Feb/March 2017

A person purchased a shop and filled it with fresh fruit. He hired one family member to assist in the shop. Which factors of production have been used?

The factors of production

The table below illustrates the way three individuals use their income. Arrange the three people in the order you would most likely expect for income, from the smallest income to the largest income.

Households

What is generally a function of a trade union?

Trade unions

A firm wants to be the only supplier in the market. Which policy is it most likely to use to eliminate competition?

Market structure

At what point is a firm most likely to cut its demand for labour?

Workers

The large quantity of goods sold by big supermarkets allows them to lower prices, but the main advantage these businesses possess is that they are able to sell non-food items alongside food. Which economic results does the statement indicate are available to large supermarkets?

Firms’ costs, revenue and objectives

A company makes five units of output with an average cost of $20 per unit. The cost of producing the sixth unit is $26. What is the average cost of six units?

Firms’ costs, revenue and objectives

Which item is not an expenditure of the public sector?

Fiscal policy

The Indian government makes use of both direct taxation and indirect taxation. Which one is a direct tax?

Fiscal policy

A worker receives $60000 each year and pays $25\% income tax. He spent $2000 on furniture and $5000 on a computer, and he paid $20\% sales tax on each. How much indirect tax did he pay?

Fiscal policy

The Indian government provides farmers with a subsidy of $5 per kilo so that they supply food in a market where X shows the equilibrium position. The resulting effect is shown in the diagram below. What will the new equilibrium price and quantity supplied be after the subsidy?

Supply

The diagram illustrates a production possibility curve for a country. Because demand for manufactured goods rises, it shifts from unemployment to full employment. How would this be shown on this diagram?

Production possibility curve (PPC) diagrams

What might lead to a sudden fall in the working population?

Employment and unemployment

Which pair of changes in national output and population would lead to a rise in GDP per head?

Economic growth

The table presents the Consumer Price Index (CPI) for an economy across five years. During which pair of years was inflation highest?

Inflation and deflation

Over one year, the inflation rate in a country stood at 3%. In that same year, the salaries of company managers increased by 6% and the wages of office workers increased by 2%. What was the effect on real income (purchasing power)?

Inflation and deflation

Many developing countries want to stop people living in rural areas from relocating to towns. Companies are offered investment grants if they establish their operations in rural districts. What is this policy meant to accomplish?

Supply-side policy

The age composition of many developed countries is changing. Birth rates are low, people aged over 65 are living longer, and the working population (16-65 years) forms a smaller share of the total population. What is the most likely result of this changing structure?

Population

The table presents data for four countries in 2006. Using the information provided, what is the probable order of the four countries by level of development, from the most developed to the least developed?

Differences in economic development between countries

The table gives information about India’s current account in the balance of payments for the 1st quarter of 2014. What is the trade in services (invisible) balance?

Current account of balance of payments

Which policy counts as a type of protectionism?

Globalisation, free trade and protection

At what point does free trade take place?

Globalisation, free trade and protection

The diagram illustrates the options open to an individual between leisure and earnings. He currently earns $25$ a day. What is the opportunity cost for the person if he works more and earns $75$ a day?

Opportunity cost

The diagram illustrates the market for the Indian rupee quoted in US dollars. The equilibrium point is located at X. If more Americans go on holiday in India and fewer Indians purchase American exports, in which part of the diagram will the new equilibrium price and quantity of the Indian rupee be?

Foreign exchange rates

Give one example of market failure.

Market failure

How will the closure, for maintenance work, of the world’s largest oil field affect the market for oil?

Supply

The diagram illustrates a rice market that is in equilibrium. Which shaded area shows the total revenue earned by rice farmers?

Firms’ costs, revenue and objectives

The price elasticity of demand for a product is greater than one. What will happen to total revenue if the product’s price is cut by $3\%$?

Price elasticity of demand (PED)

What causes some assembly workers to be paid poorly?

Workers

The table presents how income changed for selected occupations from 1995 to 2015. What conclusion can be drawn from the table?

Workers

For many years, low-cost airlines have been vying on short-haul routes not only with traditional airlines, but also with rail services and road transport by car. They are now beginning to compete with traditional airlines on long-haul routes as well. Because competition has intensified, some horizontal mergers have taken place among the traditional airlines. By 2030, China is forecast to become the largest domestic air travel market in the world, accounting for 20% of total global air travel. At present, the USA is the leading market, and it is predicted that from 2015 to 2030 the country will order 6160 of the 28000 passenger aircraft that are expected to be produced. India, where airlines are both state-owned and privately owned, is seeing a very large rise in domestic flights and international flights. More airports are being constructed in India, together with extra facilities in and around them. For instance, more taxi firms are being established to transport passengers to and from airports. The fast growth of air travel in India and in other countries is affecting the labour market for pilots, as shown in Fig. 1. Fig. 1 The market for pilots. The vertical axis is labelled "price of pilots" and the horizontal axis is labelled "quantity / number of pilots". The origin is labelled "O". Two equilibrium prices are shown, labelled $P_1$ and $P_2$. Two quantities are shown, labelled $Q_1$ and $Q_2$. A supply curve labelled "S" slopes upwards from left to right. Two demand curves are shown, labelled $D_1$ and $D_2$, both sloping downwards from left to right. $D_2$ is to the right of $D_1$. The speed at which the Indian air travel market expands will depend on several influences. These include how far business travel grows and the pace at which demand for overseas holidays rises. Demand for these types of air travel has, in turn, been affected by price changes. The price elasticity of demand for air travel has been estimated at $-1.2$. One factor affecting prices, and therefore the inflation rate, is changes in taxation.

Market structure

Actions taken by the Government of Georgia to cut inflation and unemployment affected business organisations operating in the country during 2015. The country has a growing tertiary sector, including its banking sector, and now shows several features of a market economy.

Firms’ costs, revenue and objectives

Businesses combine land, labour, capital and enterprise in different proportions when making their goods. A production possibility diagram can be used to show how a country's resources may be allocated, and how fully those resources are being used.

Production possibility curve (PPC) diagrams

Workers' earnings affect the standard of living they can afford. Some workers are paid comparatively little. Governments have several methods of helping those on low pay.

Fiscal policy

Abu Dhabi has a rapidly developing economy. Three new museums are being built in its new cultural district, and these may draw in more tourists and improve its balance of payments. Some of the art works in the museums will be extremely expensive.

Current account of balance of payments

At the beginning of 2015, dockworkers on the USA's west coast carried out industrial action in the form of a go-slow, which disrupted imports and exports. Their trade union coordinated this action. Unions in the USA are becoming weaker, especially in the private sector. The majority of workers in the USA are employed in the private sector.

Trade unions

Governments try to cut market failure in several ways, one of which is to put regulation in place. They also make some goods and services themselves by employing people in the public sector.

Market failure