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IGCSE ECONOMICS : SECTION A - REVISION QUESTIONS- MARK SCHEME Practice Questions 2(a)1.a. b.i. ii. Inelastic c. 1 Ms.Dharshani Perera IGCSE ECONOMICS : SECTION A - REVISION QUESTIONS- MARK SCHEME 2. a.i. ii. b. 3. a.i. ii. b.i. ii. 2 Ms.Dharshani Perera IGCSE ECONOMICS : SECTION A - REVISION QUESTIONS- MARK SCHEME 4.a. b. c. 3 Ms.Dharshani Perera IGCSE ECONOMICS : SECTION A - REVISION QUESTIONS- MARK SCHEME 5. 6. 4 Ms.Dharshani Perera IGCSE ECONOMICS : SECTION A - REVISION QUESTIONS- MARK SCHEME 7. Read the note below. 8. 5 Ms.Dharshani Perera IGCSE ECONOMICS : SECTION A - REVISION QUESTIONS- MARK SCHEME 9. 6 Ms.Dharshani Perera IGCSE ECONOMICS : SECTION A - REVISION QUESTIONS- MARK SCHEME Ms.Dharshani Perera 10. a. b. c. Diagram: Correct axes and demand and supply curves, original price and qty Shift of supply to left New higher price Explanation i. correct definition 2 marks ii. One point(1 mark) , development (1 mark) each point (1 mark each) 1 mark 1 mark 1 mark 1 mark 11. (a) Definition: the responsiveness of quantity supplied to a change in price (up to 2 marks) Diagrams (up to 2 marks) Examples eg less than one = inelastic (up to 2 marks) (6) (b) (i) Must have demand and supply factors for full marks.Responses giving only demand or only supply, maximum 3 marks.Demand factors 1 mark for identification, 1 mark for development eg high population in city centres competitive demand demand high for commercial properties Supply factors 1 mark for identification, 1 mark for development eg inelastic supply (5) (ii) Definition of exchange rates (1 mark)Must have demand and supply factors for full marks. Responses giving only demand or supply, maximum 3 marks. Demand factors 1 mark for identification, 1 mark for development eg demand for exports Supply factors 1 mark for identification, 1 mark for development eg demand for imports (5) (iii) Must have demand and supply factors for full marks. Responses giving only demand or supply maximum 3 marks. Demand factors 1 mark for identification, 1 mark for development eg if wages are too high people may do the job themselves Supply factors 1 mark for identification, 1 mark for development eg no skills required therefore supply high (4) 12. (a) 1 mark for correct formula or in words, 2 marks for correct answer = + 5 (do not need + sign for 3 marks). 7 IGCSE ECONOMICS : SECTION A - REVISION QUESTIONS- MARK SCHEME Ms.Dharshani Perera Accept 5% = 2 marks. 1 mark if equation is correct but final answer incorrect. If income is related to demand 1 mark only (3) (b) Normal good = demand increases as income increases (1 mark), therefore positive (1 mark), Inferior good = demand falls as income rises (1mark), therefore negative (1 mark) 1 mark for 2 correct examples (5) 13. a) For the correct definition (1 mark), correct answer, 2(1 mark) b) (15*150)- (20*100)= 250 (2 marks) c) Foe one point, 1 mark each e.g. climate, tournament, local authorities having promotional events to popularize football 14. (UIIIII(I????????????????????????? IGCSE Questions Q1. 1(a)(i) 1(a)(ii) As price rises quantity (2) demand falls (1 mark) Reference to data 1 mark Price rises 1.5 Euros to 2 Euros demand falls 28 kg to 26 kg. = 2 marks Explanation which refers to (4) total amount spent (total revenue) (2 marks). Inelastic: As price rises total revenue rises (2 marks). Also accept as price rises there is a less than proportionate (also accept responsive) change in quantity demanded. (2 marks). Reference to data – 2 marks Total amount spent in 2007 = 1.5 Euros x 28 = 42 Euros Total amount spent in 2008 = 2 Euros x 26 = 52 Euros b.i 8 IGCSE ECONOMICS : SECTION A - REVISION QUESTIONS- MARK SCHEME Ms.Dharshani Perera ii. A iii. Accept reference to no change in supply with price change (1 mark). Reason (1 mark). The supply of wheat can’t change in 1 year/2007 as it takes a long time to grow(1 mark) so as price changes there will be no change in supply (1 mark) c.i. A ii. Explanation 1 mark. Reference to high income earners 1 mark, low income earners 1 mark As income of high income earners rises their demand for pasta falls (1 mark) from 25kg to 20kg (1 mark) so it is an inferior good. Whilst low income earners demand more as their income rises (1 mark) so it is normal/not inferior (1 mark). d.i. On diagram: Minimum wage level/ new price level = 1 mark New quantity demanded/New quantity supplied = 1 mark. Or level of unemployment 