Total marks: 60 · Duration: 1 hour 30 minutes
Instructions to candidates
• Answer all questions. • Use black ink or black ball-point pen. • The number of marks is given in brackets [ ] at the end of each question or part question. • Calculators may be used. • You should support your answers with reference to the data provided where appropriate. • The total number of marks for this paper is 60. • All the data and tables you need are printed within the questions.
Paper
Section A — Structured Questions (40 marks)
1. Markets, demand and supply
(a) Define the term demand. [2]
(b) Explain two factors, other than price, that could cause the demand for coffee to increase. [4]
(c) The table shows the demand and supply of a product at different prices.
| Price ($) | Quantity demanded (000s) | Quantity supplied (000s) |
|---|---|---|
| 2 | 90 | 30 |
| 4 | 70 | 50 |
| 6 | 50 | 50 |
| 8 | 30 | 70 |
(i) State the equilibrium price and explain how you identified it. [2]
(ii) Explain what would happen in this market if the price were set at $2. [4]
2. Elasticity
(a) Define price elasticity of demand (PED). [2]
(b) When the price of a bus ticket rose from $2.00 to $2.40, the quantity demanded fell from 5000 to 4600 journeys per day. Calculate the price elasticity of demand and state whether demand is elastic or inelastic. [4]
(c) Explain two reasons why the demand for a good such as petrol tends to be price inelastic. [4]
3. Market failure
(a) Explain what is meant by a negative externality. [2]
(b) A factory pollutes a river used by a local community. Explain how this is an example of market failure, and describe one way the government could reduce the problem. [6]
4. The wider economy
The table shows economic data for a country over three years.
| Year | Inflation rate (%) | Unemployment rate (%) |
|---|---|---|
| 2022 | 3 | 6 |
| 2023 | 7 | 5 |
| 2024 | 9 | 4 |
(a) Define inflation. [2]
(b) Using the data, describe what happened to inflation and unemployment between 2022 and 2024. [4]
(c) Explain two problems that high inflation can cause for people in a country. [4]
Section B — Extended Response (20 marks)
5. Explain how a government could use policies to reduce unemployment in an economy. [8]
6. "Free international trade always benefits a country."
Discuss this statement. In your answer you should consider arguments for and against, and reach a supported conclusion. [12]