Assessment objectives and their...

Md. Ziaul Alam, MSS,MBA, B.ed, Teacher: Economics, Business Studies, BD. Studies Cell: 01712524004, Mail: [email protected], Web: zia-academy.com

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SYLLABUS Cambridge O Level, Economics, 2281 For examination in June and November 2015

1. Assessment at a glance 1. Paper 1 Multiple choice : 45 minutes

Candidates answer 30 multiple choice questions. Weighted at 30% of total available marks.

2. Paper 2 Structured questions: 2 hours 15 minutes

Candidates answer one compulsory question, which requires them to interpret and analyse previously unseen data relevant to

a real economic situation, and three optional questions from a choice of six. Weighted at 70% of total available marks.

2. Assessment objectives and their weightings The three assessment objectives in Cambridge O Level Economics are:

AO1: Knowledge with understanding

AO2: Analysis

AO3: Critical evaluation and decision-making.

AO1: Knowledge with understanding Candidates should be able to:

• show knowledge and understanding of economic facts, definitions, concepts, principles and theories

• use economic vocabulary and terminology.

AO2: Analysis Candidates should be able to:

• select, organise and interpret data

• apply economic knowledge and understanding in written, numerical, diagrammatic and graphical form

• use economic data, to recognise patterns in such data, and to deduce relationships.

AO3: Critical evaluation and decision-making Candidates should be able to:

• distinguish between evidence and opinion, make reasoned judgments’ and communicate those judgments’ in an accurate and

logical manner

• recognize that economic theory has various limitations and uncertainties

• evaluate the social and environmental implications of particular courses of economic action

• draw conclusions from economic information and critically evaluate economic data

• communicate conclusions in a logical and clear manner.

3. The weightings given to the assessment objectives are:

Assessment objective Paper 1 (%) Paper 2 (%) Overall AO1: Knowledge with understanding 45 ± 5 20 ± 5 28 ± 5

AO2: Analysis 55 ± 5 35 ± 5 41 ± 5

AO3: Critical evaluation and decision-making 0 45 ± 5 31 ± 4

The assessment objectives are weighted to give an indication of their relative importance. The weightings are not intended to provide a

precise statement of the number of marks allocated to particular assessment objectives.


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Section 1: Basic economic problem: choice and the allocation of resources

• Economic problem • Factors of production • Opportunity cost • Resource

allocation • Choice • Production possibility curves.

OCTOBER/NOVEMBER SESSION 2002

1. (a) Explain the concept of opportunity cost and illustrate it by using the above statement. [5]

October/November 2004

2. (4c) a. Explain what is meant by (i) an opportunity cost and (ii) a social benefit. [4]

May/June 2004

3. In Zimbabwe a local community markets a tea which grows wild in their area. ‘Communities should be able to manage their

natural resources if they are to benefit, especially if they are to gain an economic benefit,’ the leader of the project said.

(a) Identify the factors of production. [4]

(b) Explain what benefits might be gained by the local community in Zimbabwe from the project. [6]

(c) Tea is also grown and sold by large companies. Explain how this might affect the market for the local community’s tea. [4]

(d) Discuss whether a community should always exploit rather than conserve its resources. [6]


4. (a) Explain how the principle of opportunity cost might be relevant when a person chooses a new job. [3]


5. (a) Describe, with the use of examples, two factors of production. [4]

(b) Explain what is meant by the economic problem and why opportunity cost is relevant to the allocation of resources. [6]

(c) Discuss whether every economy should have some government intervention. [10]

May/June 2013

6. Production involves the use of the four factors of production. The use of these resources involves an opportunity cost.

(a) Using appropriate examples, describe the four factors of production. [6]

(b) Using a production possibility curve, explain what is meant by opportunity cost. [6]

(c) Discuss whether more factors of production should be used to build houses. [8]

S2014/22 7. A number of economies are devoting more of their resources to the provision of health care. Due to the economic problem, this

involves them having to make difficult choices.

(a) What is meant by the ‘economic problem’? [2]

(b) Using a production possibility curve diagram, explain why choices have to be made as to how to allocate resources. [6]

(c) Explain how resources are allocated differently in market and mixed economic systems. [4]

(d) Discuss whether an economy would benefit from an increase in the provision of health care. [8]

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8. Factors of production, private and external costs and opportunity costs are all important concepts in Economics.

(a) Using examples, define the factor of production, ‘capital’. [4]

(b) Using examples, distinguish between a private cost and an external cost. [4]

(c) Explain why scarcity gives rise to an ‘opportunity cost’. [4]

(d) Discuss whether a decision to cut down trees for wood is an appropriate use of a scarce resource. [8]

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9. In 2013, an earthquake on the Iran/Pakistan border destroyed many factories and homes. Some officials wanted the

Governments to rebuild the factories and homes, even though there would be an opportunity cost. Others suggested that some

people should be encouraged to emigrate.

(a) Define ‘opportunity cost’. [2]

(b) Explain why the economic problem can never be solved. [4]

(c) Using a production possibility curve diagram, analyse the effect of the destruction of some of its resources on an economy.[6]

(d) Discuss whether a country will benefit from the emigration of some of its people. [8]

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Section 2: The allocation of resources: how the market works; market

failure

• Market and mixed economic systems

• Demand and supply analysis

• Price elasticity

• Market failure

• Social and private costs and benefits.


1. (a) Identify three causes of a change in the demand for a good. [3]

A combination of excess supply, weak consumer demand and competition from new channels such as the internet has pushed

prices down in shops for goods from clothing to electrical products.

(b) Using demand and supply analysis, explain whether the reasons given in the above extract would lead to the stated effect on

prices. [7]

(c) Define what is meant by price elasticity of demand and explain how it is calculated. [3]

(d) Discuss whether clothing and electrical products would be likely to have an elastic or an inelastic price elasticity of demand.[7]

2. Protestors often oppose large companies that wish to erect large buildings on open rural land rather than in more expensive city

centres. The protestors regard this as a destruction of the environment rather than the use of natural resources.

(a) Explain the concept of opportunity cost and illustrate it by using the above statement. [5]

(b) Explain what is meant by (i) external cost, [2] (ii) social benefit. [3]

(c) Discuss the possible costs and benefits of developing a site in a rural area rather than in a city centre. [10]


3 In the UK the Royal Society for the Protection of Birds (RSPB) has recently bought land around the coast to prevent building on

the area where rare birds breed. It has received donations from the public towards the cost. The RSPB plans to set up special

visitor centres in the area.

(a) Explain which factors of production are involved in the above action by the RSPB. [4]

(b) Discuss whether the local area might be more likely to gain or lose from the action of the RSPB. [6]

(c) Define the following terms and identify an example of each in the above passage. (i) private cost (ii) social benefit. [4]

(d) The RSPB is a private charity. Do you think the protection of rare birds should be the responsibility of a government rather

than private charities? [6]

May/June 2003

4 The most important status symbols for the emerging black middle class in South Africa are clothing and footwear,

together with certain perfumes, hair-styles, cell-phones and household appliances. Some of these are expensive products

that can be linked to a luxurious life style.

(a) According to economic theory, what determines the demand for a product? [5]

(b) Discuss why different income groups have different spending patterns. [5]

(c) What is meant by price elasticity of demand? [5]

(d) Discuss why the price elasticity of demand for the items mentioned in the article might differ. [5]

May/June 2005

5 (a) Explain what is meant by a market system. [5]

(b) Discuss when it might be desirable for a government to act as a producer of goods or services. [6]

(c) Sometimes the government does not act as a producer of goods and services but still influences private producers. Explain how

it might do this. [9]


6. (a) Explain the difference between an equilibrium price and a disequilibrium price. [4]

(b) Many more people travel by aeroplane today than ten years ago. With the help of a demand and supply diagram, explain what

might have happened in the market for air travel to cause this increase. [6]

(c) Define price elasticity of demand and suggest why different goods have different price elasticities. [5]

(d) Discuss whether knowledge of price elasticity of demand is of use to a company selling holiday tours. [5]

May/June 2006

7. (a) Distinguish between the private sector and the public sector of an economy. [3]

(b) Discuss the disadvantages of allocating resources through the public sector. [7]

The Singapore government plans to build Asia’s first airport dedicated to serving low-cost airlines. Its estimated cost is $26.5

million and it will be designed to handle about 2.7 million passengers each year.


