Economics: Post your doubts here (O + A level)

[abcde]

@asadmehmood
Thank you for the above attempt! =)
One doubt:
The original price is $12 and the original quantity demanded is 4000 units.
The new price is an unknown X (which we need to calculate) and the new quantity demanded is 20 000 units.
Why is it that you used the original price of $12 in the denominator when calculating % change in P and yet the new Qd of 20 000 in the denominator when calculating the % change in Qd (instead of the original 4000 units)?

4000 - 20 0000 / 20 000 = 0.8? Are you serious?

Obviously a typo, Nibz. He meant: 4000 - 20 000 there.

 

[asadmehmood]

yes infact its -0.8 but in elasticities we ignore the minus sign . you can calculate it u will also get the same answer.

 

[asadmehmood]

I am always here to help u all...

 

[Achmerd]

Re: Any body can ask any thing about ECONOMICS

OCT /NOV 2011 paper 22 (guess paper)


Section A
Answer this question


1. Lesotho National Development Corporation

Since its establishment the Lesotho National Development Corporation (LNDC) has been the Lesotho Government’s main means of promoting industrial development. The LNDC is now expanding its job creation programmed by promoting exports and encouraging firms to grow in size. It also encourages and supports local entrepreneurs. Two of the projects it has supported are local chicken farms and the building of a private hospital. The slogan of the LNDC is ‘We build industry’.

(a) Describe the main role of an entrepreneur. [2]

(b) Identify from the passage one project in the primary sector and one project in the secondary sector. [2]

(c) Explain what is meant by industrial development. [4]

(d) Explain the policies that a government might use to encourage private businesses. [6]

(e) Why might a government wish to create jobs? [6]

Section B
Answer any three questions
2. 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]

3. (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.

(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]
4. In the UK four large supermarket companies dominate the sale of food but there are also many small food shops.
(a) Define a fixed cost and a variable cost, and identify one fixed cost and one variable cost that the supermarket might have. [4]

(b) Discuss why a small food shop might survive when there are very large supermarkets. [6]

(c) How do some firms become large? [4]

(d) Discuss how a supermarket might benefit from economies of scale. [6]


5. (a) Using examples, contrast a direct tax with an indirect tax. [4]

(b) Discuss how a government might use taxation to affect the distribution of income. [6]

(c) Explain the concept of price elasticity of demand. Choose two goods and explain why they might have different price elasticities of demand. [6]

(d) Use the concept of elasticity to discuss how indirect taxes may be used by a government to

(i) increase its revenue,

(ii) decrease imports. [4]

6. 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]

7. (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]

NOTE: ( its just a sample paper based on importan questions) Do not depend on this sample paper only .

Can publish the answers also. so that it will b easy for us to remember the correct / best points... ihope u will do so.. thanks!!!

 

[asadmehmood]

Here are some suggested answers for section B.




2. (a) Identify the four factors, 2 marks. Explain the four factors, 2 marks. [4]

(b) Discussion of reasons for small firms: market, finance, service, recently established, location.
[6]
(c) Horizontal 1, vertical 1, backwards 1. [3]

(d) Explanation and discussion of economies of scale, discussion of economies v. diseconomies. Benefits: greater efficiency, economies of scale, security of supply, help company and consumer. Drawbacks: less competition, higher prices, reduced choice, harm the consumer while diseconomies of scale harm the firm and consumer. Benefits up to 4 marks, Disadvantages up to 4 marks, to a maximum of 7 marks. [7]

3. (a) Comment on the difference between government control and ownership and private control and ownership, public sector embraces goods/services and the provision of transfer payments, grants, subsidies, sources of finance. The two sectors have different aims and methods of working.
[3]

(b) Discussion of bureaucracy, lack of incentive, inefficiency, lack of choice, lack of competition, possible political intervention. Identification of disadvantages up to 4 marks, discussion up to 2 marks per point. [7]

(c) External costs, noise, pollution, destruction of property, changing environment around the airport, loss of property values. [4]

(d) Understanding of taxes (2 marks). Comparison of fairness, efficiency, incidence. (4 marks) Reasoned conclusion (2 marks) - up to maximum of 6. [6]
4. (a) 2 for definition mentioning changes, or not, in output. 2 for examples. Wage may be considered either a fixed or variable cost, but not both in the same script. [4]

(b) Description of benefits of availability in local area, personal service, possible longer hours, less queues, convenience. Max 4 marks for benefits of a small firm with no reference to small food shops. [6]

(c) Comment on the possibility of mergers; of general growth through increased sales caused by increased demand/advertising; of increased profits caused by either
increased demand or different pricing policies; of growth caused by a change in type of stock or image; of expansion into other areas/products; and a comment on the methods used to obtain finance – profits, borrowing, shares. [4]

(d) Discussion of relevance of economies to supermarket using some of the types of economy to illustrate the answer. (2 marks for simple definition in terms of lower average costs with no explanation of reasons why or effects).
Max 4 marks if no reference to supermarket. [6]

