Please write clearly in block capitals.
Centre number Candidate number
AS
ECONOMICS
Surname
Forename(s)
Candidate signature
I declare this is my own work.
7135/1
Paper 1 The Operation of Markets and Market Failure
AS
Mark scheme
ECONOMICS June 2026
Paper 1 The Operation of Markets and Market Failure Version: 1.0 Final
Tuesday 12 May 2026 Morning Time allowed: 1 hour 30 minutes
Materials
For this paper you must have: For Examiner’s Use
• the Insert
Section Mark
• a calculator.
A
Instructions B
• Use black ink or black ball-point pen. Pencil should only be used for drawing.
TOTAL
• Fill in the boxes at the top of this page.
• Answer all questions in Section A.
• Answer either Context 1 or Context 2 in Section B.
• You will need to refer to the Insert provided to answer Section B.
• You must answer the questions in the spaces provided. Do not write outside
the box around each page or on blank pages.
• If you need extra space for your answer(s), use the lined pages at the end of
this book. Write the question number against your answer(s).
• Do all rough work in this book. Cross through any work you do not want to be
marked.
Information
• The maximum mark for this paper is 70.
• The marks for questions are shown in brackets.
• No deductions will be made for wrong answers.
*Jun *
IB/M/Jun26/G4004/V3 7135/1
, 2
MARK SCHEME – AS ECONOMICS – 7135/1 – JUNE 2026
Do not write
outside the
Section A box
Mark schemes are prepared by the Lead Assessment Writer and considered, together with the relevant
Answer all questions in this section.
questions, by a panel of subject teachers. This mark scheme includes any amendments made at the
standardisation events which all associates participate in and is the scheme which was used by them in
this examination. The standardisation process ensures that the mark scheme covers the students’
Only one answer per question is allowed. responses to questions and that every associate understands and applies it in the same correct way.
As preparation for standardisation each associate analyses a number of students’ scripts. Alternative
For each question completely fill in the circle alongside the appropriate answer. answers not already covered by the mark scheme are discussed and legislated for. If, after the
standardisation process, associates encounter unusual answers which have not been raised they are
CORRECT METHOD WRONG METHODS required to refer these to the Lead Examiner.
If you want to change your answer you must cross out your original answer as shown. It must be stressed that a mark scheme is a working document, in many cases further developed and
expanded on the basis of students’ reactions to a particular paper. Assumptions about future mark
If you wish to return to an answer previously crossed out, ring the answer you now wish to select schemes on the basis of one year’s document should be avoided; whilst the guiding principles of
as shown. assessment remain constant, details will change, depending on the content of a particular examination
paper.
No student should be disadvantaged on the basis of their gender identity and/or how they refer to the
0 1 Which one of the following is the correct definition of a positive economic statement? gender identity of others in their exam responses.
[1 mark]
A consistent use of ‘they/them’ as a singular and pronouns beyond ‘she/her’ or ‘he/him’ will be credited in
exam responses in line with existing mark scheme criteria.
A A statement that can be tested by the evidence
B A statement that contains a value judgement Further copies of this mark scheme are available from
C A statement that must be true according to the evidence
D A statement that supports the most desirable outcome
0 2 Why do higher prices provide an incentive to increase production?
[1 mark]
A Higher prices are needed to cover higher costs
B Higher prices lead to higher profits
C Producers will allocate resources more efficiently
D Producers will satisfy more needs and wants
information
retains the on all its publications. H r, registered schools/colleges for are permitted to copy material from this booklet for their own
al use, wit ing important exception: cannot give permission to school eges to photocopy any material that is acknowledged to a third
party even for internal use within the centre.
and its licensors. All rights reserved.
*02*
2
IB/M/Jun26/7135/1
, 3
MARK SCHEME – AS ECONOMICS – 7135/1 – JUNE 2026
Do not write
outside the
0 3 Which one of the following situations shows negative externalities in consumption box
and production? SECTION A
[1 mark]
The following list indicates the correct answers used
in marking the students’ responses.
A Air pollution from oil refineries and noise pollution caused by fuel deliveries
to motorway service stations
KEY LIST
B Consumers experiencing breathing problems and longer journey times due
to an increase in the use of diesel cars A A
1 (A statement that can be tested by 11 (Individuals cannot be prevented from
C Increased road congestion from rising car use and higher oil prices raising the evidence) consuming the product)
the price of plastic
B C
D Water pollution from leaking oil tankers and rising global temperatures 2 (Higher prices lead to higher 12 (£13 250 000)
caused by households using petrol cars profits)
D D
(Water pollution from leaking oil (There are many buyers and sellers with
0 4 Hamida is paid £2000 per month to manage a business offering tutoring services to 3 tankers and rising global 13 good market information)
sixth-form students. The business has a contract to rent premises for £3000 per month temperatures caused by
and has a broadband contract that costs £100 per month. Tutors are paid £35 per hour. households using petrol cars)
There are no other costs.