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(c) When airports are planned, there are usually some people who campaign to stop them being built. What disadvantages might

the building of an airport have? [4]

(d) A government is considering paying for a similar airport by either increasing income tax or introducing a specific (flat-rate) tax

on air passengers. Discuss which of these you would favour. [6]


8. In recent years many countries have put greater emphasis on the market system and less emphasis on trade protection.

(a) Explain what is meant by a market system. [4]

(b) Discuss the advantages and disadvantages of placing a greater emphasis on the market system. [8]

(c) Discuss whether countries should use trade protection. [8]

May/June 2007

9. (a) What are the main differences between a planned economy and a market economy? [4]

(b) Discuss how some aims of government policy might conflict with each other [6]

(c) Many economies are mixed economies. Discuss why most countries have decided to have a mixed economy. [10]


10. In February 2005 Kuwait opened a new port extension, said to be the largest and most advanced in the Middle East, near the

country’s main oil refinery. It took 3 years to build, can accommodate four supertankers at the same time, cost £187 million and

is hoped to last at least 30 years. Kuwait is actively seeking new markets for its planned increase in oil production.

(a) Explain, using demand and supply analysis, why Kuwait might want to seek new markets when it increases its oil production.

[4]

(b) Distinguish between fixed and variable costs and consider which is likely to have the highest proportion in the production and

distribution of oil. [6]

(c) Explain what is meant by a substitute good and a complementary good and give an example of each connected with oil. [4]

(d) Explain what is meant by price elasticity of demand and use this concept to discuss what might happen in the market for oil if

the price of oil was raised. [6]

11. Investment spending is undertaken by both the private sector and the public sector.

(a) Use examples to distinguish between private sector and public sector investment spending. [4]

(b) Explain why investment spending is important for an economy. [6]

(c) What is the difference between a mixed economy and a market economy? [4]

(d) Explain how economic growth might change the relative importance of the primary, secondary and service sectors. [6]

May/June 2008

12. In Ghana local farmers manage small plots of land for subsistence farming. However, some have benefited by selling

pineapples at an agreed, fixed price to an exporter. The exporter provides finance, training, fertilizers and machinery and even

building materials for the farmers’ homes.

(a) Identify and explain which factors of production are mentioned above. [4]

(b) In 2005, European supermarkets changed their demand to a new, sweeter pineapple not grown in Ghana. Use demand and

supply diagrams to explain what happened in the market for both types of pineapple. [6]

(c) Explain why farmers might benefit from an agreed, fixed price. [3]

(d) The Ghanaian Government has launched an Action Plan to provide farmers with more finance, better transport and storage

facilities to help them compete. Discuss whether governments should always subsidise the production of goods and services. [7]


13. In 2007, there was an increase in demand for holidays using cruise ships as people wished to avoid long delays at airports

caused by increased security controls.

(a) Explain, using a demand and supply diagram, what is likely to happen in the market for air travel as a result of increased delays

at airports. [4]

(b) Identify a complementary (jointly demanded) good or service industry connected with cruise ships and discuss the possible

employment prospects in that industry as a result of the increase in airport delays. [6]

(c) Some countries rely very heavily on the tourist industry. Discuss the possible consequences of the delays at airports for the

economy of such a country. [10]

14. Cadbury, the chocolate manufacturer, declared to its shareholders profits of £69 million in the first six months of 2007.

However, in July 2007, floods in the UK severely damaged farms. As a result, Cadbury had to pay £20 million extra for milk to

make the chocolate in addition to its annual milk cost of £150 million.

(a) Explain whether milk is a fixed or variable cost for Cadbury. [3]

(b) Discuss whether the demand for chocolate is likely to be price elastic or price inelastic. [7]

(c) Suggest, from the information given, what type of business organisation Cadbury is likely to be. [4]

(d) Discuss whether the rise in milk costs is likely to have a significant effect on Cadbury’s profits. [6]

May/June 2009

15. A company produces cigarettes which it believes have a low price elasticity of demand.

(a) Explain what is meant by price elasticity of demand. [4]


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(b) How might knowledge of price elasticity be of use to a producer? [6]

(c) Some countries have now prohibited smoking in public areas in buildings. Use the concepts of private and social costs and

benefits to explain this policy. [6]

(d) Discuss what effect the policy of prohibiting smoking in public areas might have on the manufacturers of cigarettes. [4]

16. Many governments have increased their spending on police and armed forces but there is an opportunity cost of this policy.

(a) Explain the term opportunity cost and discuss why an increase in spending on police and armed forces may result in an

opportunity cost. [4]

(b) Discuss whether such government spending could be a result of market failure. [6]

(c) Sometimes governments do not provide goods and services but they still influence the activities of private firms. Analyse how

they might do this. [10]

May/june 2010

17. a.(i). using a demand diagram, show an increase in demand for a product.[2]

(ii) identify two causes of such an increase in demand. [2]

(b) Explain what is meant by price elasticity of demand?[4]

(c) why is the concept of price elasticity of demand potentially very useful to a business?[4]

(d) discuss why market failure could occur in an economy?[8]

May/June 2011

18. One feature of many mixed economies is that governments may intervene by giving subsidies to some producers.

(a) What is meant by a subsidy? [3]

(b) Explain, using a demand and supply diagram, how a subsidy can affect the equilibrium price and equilibrium quantity in a

market. [6]

(c) Identify the three questions faced by every type of economic system. [3]

(d) Discuss why virtually every country today has a mixed economy. [8]

19. Firms are keen to know what influences consumers in their buying decisions. Publishing firms in India have researched why

people buy particular magazines and have found that the price elasticity of demand for different magazines varies.

(a) Describe the factors that can affect the demand for a product. [6]

(b) Explain what is meant by price elasticity of demand. [6]

(c) Discuss how knowledge of the price elasticity of demand for magazines may be used by a firm which produces and sells

magazines. [8]

May/June 2012

20. Both the private sector and the public sector are involved in building houses. In one country a private firm has built an extra

100 000 houses but, at the same time, its government has increased income tax significantly.

(a) Explain, using a demand and supply diagram, how these two actions would have affected the equilibrium price and the

equilibrium quantity of houses. [6]

(b) Explain what determines the demand for houses. [6]

(c) Discuss whether it is better for the public sector to build houses rather than the private sector. [8]


21. A government is planning to build a high speed railway through a large area of fertile land and scenic beauty. A decision to

construct the railway will depend upon how the project is financed and the social costs and social benefits arising from its

construction.

(a) Describe, with the aid of examples from the construction of a railway, the meaning of social costs. [4]

(b) Explain why a government might consider using private funding rather than public funding to finance the project. [6]

(c) Discuss the advantages and disadvantages of such a high speed railway to a country’s economy, both locally and nationally.

[10]

May/June 2013

22. The demand for flat screen televisions has increased enormously in many countries and this has had an effect on the market.

(a) Describe what can influence the demand for flat screen televisions. [4]

(b) Using a demand and supply diagram, analyse how an increase in income can affect the equilibrium price and equilibrium

quantity of flat screen televisions. [6]

(c) Explain what is meant by price elasticity of demand [4]

(d) Discuss the potential usefulness of price elasticity of demand to a manufacturer of flat screen televisions. [6]

Oct/nov 2013

23. 2 An entrepreneur plans to cut down timber in a rainforest. The local community, however, are concerned that the social costs

will be greater than the social benefits.

(a) Define the factor of production, enterprise. [4]

(b) Distinguish between the social benefits and the social costs involved in this example. [6]

(c) Discuss whether a resource, such as a rainforest, should be conserved rather than used.[10]

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24.3 Many governments seek to discourage people from smoking cigarettes, whilst encouraging them to eat more fruit, including


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bananas and apples. The government’s ability to influence people’s consumption is determined, in part, by the price elasticity of

supply and the price elasticity of demand of the products, and by changes in market conditions.

(a) Define ‘price elasticity of supply’. [2]

(b) Explain three reasons why the supply of bananas may decrease. [6]

(c) Analyse what effect a rise in the price of apples, which are a substitute for bananas, will have on the market for bananas. [4]

(d) Discuss whether a government should increase the tax on cigarettes. [8]

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25.3 Despite more cars being sold, world demand for bicycles is increasing. It has been estimated that the world price elasticity of

demand for bicycles is –0.18 but this does vary between countries. The indirect taxes imposed on bicycles also differ between

countries.

(a) Define ‘demand’. [2]

(b) Explain three likely causes of an increase in demand for bicycles. [6]

(c) Analyse why the demand for a product may be more price elastic in one country than in another country. [6]

(d) Discuss whether a government should impose indirect taxes only on products with inelastic demand. [6]

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26.2 All market systems have both advantages and disadvantages.

(a) Explain how resources are allocated in a market system. [5]

(b) Analyse three reasons why a market system could fail. [7]

(c) Discuss whether government intervention in a market is always to be supported. [8]

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3 In 2013, the market price of houses rose in China but fell in Greece. The Chinese Government tried to reduce the rise in house

prices by discouraging borrowing. In Greece, the equilibrium price of houses fell, largely because of a decrease in income. In some

countries, governments give subsidies to housebuilders to influence the market for houses.

