate of substitution.