Economics · 2012 · May · Paper 2 · SL · Question paper

M12/3/ECONO/SP2/ENG/TZ0/XX ECONOMICS STANDARD lE vEl PAPER 2 Wednesday 16 May 2012 (morning) INSTRUCTIONS TO CaNdIda TES  d o not open this examination paper until instructed to do so.  a nswer three questions. Each question is worth [20 marks].  Use fully labelled diagrams and references to the text / data where appropriate.  The maximum mark for this examination paper is [60 marks]. 2 hours 2212-5113 11 pages © International Baccalaureate Organization 2012 2212511 3 M12/3/ECONO/SP2/ENG/TZ0/XX 2212-5113 – 2 – 1. Study the extract below and answer the questions that follow. EU court rules minimum price for cigarettes illegal  The European Court of Justice has ruled that Ireland cannot impose a minimum price on cigarettes. It said that member countries would have to find other ways to combat smoking. This could be achieved by increasing indirect tax on tobacco, but imposing a minimum price would distort fair competition in the market. The ruling is designed to maintain the freedom of manufacturers and importers to benefit from lower costs and greater efficiency.  The judgment said the aim of ensuring that tobacco prices are high can be “adequately” achieved by increasing tax, since any indirect tax rises are, sooner or later, reflected in an increased retail price, without removing the freedom of manufacturers to set prices.  The Irish government had claimed that it needed to fix a high minimum price to discourage smoking. This followed government legislation to ban tobacco advertising and promotion in July 2009. According to a spokesperson from the anti-smoking group ASH (Action on Smoking and Health), this measure helped to prevent retail outlets from making young people feel attracted to buying cigarettes. “Close to 30 % of our population still smoke and 7000 die from tobacco-related disease each year,” he said.  It has been argued that increasing the price of cigarettes is one of the most effective ways of curbing harmful smoking and there is a need to make cigarettes less appealing, particularly to young people. The evidence is that banning advertising, introducing minimum pricing and increasing health warnings can all work.  The