2025 DHS Paper 1 - Mark Scheme

Question 1 Suggested Answers (a) Compare the projected sales of battery -electric vehicles and internal combustion vehicles between 2018 and 2030. [2] ● Difference (level): Each year between 2018 and 2030, the sale of battery- electric vehicles is always projected to be less than the sales of internal combustion vehicles. [1] ● Difference (direction): The sales of battery-electric vehicles is projected to increase over the period while the sales of internal combustion vehicles is projected to fall over the period. [1] (b) With reference to Extract 1, explain one way in which electric vehicle (EV) manufacturers can enjoy cost savings from an increase in scale of production. [2] (Explain 1 example of IEOS using evidence from Extract 1) ● [Use of one example from Ext 1] By increasing its scale of production, EV manufacturers would be able to spread the costs of indivisible capital equipment such as its assembly lines (Ext 1) over a larger output. [1] ● This would allow it to enjoy internal economies of scale leading to a fall in its average costs of production. [1] Other examples: IEOS from bulk purchase of EV components, IEOS from specialisation of roles, etc... (c) With reference to Extract 2, explain how the use of electric vehicles (EVs) may result in positive externalities. [2] ● Through the use of electric cars, third parties such as those living near roads and highways are able to enjoy cleaner air and less noise pollution as the air is cleaner and quieter (Extract 1) as motorist have switched to using EVs. This would benefit these third parties in terms of reduced medical bills from less respiratory or hearing problems . [1m to identify specific third party, 1m to explain the benefit] (d) Extract 2 highlights how Norway has transitioned away from internal combustion engine vehicles to EVs. Using a demand and supply diagram, explain how the government policies mentioned in Extract 2 have led to more electric cars on the roads. [6] Students are to identify the two policies mentioned (i.e., VAT exemptions and higher taxes from ICE cars) and explain how the combined effect leads to more electric cars. Extract 2 highlights how Norway has used two policies – exemption from value-added tax (VAT) for EVs and higher taxes on internal combustion engine (ICE) cars, to encourage more EV usage.

Through exemptions from VAT for EVs, this would mean reduction/removal of an indirect tax on EVs which would reduce the marginal costs of EV producers leading to an increase in supply of EVs. [1] The higher taxes on ICE cars lead to a rise in marginal cost for ICE car producers which leads to a fall in supply of ICE cars and results in a increase in the price of ICE cars. Given that ICE cars and EVs are substitutes for one another with a positive cross elasticity of demand (XED>0) as they are both forms of private transport, the rise in price of ICE cars leads to a fall in the qty dd of IC