(a) Define ‘equilibrium price’. [2]

(b) Explain two reasons why borrowing may decrease. [4]

(c) Using a demand and supply diagram, analyse why a fall in incomes may reduce the market

price of houses. [6]

(d) Discuss whether the building of houses should be subsidised. [8]

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2 The United Nations’ World Tourism Organisation has estimated that the proportion of the world’s population who have visited

another country will have reached only 7% by 2020. Increasing international travel might create jobs and influence incomes.

However, it would also put pressure on finite resources and would create external costs.

(a) Define ‘resources’. [2]

(b) Explain how international travel may create external costs. [4]

(c) Analyse how an increase in international travel may influence incomes. [6]

(d) Discuss whether demand for international travel is likely to continue to increase. [8]

3 A heatwave in July 2013 in the United Kingdom resulted in sales of ice cream more than doubling. Extra workers were taken on

to meet the higher demand. In recent years, the demand and supply conditions of ice cream have changed, leading to demand and

supply becoming more elastic. The market has also been influenced by government policies and by changes in the country’s

economic growth rate.

(a) Define ‘supply’. [2]

(b) Explain two ways a government could influence the price of a product. [4]

(c) Analyse why demand for a product may become more price elastic. [6]

(d) Discuss whether the wages of all workers will increase during a period of economic growth.[8]

Section 3: The individual as producer, consumer and borrower

• Functions of money • Exchange

• Central banks, stock exchanges and commercial banks

• Labour market • motives for spending, saving and borrowing.

May/June 2003

1. Expenditure in an economy may be either private expenditure or public expenditure.

(a) Explain the difference between these types of expenditure, giving one example of each. [3]

(b) Why might public expenditure fall if an economy comes to rely more on the market system? [3]

(c) Explain how public expenditure can be paid for. [8]


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(d) Discuss, with examples, how decisions on public expenditure might illustrate the idea of opportunity cost. [6]


2. In 2002 in the UK and in Germany trade unions supported strikes in some public sector occupations.

(a) Explain what is meant by the public sector and give one example of a public sector occupation. [3]

(b) Describe the functions of trade unions and explain which function you consider to be the most important. [7]

(c) State three factors that might determine an individual’s choice of occupation. [3]

(d) Discuss why some occupations receive higher wages than other occupations. [7]

May/June 2004

3. It was reported that in a country the poorest households spent 30% of their income on food while the richest households spent

13% of food.

(a) Do these figures mean that the actual amount that the richest households spent on food is lower than that spent by the poorest

households? Explain your answer. [4]

(b) Ali has started his first job. Faizal is now in a senior position in her company. Describe how the expenditure pattern of these

two people might be different. [4]

(c) Analyse the motives that might cause a person to save rather than to spend. [6]

(d) What might be the result of a general increase in the level of consumers’ spending in an economy? [6]

May/June 2005

4 Some workers work long hours but earn little because the rate they receive for each hour worked is very low.

(a) Why do you think a worker would be prepared to work for very low wages? [5]

(b) What reasons might make a worker decide to move to another job at the same rate of pay? [5]

(c) Some workers belong to a trade union. Explain how membership of a trade union might be beneficial to a worker. [5]

(d) An older skilled worker’s pattern of spending and saving is likely to be different from that of a younger unskilled worker.

Discuss why. [5]


5. (a) State four non-wage influences on an individual’s choice of occupation. [4]

(b) Explain what is meant by the primary, secondary and tertiary sectors of production and describe how the importance of each

sector changes as a country develops. [6]

(c) Explain what is meant by a trade union. [3]

(d) Discuss the extent to which the relative strengths of trade unions influence the level of earnings in different occupations. [7]

May/June 2006

6. (a) Explain the terms scarcity and opportunity cost. [4]

(b) Describe the factors that affect an individual’s choice of occupation and show how the idea of opportunity cost might be

relevant to that choice. [6]

(c) Analyse how a person’s earnings are likely to change during their working life. [4]

(d) Discuss why different occupations have different rates of pay. [6]


7. A multi-national was described as a large company that employs people from different countries and is controlled by a

government.

(a) Explain whether this is a correct description. [4]

(b) If a company is large and employs many people it often has to deal with trade unions. What is a trade union and what is its role

in an economy? [6]

(c) How might a company become large? [4]

(d) Multi-national car companies are sometimes said to have economies of scale. Analyse what this means for such companies. [6]


8. (a) Explain why different income groups might have a different pattern of spending and saving. [5]

(b) Discuss what might influence government spending. [5]

(c) Outline the functions of a central bank. [4]

(d) Analyse how a central bank might influence consumer saving. [6]

May/June 2008

9. (a) Explain what is meant by a trade union and describe its functions. [5]

(b) Trade unions are not often found in small enterprises. How significant might this be as a factor which influences someone in

choosing to work for a small enterprise? [5]

(c) Why do small enterprises continue to exist as an economy develops and expands? [4]

(d) Discuss the effect that the activities of a trade union might have on an economy. [6]

10. It is stated that the richest households in a country spend under 15 % of their income on food while the poorest households

spend over 30 %.

(a) Do these figures mean that the actual amount spent on food by the richest household’s is lower than that spent by the poorest

households? Explain your answer. [4]


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(b) Daniel recently finished training to be a dentist and started his first job. Samira works in a bank and is now in a senior position.

Describe how the expenditure pattern of these two people might be different. [6]

(c) What might be the result of a general increase in the level of consumer spending in an economy? [4]

(d) Analyze why earnings might vary between different occupations? [6]


11. After studying for your Economics qualification you have to decide whether to leave school and find a job or enroll at a

college for more specialized training.

(a) What factors might you consider when making your decision? [5]

(b) Is it always an advantage for an individual to have a specialized job? [5]

(c) Explain how an individual’s earnings might change over time. [4]

(d) Analyse why different income groups have different spending patterns. [6]

May/June 2009

12. In 2007, it was reported that a trade union of post office workers feared that increased capital. investment would mean more

automation and job losses. The union demanded that managers allow higher wages and shorter working hours for its members.

(a) Explain what is meant by the factors of production and identify which factors are involved in the above statement. [4]

(b) Describe the functions of a trade union. [6]

(c) What is meant when an industry is said to become more capital-intensive rather than labor-intensive? [3]

(d) Discuss whether increased automation is likely to make it easy for the union to achieve both of its demands in the statement

above. [7]

May/June 2011

13. Deciding on an occupation is difficult for some individuals. There are so many factors that need to be taken into consideration.

One of these is whether or not there is a trade union they can join.

(a) Describe the factors, other than possible membership of a trade union, which can affect an individual’s choice of occupation.[6]

(b) Is it always true that individuals are paid more as they get older? [4]

(c) Explain the benefits that an individual may get from being a member of a trade union. [4]

(d) Discuss whether trade unions always have a harmful effect on the wider economy. [6]

May/June 2012

14. Money plays a significant role in all economies.

(a) Explain why it is better for individuals to use money rather than barter. [6]

(b) Describe the functions that commercial banks perform in an economy. [6]

(c) Analyse why some individuals are more likely to borrow money than others. [8]


16. Money is said to be of vital importance in all economies.

(a) Describe the four functions of money. [4]

(b) Explain how commercial banks may encourage saving. [6]

(c) Analyse why there are often differences in the earnings of workers in the public sector and workers in the private sector. [10]

May/June 2013

17. The central bank and stock exchanges can perform important roles in economies.

(a) What is meant when it is stated that money performs the functions of (i) a medium of exchange and (ii) a store of value? [4]

(b) Explain the role a central bank can play in an economy. [6]

(c) Discuss how important a stock exchange can be in encouraging firms to expand. [10]

Oct/nov2013 18.3 A person is choosing between different occupations and realises that there are both wage and non-wage factors that need to be

taken into account.

(a) Describe the non-wage factors that can influence a person’s choice of occupation. [4]

(b) Explain the different forms of payment that a worker can receive. [4]

(c) Consider the likely changes in earnings over an individual’s lifetime. [3]

(d) Discuss whether a worker in the services sector is always likely to receive a higher wage than one in the manufacturing

sector.[9]

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2 In 2012, the Indian Prime Minister announced that the Government was going to spend US$90 million on sending a spaceship to

the planet Mars. Some economists argued that it would be better to use the factors of production, such as land and labour, to

improve education or to build more roads.

(a) Describe two ways in which land is different from labour. [4]

(b) Explain the significance of opportunity cost for a government when making its spending decisions. [4]

(c) Using a production possibility curve diagram, analyse the impact of an increase in resources on an economy. [5]

(d) Discuss whether the building of more roads will benefit an economy. [7]

5 Walmart, the US multinational retailer, is the world’s largest company. It allows its customers to pay for their purchases by cash

and by using a variety of other forms of money. The company is the third largest employer in the world. Most of its workers do not


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belong to a trade union.