D B
4 14
(300) (Fall, Rise)
In April 2025 the business had an average total cost of £52 per hour of tuition. How many
hours of tuition did it sell in the month? C C
[1 mark] (An increase in spending by the (The average productivity of the factors
5 15
government on education) of production was higher in 2022 than
2023)
A 59
C B
B 98 (An increase in the price of a (more elastic when the price per litre
6 16
substitute good for coffee) increases from 50p to 55p than from 45p
C 182 to 50p.)
A B
D 300 7 (Buyers have perfect information) 17 (Households with low incomes have less
influence on the signals firms receive)
A B
0 5 Which one of the following is most likely to be an example of the opportunity cost of the (–3, Complementary goods) (The opportunity cost of producing
government increasing its spending on health care by £20 billion? 8 18
fridges, in terms of dishwashers, is now
[1 mark] lower)
B D
A An increase in investment by firms in new machinery 9 (Output is at an inefficient level) 19 (£13)
B An increase in spending by consumers on goods from abroad
B D
C An increase in spending by the government on education 10 (To help firms to differentiate their 20 (A good that is rival in consumption and
products) is excludable)
D An increase in wages for workers in the private sector
Totals
A4
B7
C4
D5
Turn over ►
*03*
3
IB/M/Jun26/7135/1
, 4
MARK SCHEME – AS ECONOMICS – 7135/1 – JUNE 2026
Do not write
outside the
0 6 Figure 1 shows the supply curve for coffee. box
Figure 1
Level of response marking instructions
Level of response mark schemes are broken down into levels, each of which has a descriptor. The
descriptor for the level shows the average performance for the level. There are marks in each level.
Before you apply the mark scheme to a student’s answer read through the answer and annotate it (as
instructed) to show the qualities that are being looked for. You can then apply the mark scheme.
Step 1 Determine a level
Start at the lowest level of the mark scheme and use it as a ladder to see whether the answer meets the
descriptor for that level. The descriptor for the level indicates the different qualities that might be seen in
the student’s answer for that level. If it meets the lowest level then go to the next one and decide if it
meets this level, and so on, until you have a match between the level descriptor and the answer. With
practice and familiarity you will find that for better answers you will be able to quickly skip through the
lower levels of the mark scheme.
Which one of the following could have caused the movement along the supply curve from When assigning a level you should look at the overall quality of the answer and not look to pick holes in
V to W? small and specific parts of the answer where the student has not performed quite as well as the rest. If
[1 mark] the answer covers different aspects of different levels of the mark scheme you should use a best fit
approach for defining the level and then use the variability of the response to help decide the mark within
the level, ie if the response is predominantly level 3 with a small amount of level 4 material it would be
A An increase in the costs of production of coffee placed in level 3 but be awarded a mark near the top of the level because of the level 4 content.
B An increase in the price of a complementary good for coffee Step 2 Determine a mark
C An increase in the price of a substitute good for coffee Once you have assigned a level you need to decide on the mark. The descriptors on how to allocate
marks can help with this. The exemplar materials used during standardisation will help. There will be an
D An increase in the subsidy for coffee answer in the standardising materials which will correspond with each level of the mark scheme. This
answer will have been awarded a mark by the Lead Examiner. You can compare the student’s answer
with the example to determine if it is the same standard, better or worse than the example. You can then
use this to allocate a mark for the answer based on the Lead Examiner’s mark on the example.
0 7 Which one of the following characteristics of a perfectly competitive market is most likely to
lead to firms charging the same price? You may well need to read back through the answer as you apply the mark scheme to clarify points and
[1 mark] assure yourself that the level and the mark are appropriate.
Indicative content in the mark scheme is provided as a guide for examiners. It is not intended to be
A Buyers have perfect information exhaustive and you must credit other valid points. Students do not have to cover all of the points
mentioned in the Indicative content to reach the highest level of the mark scheme.
B Firms agree to charge the same price
An answer which contains nothing of relevance to the question must be awarded no marks.
