Topic 2.12 · HL only
The market’s inability to achieve equity: notes and practice questions
Summary
- This topic examines how free markets can lead to an unequal distribution of income and wealth.
- Equity refers to the concept of fairness, distinct from equality.
- Free market economies may inherently result in an unequal distribution of income and wealth.
- The circular flow model can be used to illustrate how free markets contribute to inequalities.
How it is examined
Small and rarely a question on its own. Its role is to set up 3.4. At most it supplies a short HL Paper 1 part (a) on why free markets generate inequality, using the circular flow diagram.
Guiding questions
- Even where a market is efficient, is the result fair?
Linking questions
- Bridges Unit 2 into 3.4, economics of inequality and poverty, where measurement and policy live.
- Uses the circular flow model from 1.1.
- Equity as a key concept, defined in the guide as fairness rather than equality, is the whole point of the subtopic.
Practice questions
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Where marks are lost
- No real-world example, or a stated one. An answer that names a country and stops cannot reach the top two bands.
- One-sided argument. Balance is an explicit axis. A student who argues only that a policy works is capped at 9 out of 15 on that axis alone.
- Diagram present but not explained. The diagram bullet escalates across three bands: included, included and explained, included and fully explained. A diagram dropped into an answer without prose that refers to it sits at 5 to 6 on a 10-mark part.