(a) Describe two influences on the amount people spend. [4]

(b) Explain why an item has to be generally acceptable and divisible for it to carry out the functions of money. [4]

(c) Explain two advantages of working for a large company. [4]

(d) Discuss whether a firm will benefit from encouraging its workers to join a trade union. [8]

S2014/22

4 The number of people employed in the banking sector in Turkey is increasing. The sector consists of a number of commercial

banks, some of which are growing in size, and the Central Bank of the Republic of Turkey.

(a) Describe two functions of a central bank. [4]

(b) Explain two types of internal economy of scale that a growing bank can enjoy. [4]

(c) Analyse how the spending pattern of high paid workers is likely to differ from the spending pattern of low paid workers. [4]

(d) Discuss whether workers employed in banking are likely to earn more than workers employed in agriculture. [8]

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4 Money, central banks and commercial banks all play a key role in economies.

(a) Explain how well money performs its function as a medium of exchange. [5]

(b) Analyse the importance of a central bank in an economy. [7]

(c) Discuss whether a country’s largest commercial banks should be nationalised and so become public corporations, and taken

under government control. [8]

7 Specialisation can lead to a significant increase in output and international trade.

(a) Explain what is meant by ‘specialisation’. [4]

(b) Describe the benefits and disadvantages of specialisation at a regional level. [6]

(c) Discuss whether an economy will always benefit from an increase in international trade [10]

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3 A government decides to increase the number of schools it operates, leading to an increase in the demand for teachers. At the

same time, the government decides to increase the qualifications that a person needs to have to become a teacher.

(a) Using a demand and supply diagram, analyse the effect of these two decisions on the equilibrium wage rate and the equilibrium

quantity of teachers. [6]

(b) Describe why the earnings of teachers can change over a period of time. [4]

(c) Consider whether teachers working in the private sector and in the public sector are likely to receive different earnings. [4]

(d) Discuss whether highly-paid teachers are likely to spend more and borrow more than less well-paid teachers. [6]

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4 Trade union membership is decreasing in some countries, but it is increasing in China. Industrial action by workers is becoming

more common in China, with workers seeking higher wages. Recently there was a strike at a car factory in South China, owned by

a Japanese multinational company.

(a) Define ‘multinational company’. [2]

(b) Explain why governments may discourage strikes. [4]

(c) Analyse three reasons why trade union membership may decrease in a country. [6]

(d) Discuss whether a rise in the wages a firm pays would reduce its profits. [8]

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7 In 2013, the Singapore Government was concerned that its economy might experience a recession. It was introducing a range of

supply-side policy measures to increase productivity, avoid a recession and achieve its other aims for the economy. It was also

trying to reduce the international value of the Singapore dollar.

(a) Define ‘recession’. [2]

(b) Explain two reasons why an economy may have a high foreign exchange rate. [4]

(c) Analyse how supply-side policy measures could increase productivity. [6]

(d) Discuss whether a fall in the international value of its currency will always benefit an economy.[8]

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5 In 2009, a digital currency called Bitcoin was invented. Between 2009 and 2014 there was a growth in the number of people and

firms accepting it as a medium of exchange and store of value. Financial experts have called for digital money to be regulated by

central banks. One of their concerns is that it could increase the money supply and cause inflation.

(a) Define ‘medium of exchange’. [2]

(b) Explain two ways in which a central bank differs from a commercial bank. [4]

(c) Analyse how an increase in the money supply may cause inflation and a fall in saving. [6]

(d) Discuss whether price stability should be a government’s main economic aim. [8]

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3 It is forecast that India’s working-age population aged between 15 and 64 will rise by 125 million between 2015 and 2025 and by a further 103 million over the following decade. Of course, not everyone of working age will be in work or will be seeking work. Changes in population and the


10

labour force affect a government’s ability to achieve its economic aims. (a) Identify two government economic aims. [2] (b) Explain two reasons why someone may be of working age but not in the labour force. [4] (c) Analyse what may cause an increase in a country’s labour force. [6] (d) Discuss whether an economy will benefit from having a younger labour force. [8]

Section 4: The private firm as producer and employer • Types and sizes of business organization

• Demand for factors of production • Costs and revenue

• Profit maximisation and other business goals • Perfect competition

• Monopoly • Advantages and disadvantages of increased scale.


1. In 2001 there was a crisis in the farming industry in the UK. The spread of a disease meant many animals had to be killed. The

government decided to compensate the farmers with a subsidy.

(a) Explain what is meant by a subsidy and illustrate the effect of a subsidy in a market by using a demand and supply diagram. [4]

(b) Discuss how UK farmers’ costs, revenues and profits might have changed in 2001. [6]

(c) Explain what is meant by price elasticity of demand. [4]

d) How might the concept of price elasticity of demand be of use to a farmer? [6]

2. British Gas is a large profit-making public company in the UK. A publicity leaflet from the company stated that the number of

customers it served had increased. It also said that the company was more willing to pay compensation to customers for failure

to meet required standards of service.

(a) Explain what is meant by the principle of profit maximization. [4]

(b) Discuss what might have happened to profits as a result of each of the changes mentioned in the leaflet. [6]

(c) Describe briefly the main types of business organization and consider which of them is likely to be the most significant in a

developed economy. [10]

May/June 2003

3 Some car manufacturers are multi-national companies with plants in several countries. These plants produce thousands of cars a

year and are capital-intensive.

(a) Define the term ‘capital-intensive’. [3]

(b) Why are some organizations capital-intensive and others labour-intensive? [7]

(c) Identify three possible advantages for the car manufacturer of establishing production in another country. [3]

(d) Discuss how an increase in car production through the establishment of a new plant might affect a country’s Gross National

Product. [7]


4 In 2002 a film was made of a popular children’s book. It was extensively advertised and was a great success.

(a) You have been asked to arrange the advertising for such a film. Explain what methods might be best. [4]

(b) Explain how a successful film can also increase or decrease the profits of other companies. [8]

(c) The major film companies are large organizations. What might be the advantages of this? [8]

May/June 2004

5. The UK/Dutch consumer goods company Unilever had a 35% rise in profits in the first part of 2002. The group, whose brands

include tea, soap and washing powder, benefited from a rise in profit margins, but the growth in sales was slow.

(a) Explain who might benefit from the rise in profits. [4]

(b) Discuss how firms might achieve a rise in profits. [6]

(c) Explain what is meant by a high price elasticity of demand. [4]

(d) Consider whether the price elasticity for soap is likely to be high or low. [6]

May/June 2005

6. A major computer company announced in 2003 that its profits had fallen.

(a) Explain what might cause profits to fall. [5]

(b) There are some very large computer companies. How might a firm become large? [5]

(c) Some companies are often said to benefit from economies of scale. Briefly describe three types of economies of scale that a

computer company might experience. [6]

(d) Discuss why a company might change its use of different factors of production. [4]



11

7 (a) What is meant by fixed cost, variable cost and average total cost? [4]

(b) Discuss what might happen to these costs if a firm replaces labour with machines. [6]

(c) Some firms integrate with others. Explain the different forms of integration, and suggest why integration happens. [10]

May/June 2006

8. Sometimes in an industry a firm buys a smaller competitor which uses similar factors of production. At other times a firm buys

another firm which supplies it with the raw materials and other inputs for its production.

(a) Explain what is meant by the factors of production. [4]

(b) Discuss the reasons why some firms remain small. [6]

(c) Identify the types of integration in the two situations described above. [3]

(d) Discuss whether such integration is always beneficial. [7]


9. (a) Explain how the principle of opportunity cost might be relevant when a person chooses a new job. [3]

(b) Some service sector occupations pay very well, others have low rates of pay. Discuss why this might be so. [7]

People often borrow by using a credit card. This notice was issued by a credit card company: ‘For the next four months the interest

rate charged on outstanding amounts has been reduced to the equivalent of 1.9 % per year.’

(c) Explain what motives people have for saving rather than spending. [4]

(d) How might a reduction in interest rates on credit card borrowing affect the way that people choose to save or spend? [6]

May/June 2007

10. In 2005 Namibia entered into trade agreements with France, Italy and Austria. These countries would provide capital and

technology in order to broaden the manufacturing industry in Namibia and to increase its trade and investment in industries

which are labour-intensive.

(a) Explain the meaning of the terms ‘investment’ and ‘labour-intensive’. [4]

(b) Discuss the difference between free trade and a trade agreement. [6]

(c) Some economic writers suggest that a country should conserve its resources. What do they mean by this? [4]

(d) Discuss what benefits the trade agreements might bring to Namibia. [6]

11. Partnerships are owned by only two people while public companies are owned by the government.

(a) Explain whether the above definitions are correct. [4]

(b) Why do some firms remain small in size? [6]

(c) Explain two types of integration available to a firm. [2]

(d) Discuss how a government might influence private producers. [8]


12. A newspaper advertisement states that there is a job vacancy for a laboratory technician in a large international chemical

company. The person will need to be able to travel a lot and will need to have an advanced qualification in chemistry. Another

advertisement is for a secretary/receptionist in a local doctor’s surgery on four afternoons a week.