C New firms cannot enter the market
D Products are differentiated
*04*
4
IB/M/Jun26/7135/1
Centre number Candidate number
AS
ECONOMICS
Surname
Forename(s)
Candidate signature
I declare this is my own work.
7135/1
Paper 1 The Operation of Markets and Market Failure
AS
Mark scheme
ECONOMICS June 2026
Paper 1 The Operation of Markets and Market Failure Version: 1.0 Final
Tuesday 12 May 2026 Morning Time allowed: 1 hour 30 minutes
Materials
For this paper you must have: For Examiner’s Use
• the Insert
Section Mark
• a calculator.
A
Instructions B
• Use black ink or black ball-point pen. Pencil should only be used for drawing.
TOTAL
• Fill in the boxes at the top of this page.
• Answer all questions in Section A.
• Answer either Context 1 or Context 2 in Section B.
• You will need to refer to the Insert provided to answer Section B.
• You must answer the questions in the spaces provided. Do not write outside
the box around each page or on blank pages.
• If you need extra space for your answer(s), use the lined pages at the end of
this book. Write the question number against your answer(s).
• Do all rough work in this book. Cross through any work you do not want to be
marked.
Information
• The maximum mark for this paper is 70.
• The marks for questions are shown in brackets.
• No deductions will be made for wrong answers.
*Jun *
IB/M/Jun26/G4004/V3 7135/1
, 2
MARK SCHEME – AS ECONOMICS – 7135/1 – JUNE 2026
Do not write
outside the
Section A box
Mark schemes are prepared by the Lead Assessment Writer and considered, together with the relevant
Answer all questions in this section.
questions, by a panel of subject teachers. This mark scheme includes any amendments made at the
standardisation events which all associates participate in and is the scheme which was used by them in
this examination. The standardisation process ensures that the mark scheme covers the students’
Only one answer per question is allowed. responses to questions and that every associate understands and applies it in the same correct way.
As preparation for standardisation each associate analyses a number of students’ scripts. Alternative
For each question completely fill in the circle alongside the appropriate answer. answers not already covered by the mark scheme are discussed and legislated for. If, after the
standardisation process, associates encounter unusual answers which have not been raised they are
CORRECT METHOD WRONG METHODS required to refer these to the Lead Examiner.
If you want to change your answer you must cross out your original answer as shown. It must be stressed that a mark scheme is a working document, in many cases further developed and
expanded on the basis of students’ reactions to a particular paper. Assumptions about future mark
If you wish to return to an answer previously crossed out, ring the answer you now wish to select schemes on the basis of one year’s document should be avoided; whilst the guiding principles of
as shown. assessment remain constant, details will change, depending on the content of a particular examination
paper.
No student should be disadvantaged on the basis of their gender identity and/or how they refer to the
0 1 Which one of the following is the correct definition of a positive economic statement? gender identity of others in their exam responses.
[1 mark]
A consistent use of ‘they/them’ as a singular and pronouns beyond ‘she/her’ or ‘he/him’ will be credited in
exam responses in line with existing mark scheme criteria.
A A statement that can be tested by the evidence
B A statement that contains a value judgement Further copies of this mark scheme are available from
C A statement that must be true according to the evidence
D A statement that supports the most desirable outcome
0 2 Why do higher prices provide an incentive to increase production?
[1 mark]
A Higher prices are needed to cover higher costs
B Higher prices lead to higher profits
C Producers will allocate resources more efficiently
D Producers will satisfy more needs and wants
information
retains the on all its publications. H r, registered schools/colleges for are permitted to copy material from this booklet for their own
al use, wit ing important exception: cannot give permission to school eges to photocopy any material that is acknowledged to a third
party even for internal use within the centre.
and its licensors. All rights reserved.
*02*
2
IB/M/Jun26/7135/1
, 3
MARK SCHEME – AS ECONOMICS – 7135/1 – JUNE 2026
Do not write
outside the
0 3 Which one of the following situations shows negative externalities in consumption box
and production? SECTION A
[1 mark]
The following list indicates the correct answers used
in marking the students’ responses.
A Air pollution from oil refineries and noise pollution caused by fuel deliveries
to motorway service stations
KEY LIST
B Consumers experiencing breathing problems and longer journey times due
to an increase in the use of diesel cars A A
1 (A statement that can be tested by 11 (Individuals cannot be prevented from
C Increased road congestion from rising car use and higher oil prices raising the evidence) consuming the product)
the price of plastic
B C
D Water pollution from leaking oil tankers and rising global temperatures 2 (Higher prices lead to higher 12 (£13 250 000)
caused by households using petrol cars profits)
D D
(Water pollution from leaking oil (There are many buyers and sellers with
0 4 Hamida is paid £2000 per month to manage a business offering tutoring services to 3 tankers and rising global 13 good market information)
sixth-form students. The business has a contract to rent premises for £3000 per month temperatures caused by
and has a broadband contract that costs £100 per month. Tutors are paid £35 per hour. households using petrol cars)
There are no other costs.
