Past paper questions

Question 1

What is meant by excess supply?

Answer 1

Excess supply = supply is greater than demand

Question 2

Define price elasticity of demand.

Answer 2

Responsiveness of quantity demanded to a change in price

Question 3

With the aid of an example, explain what is meant by “division of labour”.

Answer 3

Definition: division of labour is the breaking down of a job into smaller tasks (2 marks).
Example 1 mark: in textile industry some workers cut out the patterns, others sew, others iron and pack.

Question 4

Do you agree that, for workers, the disadvantages of division of labour always
outweigh the advantages? Give reasons for your answer. (6)

Answer 4

Disadvantages:

e.g. workers can be easily replaced by machines as they perform simple jobs. They could therefore become unemployed.

They can also become bored and / or suffer from repetitive strain.

Advantages:

e. g. Division of labour will increase productivity (also accept production) (1 mark) so workers may be
* *rewarded with higher wages** especially if paid by how much they produce.

Must have both sides of argument for 4 marks.
Award 5th and 6th marks for evaluation/reasoned judgement

e.g. It depends on the actions of the firm and the government. If the firm/government provides
training then workers can find less boring jobs. If the firm wants to motivate workers then it may use job rotation to stop boredom.

Question 5

Examine the extent to which the government can influence market prices in a
mixed economy. (6)

Answer 5

1 mark for definition of mixed economy.

Mixed economy an economy where goods and services are provided by both the public and private sectors, the government can influence market prices in a number of ways: (each way 1 mark, up to 2 marks)

E.g. the government can impose indirect taxes/give subsidies/impose minimum/maximum price/regulations (banning cigarette advertising)
. E.g. the government imposes indirect taxes which increase costs and increase price on harmful goods such as cigarette, alcohol

Each way in which the private sector affects price of goods (govt has no effect) 1 mark up to 2 marks. E.g. produce goods people want to buy and are willing to pay a price. Private sector will react to changes in demand and will change supply. E.g. if demand for ice creams rise in hot weather price will rise unless supply also rises.

Must have both sides of argument for 4 marks. Award 5th and 6th marks for evaluation/reasoned
judgement

**e.g. Governments can influence price. ** Their reasons may differ e.g indirect taxes to protect the people from harmful goods whilst others may use the taxes just as a way of raising revenue but both effect price of goods.

Question 6

** The advantages** to an economy of a merger between two firms which produce
soft drinks outweigh the disadvantages.
Do you agree with this statement? Give reasons for your answer. (6)

Answer 6

Advantages:

Each advantage identified, 1 mark, up to 2

• more efficient, more competitive internationally
• take advantage of economies of scale, big firms can produce goods more cheaply than small firms can because as firms begin to epand, average costs (AC) start to fall

Disadvantages:

• unemployment - duplicate roles and jobs after the merger and people will lose jobs
• decrease competition - fewer soft drink companies to compete with

Must have both sides of argument for 4 marks. Award 5th and 6th marks for evaluation/reasoned
judgement

e.g. Depends on the state of the economy. If there are lots of other firms in the industry then it may benefit the economy as there will still be competition.
If unemployment is already high then redundant workers may not be able to find new jobs. The government plays a part as it can provide retraining programmes and encourage exports.

Question 7

Briefly describe one method a government can use to prevent the disadvantages of mergers.

Answer 7

Method identified, 1 mark

• competition commission or similar (e.g Australian Competition & Consumer Commission promotes comeption and fair trading – will look at impact on the prices of mergers/takovers)
• increase growth of small firms

Development, 1 mark

• investigate and make suggestions to reduce disadvantages
• deregulation

Question 8

What is meant by ‘price elasticity of supply’?

Answer 8

the responsiveness of supply due to a change in price

Question 9

Production of natural rubber in India is dominated by small firms where there is little division of labour.

Briefly explain one reason why small firms do not employ division of labour.

Answer 9

• The farms are too small to have specialised workers.
• Lack of finance, inability to attract skilled workers
• Production of natural rubber in each farm is too small to benefit from division of labour.
• Difficult to break production down into separate tasks
• One worker is able to carry out the tasks

Question 10

Identify two advanges of division of labour.

Answer 10

• increase in productivity or total production / so wages and living standards may rise for the workers
• Less time required training workers / lower training costs
• Workers become more skilled at what they do through repetition and so become faster
• More efficient use of capital in production / better use of the machinery and other tools

Question 11

What is meant by ‘opportunity cost’?

Answer 11

when choosing between different alternatives it is the benefit lost from the next best alternative

Question 12

What is meant by an ‘ageing population’?

Answer 12

Average age of the population is increasing

or

birth rate less than the death rate

Question 13

To what extent are changes in the population of a country the main factor affecting demand for mobile phones? (6)

Answer 13

An increase in population will increase demand for all products (1 mark). A change in age distribution (1 mark) will change the demand for particular products (1 mark).

Other factors identified 1 mark each, up to 2 marks.

Change in incomes, fashion/trends. An increase inincomes (1 mark) will lead to more disposable
income (1 mark).

