IGCSE Economics diagrams and evaluation guide (0455)

Two skills decide most of the marks in Economics: drawing and explaining the right diagram, and weighing both sides in a “discuss” answer. This guide covers both, using the diagrams from the Glide Economics notes.

How to answer a “discuss whether or not” question

The longest Economics question is marked by level, not point by point. Examiners are looking for both sides of the argument, developed, and a conclusion that follows from them.

Level	What it looks like
Level 1 (1–2 marks)	A simple attempt using economic terms, with little development.
Level 2 (3–5 marks)	A reasoned discussion of one side, with limited development of the other.
Level 3 (6–8 marks)	A balanced, well-developed discussion of both sides, reaching a justified conclusion.

A structure that reaches Level 3

Issue 1: the case for. Explain how the policy or decision works, as a chain: first step, mechanism, result.
Issue 2: the case against, or a limit. Develop at least one reason it might not work or might cost something.
Issue 3: a further point. Another benefit, limit or cost, developed.
Verdict. Say what it depends on, and reach a justified conclusion.

Worked example

Discuss whether or not a government should use expansionary fiscal policy to reduce unemployment. [8 marks]

Issue 1. Expansionary fiscal policy raises total demand, which can lower cyclical unemployment. Higher government spending or lower taxes raises C and G; firms respond to higher sales by hiring more workers, directly reducing demand-deficient unemployment.

Issue 2. If the economy is near full capacity, the policy mainly raises inflation instead of jobs. With little spare capacity left, extra total demand bids prices up rather than output up, worsening the stable-prices aim while barely moving unemployment.

Issue 3. The policy does nothing for structural or frictional unemployment, and can widen the budget deficit. Workers unemployed due to a skills mismatch are not re-employed just because total demand rises, and financing the spending through borrowing raises the deficit.

Verdict. On balance, expansionary fiscal policy works best when unemployment is cyclical and the economy has spare capacity. In a recession with idle resources the growth-and-jobs benefit is likely to dominate. Close to full employment, or where unemployment is structural, the inflation and deficit costs are more likely to dominate.

Rules from the examiner notes

A “discuss” question on any policy expects both a benefit and a limitation.
Explain a conflict between aims as a chain: state the first aim, show the mechanism, and name the second aim it damages. Naming two aims without the mechanism earns little credit.
Say which component of total demand a measure changes, and in which direction. “It helps the economy” earns no analysis marks.
Name the specific type of unemployment, and its cause, before analysing its consequence.
When evaluating a firm’s objective, weigh it against the other objectives it could have chosen.
When evaluating unemployment data, raise the limitation: a falling rate can reflect discouraged workers leaving the labour force.
On trade and multinationals, weigh the impact on both the home country and the host country.

The key diagrams

These are the diagrams used in the Glide notes. For each one: what it shows, what to state when you use it, and the slip that costs marks. When a market diagram shifts, state the new price and the new quantity.

Production possibility curve (PPC)

Notes: The Basic Economic Problem

FIG 1.1 Points on, inside, and beyond a production possibility curve.

FIG 1.2 A movement along the PPC — consumer-goods output rises only because capital-goods output falls.

FIG 1.3 An outward shift of the PPC — the whole curve moves because productive capacity has grown.

A point on the curve is productively efficient. A point inside is attainable but inefficient, because some resources are unemployed or under-used. A point beyond the curve is unattainable with current resources and technology.
A movement along the curve reallocates existing resources, and opportunity cost rises the further along you move. Only a change in productive capacity shifts the whole curve.
An outward shift is economic growth: more factors of production or better-quality factors. An inward shift is a fall in capacity.

Mark-losing slip: Draw the curve bowed outward unless the question states a constant opportunity cost. A straight line loses the shape mark.

Demand and supply: shifts and equilibrium

Notes: The Allocation of Resources

FIG 2.2 An increase in demand shifts the whole curve rightward — more is demanded at every price.

FIG 2.4 An increase in supply shifts the whole curve rightward — more is supplied at every price.

FIG 2.5 Market equilibrium at E, where the demand and supply curves cross.

FIG 2.7 A bumper harvest shifts supply from S1 to S2: price falls, quantity traded rises.

Only a change in the good’s own price moves you along a fixed curve. Every other cause shifts the whole curve.
Demand shifts right after a rise in income, a rise in the price of a substitute, a fall in the price of a complement, a change in taste in the good’s favour, population growth or effective advertising. Each cause reverses to give a shift left.
After any shift, state the new equilibrium price and the new equilibrium quantity.

Mark-losing slip: Describing a market change without stating both price and quantity. Saying only “price rises” loses the quantity mark.

Shortages and surpluses

Notes: The Allocation of Resources

FIG 2.6 A price above equilibrium leaves a surplus; a price below it leaves a shortage.

A price below equilibrium creates a shortage: quantity demanded exceeds quantity supplied, so unsatisfied buyers bid the price back up.
A price above equilibrium creates a surplus: quantity supplied exceeds quantity demanded, so producers cut price to clear unsold stock.