5. (a) Expect one example of each type of tax (2) and a comment on whether the tax is levied on a person at the source or earning or on subsequent expenditure (2). [4]

(b) Discussion of the use of both indirect and direct taxes. Could mention progressive, regressive direct taxes. Could also discuss the likely effect of imposing indirect tax on different products depending on whether the product is likely to be bought by low or high income groups. [6]

(c) Explanation in terms of proportionate responsiveness of demand or in terms of equation (simple statement 1, range of values 1) with two examples which illustrate how the value of elasticity might vary (2 for each explanation). [6]

(d) Revenue will be increased more if the government uses an indirect tax on a good with low price elasticity of demand. Imports will be decreased more if a government places the tax on a good with high elasticity of demand. [4]

6. (a) May employ people from different countries but this is not the definition. Has to operate in different countries. Governments may be involved in multi-national companies but this again is not the definition and most would be privately owned. [4]

(b) Group of people working together in a similar occupation, promote welfare, safety, negotiate wages. [6]



(c) Merger, integration, take-over, advertising, internal growth financed through retained profits, share issues, borrowing, marketing and advertising which lead to increased demand.
Need to consider both internal and external factors to gain the maximum 4 marks. If one or the other is considered, maximum 2 marks. [4]

(d) Explanation of principle of reduced cost per unit and description of different types of economies of scale. [6]
Up to a maximum of 4 marks if no reference to the car industry.

7. (a) Equilibrium: 1 Demand = Supply; 1 no tendency to change; 1 diagram: up to 3 marks.
Disequilibrium: 1 Demand does not equal Supply; 1 excess Supply; 1 excess Demand; 1 diagram;
up to 3 marks. [4]
(Note – candidates do not have to include a diagram.)

(b) Increased demand because, for example, of an increase in incomes. 2 diagram (labels and
equilibrium 1, shift 1); 2 explanation. Maximum of 4 marks.
Increased supply because, for example, cost reduction. 2 diagram (labels and equilibrium 1, shift 1),
2 explanation. Maximum of 4 marks. [6]
(Note – if candidates include 2 diagrams, credit the labelling once only.)

(c) 2 for definition either in terms of formula or in words; 3 for suggested factors. Habit, availability of substitutes, proportion of income. (May get all 3 for one point if sufficiently developed.) [5]

(d) Knowledge of price elasticity would enable the company to anticipate the effect on its sales and
therefore on its revenue and profit if it changed its price; e.g. if it raised its price, sales would fall,
but sales revenue and profit would rise if demand were inelastic. 3 explanation of relationship,
2 conclusion. [5]

Hope this will hep you....

 

[abcde]

One doubt:
The original price is $12 and the original quantity demanded is 4000 units.
The new price is an unknown X (which we need to calculate) and the new quantity demanded is 20 000 units.
Why is it that you used the original price of $12 in the denominator when calculating % change in P and yet the new Qd of 20 000 in the denominator when calculating the % change in Qd (instead of the original 4000 unit)?

I've realised that the question does not mention original/new price and demand anywhere. In fact,the direction of change in price and quantity is unknown. In such a case, we use average price/demand in place of original price/demand. The calculation is as follows:
Average Qd = (20 000 + 4000)/2 = 12 000
% change in Qd = (20 000 - 4000)/12 000 x 100% = 400/3 %
Average P = (X + 12)/2
% change in P = 200(X - 12)/ (X+12) %
400/3 . (X+12)/ 200(X - 12) = -1
=> 5 X = 12
So X = 2.40

 

[Achmerd]

Here are some suggested answers for section B.

thanks v much...

 

[Achmerd]

@asadmehmood
Can u explain this question. (guess paper ques...)
3)(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]

4)(d) Discuss how a supermarket might benefit from economies of scale. [6]

5)(b) Discuss how a government might use taxation to affect the distribution of income. [6]

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

7)(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]

im waiting for ur answers..do reply soon...

 

[asadmehmood]

I have given answer to all these questions please check. If u still have confusion u can contact me at skype I can give u the whole lecture . actually explaining all the stuff in detail by typing takes too much time so better to connect me on skype....