Need reasoned conclusion/judgement for 5-6 marks.
Population increase alone will not necessarily increase demand for phones - it depends on the
ability to pay; fashion/trends might be the most important factor because of influence of
advertising; availability of other technologies could make phones outdated eg tablets

Question 14

Explain, with the aid of examples, the terms ‘private sector workers’ and ‘public sector workers’. (4)

Answer 14

** Private sector workers:** workers who work in that part of the economy owned by private individuals/firms (1 mark). E.g.(1 mark) people who work for Accenture

Public sector workers: workers who work in that part of the economy owned by the state (1 mark).E.g.(1 mark) policemen. 2 + 2 marks

Question 15

Briefly explain one reason why the minimum wage for private sector workers in poorer, rural areas is less than private sector workers in cities. (2)

Answer 15

** Reason identified** 1 mark, development 1 mark

• low level of skill required (1) therefore government has set minimum wage lower (1);
• shortage of labour in the city (1) therefore government have set a higher minimum wage to attract labour from rural areas(1);
• surplus of labour in rural area relative to demand (1) therefore government has set minimum wage lower (1);

Question 16

Examine the advantages and disadvantages of a minimum wage for country of your choice.

Answer 16

Each advantage of MWR, 1 mark each up to 2

Advantages:

• increase demand, increase standard of living/reduces poverty, decrease voluntary unemployment, reduces gender inequality
• low paid workers have more disposable income so will spend more and stimulate economy. Women are often the largest group to benefit

Disadvantages:

• increase costs, reduce international competitiveness
• firms will face increase in costs which may lead to unemployment. The increase in costs may be passed on to consumers so inflation will occur.

**Need reasoned conclusion/judgement for 5-6 marks. eg depends on: **
• where minimum wage is set (ie above or below the equilibrium wage);
• what happens to productivity
• reaction of firms eg how it effects demand for labour

Question 17

** Lack of finance** is the most important limitation to the growth of firms. Do you agree? Give reasons for your answer.

Answer 17

Each argument justifying why lack of (internal or external ) finance will constrain growth (output
and/or market share)

• ** inability to finance expansion in scale of output**
• ** inability to grow market share or expand into other markets**

Each argument supporting other limitations to growth 1 mark, up to 2.

• ** lack of demand (local market/niche market), owner may not want to expand, availability of other factors of production**

Need reasoned conclusion/judgement for 5-6 marks.

• ** Even if finance is available and affordable other factors may prevent or not justify growth.**

Question 18

Explain Fixed Costs

Answer 18

Costs that do not vary with the level of output

Question 19

Explain variable cost

Answer 19

Variable costs costs that rise or fall as output levels are increased or decreased, respectively.

Question 20

Define price elasticity of supply.

Answer 20

Responsiveness of quantity supplied to a change in price

%change in quantity supplied
% change in price

Question 21

It is easier to increase the supply of chocolate than the supply of cocoa beans.
Do you agree with this statement? Give reasons for your answer. (6)

Answer 21

Each reason why supply is easier to increase, 1 mark (up to 2 marks)

• *e.g. manufactured good, stocks.
  e. g. firms can hold stocks of finished good (chocolate) and also stocks of cocoa beans.**

Each reason why supply of cocoa beans cannot be increased easily, 1 mark (up to 2 marks).

E.g. primary (agricultural) product.

e.g. there is a time lag between planting cocoa trees and harvesting cocoa beans.

Award 5th and 6th mark for evaluation/reasoned judgement.

Accept reference to factors which limit the supply ofchocolate e.g. supply of cocoa beans.

Question 22

Define income elasticity of demand.

Answer 22

Responsiveness of quantity demanded to a change in income.
Also accept equation (2 marks): %change in Qd
% change in income

Question 23

** Division of labour benefits firms** but not their workers.
Do you agree with this statement? Give reasons for your answer. (6)

Answer 23

Each reason identified why firms benefit from division of labour, 1 mark (up to 2 marks)

e.g.
increases productivity, saves time, machinery.
e.g. as workers become more skilled they produce more.

Each reason why workers do not benefit 1 mark (up to 2 marks)

e. g. boredom, monotony, immobility, risk of unemployment.
e. g. workers only skilled in one part of process so may be easily replaced by machines.

Award 5th and 6th mark for evaluation/reasonedjudgement.
Accept **limitations to benefits for firms and/or benefits for workers. **

E.g. firms may not always benefit as it could lead to worker unrest. Workers may benefit if firms use motivation schemes like piece-work to keep workers happy.

Question 24

# Define **division of labour.** Give an example.
(3)

Answer 24

breaking down of a job into smaller tasks e.g. when each worker is given a separate job/task.

Question 25

Define Normal good.

Answer 25

A good for which demand will rise if income rises or fall if income falls.

Question 26

Define inferior good.

Answer 26

A good for which demand will fall if income rises or will increase if income falls

Question 27

define ‘economies of scale’.

Answer 27

Falling average costs due to expansion.

Question 28

Briefly explain two economies of scale which may occur in the manufacture of clothing.