Elasticity and total revenue

Notes: The Allocation of Resources

FIG 2.8 A steeper demand curve is more inelastic; a flatter one is more elastic.

FIG 2.9 When demand is inelastic, the revenue gained from a higher price outweighs the revenue lost from lower quantity.

If demand is inelastic, raising price raises total revenue. If demand is elastic, the same rise cuts revenue.
Report PED as a positive value with no units and no percentage sign.

Maximum and minimum prices

Notes: The Allocation of Resources

FIG 2.10 A maximum price set below equilibrium leaves a permanent shortage.

FIG 2.11 A minimum price set above equilibrium leaves a permanent surplus.

A maximum (ceiling) price sits below equilibrium and causes a shortage, which can lead to queuing, rationing or a black market.
A minimum (floor) price sits above equilibrium and causes a surplus.

Mark-losing slip: Mixing up the two. Reversing them reverses the whole answer.

Indirect tax and subsidy

Notes: The Allocation of Resources

FIG 2.12 An indirect tax shifts supply left: price rises, quantity traded falls.

FIG 2.13 A subsidy shifts supply right: price falls, quantity traded rises.

An indirect tax raises producers’ costs, so supply shifts left. A subsidy lowers their costs, so supply shifts right.

Mark-losing slip: The syllabus does not require demand and supply diagrams for market failure questions. A written explanation is expected, and a diagram wastes time without earning credit.

The labour market and the national minimum wage

Notes: Microeconomic Decision-Makers

FIG 3.2 A national minimum wage set above equilibrium creates unemployment — the gap between the quantity of labour supplied and demanded.

The wage rate is set where the demand for and supply of labour are equal.
A minimum wage set above equilibrium creates unemployment: the gap between the quantity of labour supplied and demanded.
Explain shifts in both the demand for and the supply of labour. Describing only one side rarely earns full analysis marks.

Short-run cost curves and economies of scale

Notes: Microeconomic Decision-Makers

FIG 3.4 Short-run cost curves — AFC falls continuously; AVC and ATC are U-shaped, with the gap between them equal to AFC.

FIG 3.3 Economies and diseconomies of scale — average total cost falls, then rises, as a firm’s scale of output grows.

Put output on the horizontal axis and cost per unit on the vertical axis.
The gap between ATC and AVC is exactly AFC, which is why the two curves converge as output grows and fixed cost is spread thinner.

Recession and economic growth

Notes: Government and the Macroeconomy

FIG 4.1 A recession is actual output falling below the economy’s rising potential-output trend — growth is restored once actual output catches back up.

Growth can come from using existing resources more fully, or from expanding what the economy is capable of producing. Examiners expect the two to be told apart.

A tariff and the exchange rate

Notes: International Trade and Globalisation

FIG 6.1 A tariff raises the cost of supplying an import, shifting supply from S₁ to S₂ — the market moves from P₁,Q₁ to a higher price and a lower quantity traded, P₂,Q₂.

FIG 6.2 A rise in demand for a currency — for example, from stronger export sales — shifts demand from D₁ to D₂, appreciating the currency from P₁ to the higher P₂.

A tariff raises the cost of supplying an import, which is equivalent to a shift left in supply.
A depreciation makes exports cheaper and imports dearer. This direction is commonly reversed, so re-derive it from the diagram instead of recalling it as a fact.

Mark-losing slip: Treating a tariff and an import quota as the same thing. A quota is a quantity limit and raises no tariff revenue.

Four diagram mistakes that cost marks

Treating a movement along a curve as a shift of the curve.
Describing a market change without stating both price and quantity.
Treating a movement along the PPC as if it were a shift.
Reversing the effect of an appreciation or depreciation on exports and imports.

Questions

How do I answer an 8-mark “discuss whether or not” question?

It is marked by level, not point by point. Develop both sides in depth, then reach a justified conclusion. A one-sided answer rarely reaches the top level.

Do I need a diagram in every Economics answer?

No. Draw one when it helps you explain a change in a market. The syllabus does not require demand and supply diagrams for market failure questions, and no diagram is required for the types of market. A written explanation is what is expected there.

What is the difference between a movement along a curve and a shift?

Only a change in the good’s own price moves you along a fixed demand or supply curve. Every other cause shifts the whole curve.

Practise on real questions with Economics past papers and their mark schemes. For the calculations, use the Economics formula sheet, and for how to word each answer, see the command words guide.

IGCSE Economics diagrams and evaluation guide (0455)

How to answer a “discuss whether or not” question

A structure that reaches Level 3

Worked example

Rules from the examiner notes

The key diagrams

Production possibility curve (PPC)

Demand and supply: shifts and equilibrium

Shortages and surpluses

Elasticity and total revenue

Maximum and minimum prices

Indirect tax and subsidy

The labour market and the national minimum wage

Short-run cost curves and economies of scale

Recession and economic growth

A tariff and the exchange rate

Four diagram mistakes that cost marks

Questions

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