D B
4 14
(300) (Fall, Rise)
In April 2025 the business had an average total cost of £52 per hour of tuition. How many
hours of tuition did it sell in the month? C C
[1 mark] (An increase in spending by the (The average productivity of the factors
5 15
government on education) of production was higher in 2022 than
2023)
A 59
C B
B 98 (An increase in the price of a (more elastic when the price per litre
6 16
substitute good for coffee) increases from 50p to 55p than from 45p
C 182 to 50p.)
A B
D 300 7 (Buyers have perfect information) 17 (Households with low incomes have less
influence on the signals firms receive)
A B
0 5 Which one of the following is most likely to be an example of the opportunity cost of the (–3, Complementary goods) (The opportunity cost of producing
government increasing its spending on health care by £20 billion? 8 18
fridges, in terms of dishwashers, is now
[1 mark] lower)
B D
A An increase in investment by firms in new machinery 9 (Output is at an inefficient level) 19 (£13)
B An increase in spending by consumers on goods from abroad
B D
C An increase in spending by the government on education 10 (To help firms to differentiate their 20 (A good that is rival in consumption and
products) is excludable)
D An increase in wages for workers in the private sector
Totals
A4
B7
C4
D5
Turn over ►
*03*
3
IB/M/Jun26/7135/1
, 4
MARK SCHEME – AS ECONOMICS – 7135/1 – JUNE 2026
Do not write
outside the
0 6 Figure 1 shows the supply curve for coffee. box
Figure 1
Level of response marking instructions
Level of response mark schemes are broken down into levels, each of which has a descriptor. The
descriptor for the level shows the average performance for the level. There are marks in each level.
Before you apply the mark scheme to a student’s answer read through the answer and annotate it (as
instructed) to show the qualities that are being looked for. You can then apply the mark scheme.
Step 1 Determine a level
Start at the lowest level of the mark scheme and use it as a ladder to see whether the answer meets the
descriptor for that level. The descriptor for the level indicates the different qualities that might be seen in
the student’s answer for that level. If it meets the lowest level then go to the next one and decide if it
meets this level, and so on, until you have a match between the level descriptor and the answer. With
practice and familiarity you will find that for better answers you will be able to quickly skip through the
lower levels of the mark scheme.
Which one of the following could have caused the movement along the supply curve from When assigning a level you should look at the overall quality of the answer and not look to pick holes in
V to W? small and specific parts of the answer where the student has not performed quite as well as the rest. If
[1 mark] the answer covers different aspects of different levels of the mark scheme you should use a best fit
approach for defining the level and then use the variability of the response to help decide the mark within
the level, ie if the response is predominantly level 3 with a small amount of level 4 material it would be
A An increase in the costs of production of coffee placed in level 3 but be awarded a mark near the top of the level because of the level 4 content.
B An increase in the price of a complementary good for coffee Step 2 Determine a mark
C An increase in the price of a substitute good for coffee Once you have assigned a level you need to decide on the mark. The descriptors on how to allocate
marks can help with this. The exemplar materials used during standardisation will help. There will be an
D An increase in the subsidy for coffee answer in the standardising materials which will correspond with each level of the mark scheme. This
answer will have been awarded a mark by the Lead Examiner. You can compare the student’s answer
with the example to determine if it is the same standard, better or worse than the example. You can then
use this to allocate a mark for the answer based on the Lead Examiner’s mark on the example.
0 7 Which one of the following characteristics of a perfectly competitive market is most likely to
lead to firms charging the same price? You may well need to read back through the answer as you apply the mark scheme to clarify points and
[1 mark] assure yourself that the level and the mark are appropriate.
Indicative content in the mark scheme is provided as a guide for examiners. It is not intended to be
A Buyers have perfect information exhaustive and you must credit other valid points. Students do not have to cover all of the points
mentioned in the Indicative content to reach the highest level of the mark scheme.
B Firms agree to charge the same price
An answer which contains nothing of relevance to the question must be awarded no marks.
C New firms cannot enter the market
D Products are differentiated
*04*
4
IB/M/Jun26/7135/1