(a) Explain in what type of business organization the two occupations might be found. [4]

(b) Explain the factors that might affect an individual’s choice of occupation. [6]

(c) Describe how a person’s income is likely to change during their life . [3]

(d) Discuss what might determine why one job is paid more than another. [7]

May/June 2008

13. Explain what is meant by specialization and in what circumstances it might occur.


14. (a) Describe what is meant by a mixed economy. [4]

(b) Explain three macro-economic aims a government might have. [6]

(c) What is meant by a government’s budget? [4]

(d) Discuss how a government might finance its expenditure. [6]

May/June 2009

15. In the same industry there are often firms of different sizes. Sometimes a firm integrates with another firm.

(a) What is the difference between horizontal and vertical integration? [4]

(b) Contrast the characteristics of two types of business organization. [6]

(c) Discuss whether the growth of a firm is advantageous for both the firm and consumers. [10]

16. (a) What is meant by inflation? [4]

(b) Explain how a government might calculate the rate of inflation in its economy. [6]

(c) How might inflation affect a person’s spending, saving and borrowing? [10]

May/June 2011

17. The size of firms in the United Arab Emirates can vary enormously, from very small sole proprietor businesses to very large

public limited companies.

(a) Describe the disadvantages of a sole proprietor business. [4]


12

(b) Explain why a private limited company might wish to become a public limited company. [6]

(c) Explain how firms can grow in size. [4]

(d) Discuss whether some large firms might benefit from reducing their size. [6]

May/June 2012

18. (a) Explain, using examples, what is meant by the factor of production called land. [3]

(b) Analyse why a firm might decide to change from labour-intensive production to capital intensive production. [7]

(c) Discuss the advantages and disadvantages of a newly established firm, with limited resources ,expanding into foreign markets.

[10]

19. (a) Identify the differences between a partnership and a company. [4]

(b) Explain why a firm’s profits might increase. [4]

(c) Distinguish between internal and external economies of scale. [4]

(d) Discuss whether all small firms will eventually become large firms. [8]


20. (a) Describe the main features of (i) a co-operative and (ii) a public corporation. [4]

(b) Explain to what extent (i) a co-operative and (ii) a public corporation have profit maximisation as an objective. [4]

(c) Firms can grow large through integration. Explain, with the aid of examples, the difference between horizontal and vertical

integration. [4]

(d) Discuss whether the disadvantages of a monopoly always outweigh the advantages. [8]

Oct/nov 2013

21. 4 Perfect competition is one type of market structure with a number of distinctive characteristics. It is often compared

favourably with monopoly.

(a) Analyse three characteristics of perfect competition. [6]

(b) Distinguish between a firm that is a price taker and one that is a price maker. [4]

(c) Discuss whether pricing and output policies in perfect competition are more favourable to the consumer than those in

monopoly. [10]

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22.4 Co-operatives play a key role in the Kenyan economy, accounting for 43% of the country’s output. They operate in a number

of industries, some of which come close to a monopoly and some of which are more competitive. There are many co-operative

farms growing cotton. The Kenyan Government is seeking to develop a vertically integrated textile industry.

(a) Describe two characteristics of a co-operative. [4]

(b) Explain three ways in which monopoly differs from perfect competition. [6]

(c) Analyse the advantages of vertical integration. [4]

(d) Discuss what impact a rise in output is likely to have on a farmer’s profit. [6]

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23.5 A Zambian copper mine is operated by a foreign multinational company. The company’s main goal is profit maximisation. Its

mine creates pollution in the area, which causes diseases and damages crops. Some economists have suggested that the economy

would benefit from the mine being operated by the Zambian Government.

(a) Define a ‘multinational company’. [2]

(b) Explain one goal a multinational company may have other than profit maximisation. [3]

(c) Explain why pollution is an example of market failure. [5]

(d) Discuss whether a mine operated by the government would be more likely to benefit an economy than one operated by a

foreign multinational company. [10]

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24.5 There are many large firms in most economies, but this does not mean that all small firms will become large.

(a) Explain two reasons why a decision might be taken to change a private limited company into a public limited company. [4]

(b) Explain two reasons why production by a firm might be changed from capital-intensive to labour-intensive. [5]

(c) Using examples, distinguish between vertical, horizontal and conglomerate integration. [5]

(d) Discuss whether it is likely that the majority of small firms in an economy will remain small.[6]

W2014/23

25.4 Car production is an important economic activity in many countries. Much of this production is undertaken by large

multinational companies. These firms aim to increase both productivity and production.

(a) Describe two reasons why car production is usually undertaken by large multinational companies. [4]

(b) Distinguish between productivity and production. [4]

(c) Using an example of each, explain the difference between fixed costs and variable costs in car production. [4]

(d) Discuss whether the establishment of a multinational company in a country will always be beneficial for all the workers it

employs. [8]

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13

26.6 Capital goods make up over half of Japanese exports. In 2013, although Japan’s imports rose more rapidly than its exports,

there was still a surplus on the current account of its balance of payments. Across the world, increasing trade was leading to new

airports being opened to meet the demand for transporting goods.

(a) Define ‘capital good’. [2]

(b) Explain two reasons why a country’s export revenue might increase when export prices rise.[4]

(c) Analyse how a government could increase the surplus on the country’s current account of the balance of payments. [6]

(d) Discuss whether new airports should be built and operated by governments or the private sector. [8]

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27.4 Tuk-tuks, three-wheeled motorised rickshaws, are driven in a number of countries. India is the

largest producer of the vehicle. India’s largest tuk-tuk producing firm faces competition from

firms at home and from imported tuk-tuks. The industry is becoming more capital-intensive and

competitive but is still some way from perfect competition.

(a) Define ‘capital-intensive’. [2]

(b) Explain two characteristics of perfect competition. [4]

(c) Analyse two internal diseconomies of scale that a large firm may experience. [6]

(d) Discuss whether consumers would benefit from an increase in imports. [8]

Section 5: Role of government in economy • Government as a producer and an employer • aims of government economic policy

• Fiscal, monetary and supply-side policies • Types of taxation

• Possible policy conflicts • Government’s influence on private producers .


1. In 2000 the Singapore government revenue from income tax, motor vehicle tax, betting tax and the tax on goods and services all

increased. However, the revenue from the tax on goods and services doubled while that from income tax rose 7%. Singapore

depends on its tourist trade for part of its wealth.

(a) Explain the difference between direct and indirect tax and identify one direct and one indirect tax in the above statement. [4]

(b) Discuss why governments impose taxes. [6]

(c) An increase in revenue from taxes is mentioned in the extract. Discuss whether you can draw conclusions about what might

have happened in Singapore to (i) the numbers of tourists, [4] (ii) the level of unemployment. [6]

May/June 2003

2. In 2001 it was announced that two German organisations responsible for training personnel were to merge to form a new

organisation with a staff of 900. It was said that this would make the organisation more efficient.

(a) Why might companies spend money on training to increase the skills of their workforce? [4]

(b) Discuss whether the provision of education and training should be the responsibility of the government. [6]

(c) Explain why a merger might make an organisation more efficient. [4]

(d) Explain whether you think large organisations are necessarily better organisations. [6]


3. It was reported in 2002 that people in Germany were expecting tax rises and an increase in unemployment.

(a) Distinguish between a direct tax and an indirect tax. Give an example of each. [4]

(b) Identify three types of unemployment and explain how they are caused. [6]

(c) Describe four main aims of government macro-economic policy. [4]

(d) Discuss whether a rise in taxes can help to achieve any of these aims. [6]


4. In 2004, economists were concerned about the inflationary impact of unusually high oil prices, which were caused by political

uncertainty in the Middle East.

(a) Explain how inflation is measured. [6]

(b) Low inflation is one of the aims of government policy. Choose two other macro-economic aims of the government and explain

what they mean. [4]

(c) Explain how high oil prices may cause inflation. [4]

(d) Discuss the actions that a government might take to control inflation. [6]

5. (a) Distinguish with the use of examples between

(i) direct and indirect taxes, [3]

(ii) progressive and regressive taxes. [3]

(b) Explain why governments impose taxes. [6]

(c) Discuss what might happen in an economy if a government increases income tax rates. [8]



14

6. Three government policy aims are the redistribution of income, economic growth and price stability.

(a) Explain what these aims mean. [6]

(b) What might a government do to try to redistribute income? [6]

(c) How might a government affect economic growth in a country? [8]


7. Low inflation and low unemployment are often aims of government policy.

(a) What is meant by inflation? [3]

(b) Explain how inflation is measured. [7]

(c) Describe two reasons why there might be changes in the level of unemployment in a country. [4]

(d) Discuss why governments might be concerned to keep the rate of unemployment low. [6]

May/June 2008

8. (a) Using examples, describe the difference between direct and indirect taxes. [4]

(b) How might a reduction in taxation help any two macro-economic aims of a government? [6]

(c) Why might a government wish to increase employment opportunities? [5]

(d) Discuss what might be the consequences of unemployment. [5]

May/June 2013

9. Governments can use a range of different policies to encourage economic growth.

(a) Describe how economic growth is measured. [4]

(b) Explain how fiscal policy can be used to encourage economic growth. [6]

(c) Discuss to what extent supply-side policies are likely to be more effective than monetary policies in stimulating economic

growth. [10]

Oct/nov 2013 10. 5 There are usually many different taxes in an economy and they can be divided into direct and indirect taxes.