1 mark. ii. Level Level 3 Level 2 Mark 5 Descriptor Add justified conclusion 1 mark, e.g. evidence has shown that the number of workers losing their jobs is not many so overall living standards are improved. (1 mark) Development of arguments up to 2 marks. Must have both arguments for and against. The introduction of a MWR will increase the wages of 3-4 9 IGCSE ECONOMICS : SECTION A - REVISION QUESTIONS- MARK SCHEME Level 1 Ms.Dharshani Perera lower paid workers (1 mark) so they will have more to spend which increases their standard of living (1 mark). The increase in wages will lead to increased costs for firms (1 mark) so some may lose their jobs and their standard of living will fall (1 mark). 1 mark for each argument for/against MWR improving living standards up to 2 marks. 1-2 2. 1(a)(i) 1 mark for perfectly inelastic supply 1(a)(ii) Example 1 mark e.g. rice, oil(accept agricultural goods/minerals) 1(a)(iii) Product B 1(a)(iv) Must use the data for full marks. E.g. Elastic because as price rises TR falls (1 mark) and vice versa Price 8 TR = 160 Price 10 TR=100 (2 marks) Or calculation of elasticity: +100/-20=-5 (2 marks) 1(a)(v) Level Level 1 Mark 1-2 Level 2 3-4 (1) (1) (1) (3) Descriptor Each factor affecting elasticity of demand of rice and/or chocolate e.g. rice = necessity chocolate = luxury Factors identified and developed. Must have a factor for rice and a factor for chocolate for 4 marks. 10 IGCSE ECONOMICS : SECTION A - REVISION QUESTIONS- MARK SCHEME Level 3 5 1(b)(i) 1(b)(ii) 1(b)(iii) Level Each characteristic identified, 1 mark development 1 mark. e.g. some parts owned by state (1 mark) providing essential services like public transport (1mark), some parts owned by private sector (1 mark) and they aim to make a profit (1mark). Ms.Dharshani Perera Must have evaluative statement as well as factors identified and developed including a factor for rice and a factor for chocolate. E.g. Rice can be considered a necessity, when price rises people’s demand falls only by a small amount. Whereas chocolate is a luxury that people can live without so as price rises the demand will fall a great deal. Some might argue that both have substitutes (potatoes for rice) (biscuits for chocolate)and both might be elastic but I think that rice will be more inelastic because it is more essential than chocolate. (4) Each reason identified, 1 mark, development, 1 mark e.g. introduction of MWR (1 (4) mark), government passes a law which makes firms pay a MWR ( 1mark), shortage of skilled labour, rise in demand for labour. 2+2 marks Mark Descriptor 11 IGCSE ECONOMICS : SECTION A - REVISION QUESTIONS- MARK SCHEME Level 1 1-2 Level 2 3-4 Level 3 5-6 Ms.Dharshani Perera Each statement relating to relationship between wages and employment, 1 mark. E.g. wages are the price of labour so if price goes up demand/employment falls. Each statement relating to relationship between wages and employment, 1 mark and developed, 1 mark. E.g. wages are the price of labour so if price goes up demand/employment falls. The rise in wages may be due to introduction of MWR (1 mark). Accept other factors which might lead to increase in wages and/or increased employment. Must have evaluative statement which refers to the importance of other factors for 6 marks. E.g. wages are the price of labour so if price goes up demand/employment falls (1 mark). The rise in wages may be due to introduction of MWR (1 mark). The extent of the fall in employment may depend on the elasticity of demand for labour (1 mark). If there are no substitutes for labour then the firm will continue to demand labour at a higher wage rate (1 mark). There are other factors which might limit the fall in employment. If workers are members of a powerful trade union (1 mark) and the firm may not make workers unemployed for fear of industrial unrest (1mark) 12 IGCSE ECONOMICS : SECTION A - REVISION QUESTIONS- MARK SCHEME Ms.Dharshani Perera Q3. 1(a)(i) Vertical supply curve shift to left, 1 mark, correctly labelled, 1 mark. Must have shift to left or 0 marks.(2) 1(a)(ii) Due to horizontal axis being labelled “quality” candidates can get 2 marks for correctly indicating price as follows: 1 mark for P 1 mark for 1.5 They can also get 2 marks for indicating price, P or 1.5 and quantity! Quantity should be indicated by Q or 2007 on horizontal axis = 1 mark.