 

[Achmerd]

Here is a guess paper for economics oct nov 2011 prepared by me.........(Only 5 questions)

Section A
Answer this question
1)
a) Explain the difference between tarrif and quota.(4)
b)Why do countries engage in trade between themselves?(4)
c) Identify two advantages and 2 disadvantages of free trade.(4)
d) Why do government impose trade barriers?(8)

Section B

2) Government get revenue through taxation and use it to finance the expenditure.
a) What is a tax?(3)
b) Explain using demand and supply diagram, how a tax can affect the equilibrium price and quantity in a market?(6)
c) What is meant by impact of a tax and incidence of a tax? (4)
d) How is government expenditure financed?(7)

3)
a) What is inflation?(3)
b) Describe how a retail price index is calculated?(7)
c) Explain what is meant by cost-push inflation?(2)
d) Explain any 2 effects of inflation?(4)
e) Discuss the measures to control inflation?(4)

4) HDI can be used to measure the development of a country.
a) What is HDI?(3)
b) How can living standards be compared?(5)
c) What are the measures to alleviate poverty?(6)
d) Discuss whether a country should conserve or use its resources.(6)

5)
a) Why do small firms remain small? (5)
b) Distinguish between fixed cost and variable cost. (4)
c) Discuss how a government might influence private producers. (6)
d) Explain the advantages of horizontal integration?(5)

....................................................................................................................
....................................................................................................................
HOPE THIS HELPS!!!! BEST WISHES!!!

 

[ak20122012]

hi friend ...
can u plz send me links from which i can enhance my economics skills for o-levels..... moreover i can also get economics notes.?

thanku very much...looking for ur response....

 

[freakynerd]

Sir Asad, can i please have your email id? i need help!

 

[sweetiepie]

hi friend ...
can u plz send me links from which i can enhance my economics skills for o-levels..... moreover i can also get economics notes.?

thanku very much...looking for ur response....

http://www.o-alevel.com/p/2.html

check it

 

[Xenon]

I've realised that the question does not mention original/new price and demand anywhere. In fact,the direction of change in price and quantity is unknown. In such a case, we use average price/demand in place of original price/demand. The calculation is as follows:
Average Qd = (20 000 + 4000)/2 = 12 000
% change in Qd = (20 000 - 4000)/12 000 x 100% = 400/3 %
Average P = (X + 12)/2
% change in P = 200(X - 12)/ (X+12) %
400/3 . (X+12)/ 200(X - 12) = -1
=> 5 X = 12
So X = 2.40

there's a simpler and real easy way of doing this... "The price elasticity of demand for good X is 1" ---> clearly indicates that the good has unit elastic demand. The characteristics that follows this is that the total consumer expenditure will always remain same. Using this unique property:
At $12, total expenditure: $12*4000=$48000
At $X : X*20000=$48000 , thus X is $2.4
simple....

 

[abcde]

^Thanks for sharing that.

 

[Xenon]

^Anytime

 

[_c4_]

hi sir i need an A* and for tht i need to give good answers i recently got 85 in my midterms and my problem is tht i have the knowledge but i am not able to express my self in the paper can u tell me wht should be my approach towards answering questions

 

[Xenon]

hi sir i need an A* and for tht i need to give good answers i recently got 85 in my midterms and my problem is tht i have the knowledge but i am not able to express my self in the paper can u tell me wht should be my approach towards answering questions

first of all, you must be able to understand the requirements of questions.. for example most questions ask to 'discuss'.. this means that you should presents points for both sides
if you are uncertain on how to make a start for your answer, you can start by describing briefly any terms that appear in the question.. like if the question speaks of aggregate demand, you can define it in your answer.. and often(most of the times) it is crucial to end the answer with an evaluation. Evaluation shows that you are completely aware about the topic... remember evaluations are not simply opposite of what you wrote in the body of the answer but they represent different views.. for example an increase in investment can help to increase aggregate demand, increase employment and growth.. but it can also lead to an increase in price levels causing demand-pull inflation and thereby the problems of inflation can take place. But then again this rise in price level may not persevere if the investment is succeeds in shifting the aggregate supply curve to the right... another important part of ending is conclusion... you may be awarded one mark if you present what do you support

how you write the body depends on you.. for example if the question is about pros and cons of market system, you can either first write all the advantages of the system and then follow it with the disadvantages or you can counter one advantage with a disadvantage.. it depends on you, however whatever you do, be consistent...

now, diagrams and equations... really important staff for the body of the answer.. the best way of using diagram is by trying to blend them with the answer.. the diagram must form a part of your explanation.. like if you are writing about complementary goods, draw the diagram and refer to it in your answer.. like "..as seen in the diagram, an increase in price from P1 to P2 of good A causes a fall in demand from Q1 to Q2 of good B..".. if you know the equation you can include it.. like the equation for elasticities, multiplier, etc...

and finally I guess.. finish your answer... don't leave it incomplete

 

[shahz_h]

I teach economics, If anyone of you has any problem in this subject, you can ask here. I will be more than happy to help.

What are problems of transition when central planning in an economy is reduced?
Thankyou in advance!

 

[Xenon]

What are problems of transition when central planning in an economy is reduced?
Thankyou in advance!

Problems of transition: (I'll mostly list the points)
-- inflation
-- industrial unrest
-- changing pattern of employment
-- fall in standard of living
-- lack of welfare systems
(^just think a little and you'll understand the reason for these) and
-- macroeconomic reform (transitions can result changes in macroeconomic policies.. the role of central bank has to be changed, the tax system may require reform, there may be the need to find new trade relationships..)