(a) Explain what is meant by a regressive indirect tax. [4]

(b) Using a demand and supply diagram, analyse how an increase in tax on fuel can affect the

equilibrium price and equilibrium quantity of fuel. [6]

(c) Discuss the extent to which a direct tax, such as income tax, can affect the distribution of income in an economy. [10]

S2014/22

6 In 2012, Mexico’s monetary policy was successful in keeping the country’s inflation rate low and stable. Fiscal policy measures,

including a rise in government spending, contributed to a relatively high economic growth rate of 3.5% and a reduction in the

country’s unemployment rate.

(a) What is meant by ‘monetary policy’? [2]

(b) Explain two reasons why governments aim for low and stable inflation. [4]

(c) Analyse how an increase in government spending may cause economic growth. [6]

(d) Discuss whether a reduction in a country’s unemployment rate will always benefit an economy.[8]

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3 Governments can influence economic behaviour in different ways, such as through taxes and regulations.

(a) Explain why, in a market economy, some goods and services are over-consumed and some under-consumed. [6]

(b) Using a demand and supply diagram, analyse the effect of the imposition of an indirect tax on the equilibrium price and

equilibrium quantity of tobacco. [6]

(c) Discuss whether government regulations on private producers always achieve their intended aims. [8]

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5 In January 2013, the Portuguese Government increased tax rates. Three months later it cut its spending on health care and

education. Between these two periods, unemployment in Portugal rose.

(a) What is meant by ‘tax’? [2]

(b) Explain two reasons why an increase in unemployment may reduce tax revenue. [4]

(c) Analyse two reasons why unemployment may increase. [6]

(d) Discuss whether a reduction in government spending on education will reduce living standards. [8]

S2016/22

2 In 2013 the Mexican Government was considering imposing a sales tax of one peso per litre on the price of fizzy drinks. The Government wanted to discourage people from consuming too many fizzy drinks – 40% more fizzy drinks per person are consumed than in the United States of America. A number of multinational fizzy drinks companies have threatened to leave the country if taxes are increased. (a) Giving an example, define ‘a sales tax’. [2] (b) Explain the difference between private costs and social costs. [4]


15

(c) Using a demand and supply diagram, analyse the effect of imposing a tax on fizzy drinks. [6] (d) Discuss whether a country’s economy would be harmed if multinational companies moved out. [8]

Section 6: Economic indicators • Price indices • Inflation and deflation Employment and unemployment

• GDP, economic growth and recession • GDP and other measures of living standards.


1. ‘Even after a decade of economic growth, with record trade and global investment, 24% of the world’s population are still very

poor and live on an income of less than $1 a day per person.’

(a) Explain what is meant by economic growth. [5]

(b) Discuss how trade and investment can help economic growth. [5]

(c) Discuss whether economic growth should be the main aim of government economic policy. [10]


2. In the past the UK government was anxious to reduce the rate of inflation. Now the rate of inflation measured by the Retail

Price Index (RPI) continues to remain low and is not causing too much concern.

(a) What does a retail price index (index of consumer prices) measure? [2]

(b) What causes inflation? [8]

(c) Why might a government be worried about the rate of inflation? [10]


3. As Eastern European economies continue to grow, companies are recording an increase in profits. Public and private sector

investment are expected to rise as trade barriers are reduced.

(a) What is meant by economic growth? [3]

(b) Discuss whether economic growth is always advantageous. [7]

(c) Explain why a reduction in trade barriers might increase a company’s profits. [4]

(d) Explain why investment is important in an economy. [6]

May/June 2004

4. (a) What is meant by a retail price index? [3]

(b) Explain how a retail price index is calculated. [7]

(c) Discuss the possible causes of inflation. [10]

May/June 2006

5. Australia’s unemployment rate fell to 5.5% in May 2004, the lowest for 23 years. At the same time total employment decreased

to 9.6 million. Full-time jobs decreased by 42 600 but part-time employment rose by 1500. The shift from employment in

agriculture and manufacturing to services has continued.

(a) Calculate the change in total employment. (Show your working). [2]

(b) Explain why the pattern of employment might change. [8]

(c) The above extract says that the unemployment rate fell yet the numbers employed decreased. Explain how these statements can

both be true at the same time. [3]

(d) Discuss the economic consequences of unemployment. [7]

May/June 2007

6. An economic report stated: ‘Inflation has been kept at 2 % for the past year which is the lowest it has been for three years.

Unemployment has also decreased.’

(a) Does this statement mean that prices had fallen during the past year? [4]

(b) Describe how an index of consumer prices (retail price index) is calculated. [6]

(c) Explain how different types of unemployment may be caused and consider which might be the most serious. [10]

May/June 2008

7. (a) Identify three indicators that might be used to compare the standard of living between countries and consider which, if any,

is the most reliable. [6]

(b) It is often presumed that there is greater poverty and a lower standard of living in developing countries compared with

developed countries. Discuss whether this is always true. [6]

(c) Discuss how the standard of living in a developing country might be improved. [8]


8. (a) What is meant by a developing country? [5]

(b) Discuss whether a country should conserve or use its resources. [5]


16

(c) How may living standards between countries be compared? [10]

May/June 2011

9. Many governments are concerned about inflation in their economies. This was, for example, a

particular problem in Zimbabwe where there has been a very high rate of inflation.

(a) What is meant by inflation? [3]

(b) Describe how a retail (consumer) price index is calculated. [7]

(c) Explain what is meant by demand-pull inflation. [4]

(d) Discuss whether a government should be concerned about a high rate of inflation in its

economy. [6

May/June 2012

10. Low inflation, low unemployment and high economic growth are all government economic aims.

(a) Explain the possible causes of inflation. [5]

(b) Distinguish between structural unemployment and demand-deficient (cyclical) unemployment. [5]

(c) Discuss whether it is always possible for a government to achieve a high rate of economic growth. [10]


11. Governments usually aim to have a low rate of inflation and a high rate of employment, but these

two aims can sometimes conflict.

(a) Explain why inflation can be harmful to an economy. [6]

(b) Explain why unemployment which lasts for more than a year has more harmful effects than short-term unemployment for

(i) the unemployed and (ii) the economy. [6]

(c) Discuss to what extent the aims of a low rate of inflation and a high rate of employment are likely to conflict. [8]

S2014/21

7 Algeria’s exports have been increasing in recent years. The country has experienced low inflation, in part, because of the fiscal

and supply-side policy measures the government has introduced. In 2012, the Algerian Government stated its main objective was

to reduce unemployment.

(a) Describe two reasons why a country’s exports may increase. [4]

(b) Explain why governments aim for low unemployment. [6]

(c) Discuss whether a government should increase or decrease taxes to reduce inflation. [10]

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6 Inflation and unemployment are two economic problems that governments usually have to deal with.

(a) Distinguish between demand-pull and cost-push inflation. [4]

(b) Explain three reasons why inflation is regarded as a serious economic problem. [6]

(c) Distinguish between frictional and cyclical unemployment. [4]

(d) Discuss whether there is likely to be a conflict between the government aims of low inflation and low unemployment. [6]

w2014/23

5 Inflation is an economic problem faced by many economies, but governments differ in how they

attempt to bring down the rate of inflation.

(a) Describe how changes in the price level are measured in an economy. [5]

(b) Explain how a situation of ‘too much money chasing too few goods’ can lead to inflation. [5]

(c) Discuss whether fiscal policy, rather than monetary policy, is always a better way to bring down the rate of inflation in an

economy. [10]

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4 On average, Norwegians work only 27 hours a week. They also take more, and longer, holidays than most other countries’

workers. In 2013, Norway had the second highest productivity in the world. It was also ranked number one in the Human

Development Index (HDI). Unlike many other countries, Norway has had almost full employment in recent years.

(a) Define ‘productivity’. [2]

(b) Explain two reasons why productivity may increase. [4]

(c) Analyse why a country may have a high HDI value. [6]

(d) Discuss whether a country would benefit from having full employment. [8]

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5 In July 2016 the Sveriges Riksbank, Sweden’s central bank, cut the rate of interest to 0.25%. The Swedish economy was experiencing deflation, with the weighted price index falling by 0.2% on the previous year. The fall in the rate of interest reduced the value of the krona, Sweden’s currency, and was expected to end deflation. (a) Define a ‘weighted price index’. [2] (b) Explain two ways in which a central bank differs from a commercial bank. [4]


17

(c) Analyse how a fall in the value of a currency may increase a current account surplus on the balance of payments. [6] (d) Discuss whether a cut in the rate of interest would end deflation. [8]

Section 7: Developed and Developing Economies: Trends in

Production, Population and Living Standards • developed and developing countries • Absolute and relative poverty

• alleviating poverty • Population growth • Differences in living standards.


1. 60% of the workforce in Java, which contains a large proportion of Indonesia’s population, are rice farmers.

(a) Given this information, explain why Indonesia is likely to be a developing rather than a developed economy.[3]

(b) Describe the difference in living standards that might be found in a developing economy compared with a developed economy.

[7]

(c) Why do some countries have lower standards of living than others? [6]

(d) Discuss two economic indicators that can be used to measure the standard of living in a country. [4]


2 Countries are categorised as less developed because of their poverty and low average incomes, their lack of good human

resources and their low level of economic diversification.

(a) Explain what is meant by

(i) ‘their lack of good human resources’, [3]

(ii) ‘their low level of economic diversification’. [3]

(b) Explain whether it can be concluded from the above statement that all people in less developed countries are poor. [4]

(c) Explain what is likely to be the occupational distribution of the population in a less developed country. [4]

(d) If a less developed country becomes classified as a developed country, what changes would probably have happened to the

structure of its population and its occupational distribution? [6]

May/June 2003

3. (a) Describe what differences might be found in the standard of living of the average person in a developed country compared

with an average person in a developing country. [6]

(b) If a country had good natural resources, would the standard of living of its population necessarily be high? [6]

(c) What policies might a government adopt in order to try to improve the standard of living in its country? [8]


4 Changes in the population structure of many countries have led governments to introduce a health education programme.

(a) Identify and explain two of the issues that a health education programme might cover in developing countries. [4]

(b) How may the age structure of the population in a developing country differ from that in a developed country? [6]

(c) Explain what is meant by (i) an opportunity cost and (ii) a social benefit. [4]

(d) Discuss whether it is possible to apply these concepts to the provision of health care. [6]

May/June 2004

5. (a) Contrast the occupational distribution of the population of a developing country with that of a developed country. [5]

(b) Apart from the occupational distribution of the population, explain why a country might be classified as developing rather than

developed.[8]

(c) Multi-national companies invest in developing countries. Explain what is meant by a multinational company and discuss

whether it is advantageous for a developing country to accept investment by multi-national companies. [7]

May/June 2005

6. (a) In developing countries the standard of living is often lower than the standard of living in developed countries. Identify four

indicators that might confirm this. [4]

(b) Sometimes there is much poverty in developing countries. Discuss reasons why this might be so. [6]

(c) Discuss how the standard of living in a developing country might be improved. [10]


7. In China, the State Council has ordered a reduction in urban development projects in Beijing. This is because, as developers

clear land, people’s homes are destroyed. It will also support the government’s aim of reducing total demand in the economy.

(a) Explain what is meant by the conservation of resources. [4]

(b) Urban development is often thought to be beneficial. Consider who might benefit from an urban development project. [6]

(c) Explain how a government might control private companies that wish to develop an area. [3]

(d) Discuss why the development and exploitation of an urban area might be disadvantageous. [7]

May/June 2006


18

8. (a) The rate of population growth in developed countries is often different from the rate of population growth in developing

countries. Explain why this might be so. [5]

(b) Sometimes a government might try to limit the growth in the population of its country. Explain why it might want to do this.

[4]

(c) As countries become more economically developed, there is a change in the relative importance of the different sectors of

production. Describe what this change might be. [5]

(d) In many developed countries there will be a large increase in the proportion of older people during the next 10 to 15 years.

Discuss how governments might deal with this situation. [6]


9. 1 in 5 adults have not been educated to read or write; 98 % of them live in developing countries and 66 % of them are women.

(a) Explain three other differences that you might find between the population of a developed country and a developing country.

[3]

(b) Another indicator of living standards, apart from education, is GDP. Discuss how useful this is in comparing the living

standards between two countries. [7]

(c) Explain two reasons why education in a developing country is often provided by the public sector. [4]

(d) Discuss what effect investment in the education system might have in a developing country. [6]

May/June 2007

10. World population has more than doubled since 1950. People in many countries face poverty and malnutrition.

(a) What differences might you expect to find in the factors that affect population growth in developed and developing countries?

[4]

(b) Analyse what might happen to the occupational distribution of the population as a country becomes more developed. [6]

(c) What is meant by a country’s economic output? [3]

(d) An increase in population means an increase in labour. It is, therefore, to be encouraged. Do you agree with this view? [7]

May/June 2011

11. The living standards of people vary enormously and yet it is not always easy to measure these with great accuracy. It is,

however, certainly the case that some countries suffer from extreme poverty.

(a) Describe how living standards in a country can be measured. [6]

(b) Explain two reasons why the measurement of living standards in a country is not always accurate. [6]

(c) Discuss the actions a government might take to reduce poverty. [8]

May/June 2012

12. (a) Define the term death rate and describe the factors that can affect a country’s death rate. [6]

(b) Explain what is meant when a country is said to be overpopulated. [4]

(c) Discuss whether the population problems found in the developing world are the same as those found in the developed world.

[10]

May/June 2013

14. A number of countries have high levels of poverty, but there is no agreement as to which is the best way to try to improve

standards of living in a country.

(a) Distinguish between absolute and relative poverty. [4]

(b) Explain how the Human Development Index is measured. [6]

(c) Discuss which policies are likely to be most successful in reducing the extent of poverty in a country. [10]

Oct/nov2013

15. 6 It is not only the size of a country’s population that concerns economists, but also its age distribution.

(a) Describe three possible causes of the growth of a country’s population. [6]

(b) Explain how the rate of population growth may differ between a developed country and a developing country. [4]

(c) Explain what is meant by an ageing population. [2]

(d) Discuss to what extent an ageing population is a serious economic problem. [8]

S2014/21

6 Over time the determinants of population size, including the birth rate and the fertility rate, change. It is predicted that the world

population will rise to 9 billion by 2050. Some countries, including Italy and Japan, however, are expected to experience a fall in

population size. It is also predicted that average incomes will rise in most countries.

(a) Describe how the birth rate differs from the fertility rate. [4]

(b) Analyse how an increase in average incomes may influence a country’s population size. [6]

(c) Discuss whether a government should be concerned about a fall in the country’s population size. [10]

w2014/23

6 Developing countries have characteristics that are different from those of developed countries. One of these is the extent of

poverty in such countries.

(a) Describe three features of a developing country. [6]

(b) Describe the changes that are likely to occur as a country becomes more developed in

(i) its occupational structure, and


19

(ii) the geographical distribution of its population. [4]

(c) Explain what is meant by ‘absolute poverty’. [2]

(d) Discuss whether government policies can always reduce poverty in a developing country. [8]

S2015/21

6 About 30% of Nigeria’s labour force is employed in agriculture but the country still spends more than US$12 billion a year

importing food. The Nigerian Government is seeking to reduce the imports of food. With a high birth rate and many small farms,

this may be difficult to achieve.

(a) Define ‘birth rate’. [2]

(b) Explain two causes of a high birth rate. [4]

(c) Analyse how an increase in the size of farms may affect the cost of producing food. [6]

(d) Discuss whether a reduction in its imports will always benefit an economy. [8]

W2015/22

7 Myanmar (Burma) is seeking to move from being a developing to a developed country. It has a lower savings ratio than most

other Asian economies, with its people spending most of their income. The country’s Government is encouraging investment from

abroad to increase its economic growth. The Government is using fiscal policy in an attempt to reduce poverty, which affects a

third of its population.

(a) Identify two characteristics of a developed country. [2]

(b) Explain two reasons why people may spend most of their income. [4]

(c) Analyse how an increase in investment may increase a country’s economic growth rate. [6]

(d) Discuss whether fiscal policy measures will reduce poverty. [8]

S2016/22

7 Countries have to decide how to use their scarce resources. A number of countries are devoting more of their resources to tourism. Some of the jobs in the industry are, however, low-paid and offer little job security. The average age of workers employed, for example, in hotels is relatively young although some older workers have spent their working life in the hotel industry. (a) What is meant by ‘scarce resources’? [2] (b) Explain two reasons why someone may be willing to do a low-paid job with little job security.[4] (c) Analyse how the spending, saving and borrowing patterns of young workers may differ from older workers. [6] (d) Discuss whether developing countries should encourage foreign tourism. [8]

Section 8: International Aspects • Specialization • Absolute and comparative advantage

• Current account of the balance of payments • Current account deficits and surpluses

• Exchange rate fluctuations • Protectionism and free trade.


1. A US trade agency ruled that US imports of steel bars from China and South Korea might be unfair to US companies because

they were sold at below market price. The agency wanted a tariff to be imposed on the imports.

(a) How would the trade in steel bars be classified in the Chinese balance of payments? [2]

(b) What is the difference between a tariff and a quota? [4]

(c) Consider how cheap imports might affect US companies. [4]

(d) Why is free trade often considered advantageous to a country? [6]

(e) Discuss how the use of a protective measure such as a tariff might be better than allowing free trade. [4]


2. ‘The most effective support the industrialised countries could provide for the poorer nations would be to open their markets to

the products of developing countries by having fewer trade restrictions.' (Trade and Industry Minister for Ghana, 2001)

(a) What forms do trade restrictions often take? [3]

(b) Discuss the immediate and the long-term changes that might occur in developing countries if trading restrictions were reduced.

[7]

(c) Discuss whether it is better for a country to produce many products and protect its markets from international trade or whether

it is better to try to achieve specialisation in some products only. [10]

May/June 2003

3. The mining and export of minerals and precious stones is a very important part of the Namibian economy. It was reported that

despite a sharp decrease in the quantity of these exports between 1995 and 1999 the export value of the items rose in that

period.


20

(a) Where would the minerals and precious stones be recorded in the Namibian balance of payments? [2]

(b) Discuss whether it is beneficial for a country to specialize in the production and export of a limited range of products. [8]

(c) The statement above says that the exports of minerals and precious stones decreased sharply yet the export value rose. How

might this happen? [4]

(d) Discuss what measures a government might take to influence its country’s balance of payments. [6]


4. It was reported in September 2002 that the Namibian dollar was gaining strength and that the exchange rate against other

currencies was fluctuating less.

(a) Explain what the report means when it says that the ‘exchange rate against other currencies was fluctuating less.’ [5]

(b) Why do exchange rates fluctuate? [4]

(c) Discuss the consequences for an economy if its currency ‘was gaining strength.’ [5]

(d) A country has a deficit on its balance of payments. Discuss two policies, other than exchange rate changes, that a government

might use to try to achieve a surplus rather than a deficit. [6]

May/June 2004

5 Demand for UK exports dropped considerably in November 2002, which pushed the UK further into a visible trade deficit – the

largest since records began.

(a) Explain what is meant by a visible trade deficit and identify in which part of the balance of payments the deficit would be

recorded. [3]

(b) Discuss whether it matters if a country has a visible trade deficit. [7]

(c) Describe what policies a government might use if it wished to bring a visible trade deficit into surplus.[4]

(d) Discuss the other consequences of pursuing two of the policies you have mentioned. [6]

May/June 2005

6. (a) Distinguish between a quota and a subsidy. [5]

(b) Explain, using a demand and supply diagram, what effect would be likely to occur in a market if the government introduced a

subsidy on the production of a good. [5]

(c) Explain what is meant by price elasticity of demand. [3]

(d) In 2003, some tobacco growers in the US wanted to raise prices but a spokesman said the tobacco industry was no longer in a

position where it could increase prices in order to increase revenue. Use the concept of price elasticity of demand to discuss

what the spokesman meant. [7]

7. Changes in the rate of exchange meant that exports of goods from Egypt decreased as they became more expensive in other

countries.

(a) Explain what is meant by a rate of exchange. [3]

(b) If exports from Egypt became more expensive, how might that affect production and employment both in Egypt and in

countries importing Egyptian goods? [7]

(c) Describe the structure of the balance of payments of a country. [4]

(d) Discuss what might lead to an improvement in the balance of payments of a country. [6]

May/June 2006

8. A recent journal article stated that poor nations should be allowed to protect their new industries from foreign competition.

(a) Explain what indicators might be used to determine that a nation is poor. [8]

(b) Describe what methods might be used to protect industries from foreign competition in international trade.[5]

(c) Discuss whether it is better for a country to engage in free trade or to use some form of protection from foreign competition.[7]


9. It was reported that farmers in Malawi were being discouraged from specialising in growing the staple crop of maize. Instead

they were encouraged to diversify into other crops.

(a) Explain what is meant by specialisation. [4]

(b) Discuss whether there are any benefits from specialisation rather than diversification. [6]

(c) Distinguish, with examples, between the primary, secondary and tertiary sectors of the economy. [3]

(d) As countries develop they often rely less on exports of agricultural products and more on exports from other sectors. Discuss

the possible benefits of this. [7]

May/June 2007

10. (a) Explain what is meant by specialization and the division of labour. [4]

(b) Discuss why some people are prepared to work in low-paid occupations. [6]

(c) How might the spending and saving patterns of a poorer person differ from those of a richer person? [5]

(d) Why might a government wish to influence people’s spending? [5]

(b) Discuss the difference between free trade and a trade agreement [4]


11. Kenya and Tanzania have fishing rights in their coastal waters which contain large numbers of commercial fish species. The

fish are being caught illegally by boats from other African and Far Eastern countries. The European Union has negotiated to


21

buy a share of the fishing rights for its own fishing companies and help control the industry in which there is a lack of capital

and corrupt practices. However, the fear is that there will still be overfishing and not enough money will reach the Kenyan and

Tanzanian economies.

(a) Explain why developing countries such as Kenya and Tanzania might need the intervention f foreign companies. [4]

(b) Is intervention by a foreign multi-national always beneficial for a country? [6]

(c) Explain two policies a country might use in international trade to protect its home industries .[4]

(d) If a country has a rich natural resource, should it exploit or conserve it? [6]

May/June 2008

12. (a) Explain what is meant by specialization and in what circumstances it might occur. [5]

(b) Some countries use measures to protect home industries. Describe how three of these measures work. [6]

(c) Explain, with the use of one example, what is meant by a natural resource of a country. [3]

(d) For many countries international trade involves using their natural resources to sell to other countries. Discuss whether it is

wise for a country to use (exploit) its natural resources rather than conserve them.[6]


13. (a) What is meant by the balance of payments? [4]

(b) Why do countries trade with each other? [6]

(c) Discuss whether it is likely to be better or worse for a country’s inhabitants if a country increases the tariffs and quotas it puts

on international trade. [10]

May/June 2009

14. Countries sometimes establish agreements with each other to encourage free trade by abolishing tariffs or quotas on trade

between them.

(a) Distinguish between a tariff and a quota. [4]

(b) Analyse the possible link between the level of tariffs and international specialization. [4]

(c) Analyse the advantages of trading without tariffs and quotas. [6]

(d) There is sometimes opposition to the removal of a tariff. Analyse how this might be justified. [6]


15. (a) Explain the advantages of regional specialisation in an economy. [4]

(b) Describe the structure of the current account of a country’s balance of payments. [4]

(c) Explain why the value of a currency may fall in a floating exchange rate system. [4]

(d) Discuss whether a floating exchange rate system is always to be preferred to a fixed one. [8]

May/June 2013

16. Some countries have a fixed exchange rate system, but others allow the external value of their currency (foreign exchange

rate) to float.

(a) Explain how the external value of a currency is determined in a floating or flexible exchange rate system. [4]

(b) Describe how a government maintains the external value of its currency in a fixed exchange rate system. [4]

(c) Explain why a government might want the external value of its currency to fall. [4]

(d) Discuss to what extent a floating exchange rate is preferable to a fixed exchange rate system. [8]

Oct/nov 2013

17. 7 There are strong arguments in favour of free trade and yet many countries still use various forms of trade protection.

(a) Explain three potential benefits of free trade. [6]

(b) Distinguish between quotas and exchange controls as methods of trade protection. [4]

(c) Explain how a subsidy could be used to protect an industry from foreign competition. [4]

(d) Discuss whether the protection of a declining and inefficient industry in a country can ever be justified. [6]

S2014/22

7 In March 2012, the Indian Government increased the tariff on imports of gold. It did this to reduce the country’s growing deficit

on the current account of its balance of payments.

(a) Describe how a tariff could reduce imports. [4]

(b) Analyse three causes of a current account deficit. [6]

(c) Discuss whether a government should always be concerned about a growing current account deficit. [10]

w2014/23

7 Many countries have a deficit in the current account of their balance of payments but some countries, such as China, Germany

and Japan, regularly have a surplus in their current account.

(a) Explain two consequences of a current account deficit. [4]

(b) Analyse what can cause a surplus in the current account of the balance of payments. [8]

(c) Discuss whether a current account surplus is always to be regarded as desirable. [8]

May/June 2016

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