(2) 1(a)(iii) Incomes will fall, 1 mark. (1) 1(a)(iv) Explanation 2 marks. Reference to total revenue/income (not profits) falling as price rises (1mark) due to elastic demand curve (1 mark). For example as price rises incomes fall because the demand curve is elastic = 2 marks. Only 1 mark for definition of elastic demand curve for example it is elastic so a rise in price brings about a more than proportionate change in quantity demanded.(2) 1(a)(v) Each reason identified, 1 mark, development, 1 mark, for example orange juice is made from an agricultural good/natural good (1 mark) which cannot be increased in supply quickly / takes time to respond to changes in price/demand (1 mark). Soft drinks like cola are manufactured/artificial (1 mark) and the raw materials can easily be obtained to increase supply (1 mark).(4) 1(b)(i) 1 mark for minimum wage rate drawn above equilibrium. 1 mark for new quantity of labour demanded. 1 mark for quantity of labour supplied. 1 mark for an indication that supply is now greater than demand. Accept unemployment from old equilibrium to new equilibrium or Qd to Qs. (4) 13 IGCSE ECONOMICS : SECTION A - REVISION QUESTIONS- MARK SCHEME Q4. 1(a)(i) Ms.Dharshani Perera 1 mark for P1. 1 mark for Q1. 1(a)(ii) S2. Also accept new supply curve to the right of S1. Do not accept shift in both demand and supply. (1) 1(a)(iii) D2. Also accept new demand curve to the right of D1. Do not accept shift in both demand and supply. (1) 1(b)(i) Accurate definition = 2 marks. Responsiveness of demand to a change in income. Accept formula for 2 marks. 1 mark for incomplete or partial definition. (2) b.ii B 1(b)(iii) 1(b)(iv) As income increases, demand falls (1). Use of data (1). Normal. Also accept luxury goods. 14 (2) IGCSE ECONOMICS : SECTION A - REVISION QUESTIONS- MARK SCHEME 1(c)(i) Accurate definition = 2 marks. Responsiveness of demand to a change in price. Accept formula for 2 marks. 1 mark for incomplete or partial definition C (1). Price increase (decrease) brings a rise (fall) in Total Revenue. $50 to $54. Also accept correct calculation (2). Reference to change in price resulting in small change in demand (1). 1(c)(ii) Q5. 1(a)(i) 1 mark for original price P1. 1 mark for original quantity Q1. (2) 1(a)(ii) 1 mark for shift to left of demand curve. (1) 1(a)(iii) 1(b)(i) Ms.Dharshani Perera 1 mark for new equilibrium price, P2 and 1 mark for new quantity, Q2, corresponding to a shift to the left of the demand curve. Elastic (2) (1) 15 IGCSE ECONOMICS : SECTION A - REVISION QUESTIONS- MARK SCHEME 1(b)(ii) Elastic demand curve 1 mark (the p and q change will show this) Price fall and quantity rise 1 mark 1 mark for explaining that as price falls TR rises. 1 mark for “change in price brings more than responsive change in quantity demanded” or similar. If answer to 1(b)(i) ‘inelastic’ then accept ‘inelastic demand curve’ in 1(b)(ii) (4) 1(c)(i) Each factor identified, 1 mark. E.g. time, stocks, spare capacity. (2) 1(d)(i) Transport provided by the state/government, 1 mark, 1 mark for example. Accept any feasible example. (2) 1(d)(ii) Mixed economy. (1) 1(d)(iii) Diagram – up to 3 marks: 1 mark for movement of S to right. 1 mark for new lower equilibrium price 1 mark for increase in quantity. Explanation: 1 mark for 16 (5) Ms.Dharshani Perera IGCSE ECONOMICS : SECTION A - REVISION QUESTIONS- MARK SCHEME Ms.Dharshani Perera subsidies reduce costs. 1 mark for firm passes on reduced costs to consumers. 1 mark for reference to limitation to the working of subsidies: incidence/elasticity. Maximum 2 marks for explanation Q6. 1(a)(i) Complements (1) 1(a)(ii) Label D and S, 1 mark, original equilibrium price and quantity, 1 mark. (2) 1(a)(iii) 1 mark for shift of D to left, new equilibrium price and quantity, 1 mark. (2) 1(b)(i) 1(b)(ii) 1 & 2 Accurate definition = 2 marks. Responsiveness of demand to a change in p Accept formula for 2 marks. 1 mark for incomplete or partial definition. Reason identified, 1 mark, (4) development, 1 mark. E.g. Digital cameras are luxuries not necessities so as the price falls lots more will be bought. 17 IGCSE ECONOMICS : SECTION A - REVISION QUESTIONS- MARK SCHEME Ms.Dharshani Perera 1(c)(i) Definition 1 mark, example 1 mark. E.g. each worker does a specific task, 1 mark, in a camera some workers put in lenses others pack the cameras etc. (1 mark). The example doesn’t have to apply to camera factory. Accept specialisation for 1 mark. 1(c)(ii) Advantage 1 mark, disadvantage, 1 mark. E.g. Task becomes easier, monotony. Q7. 18 (2) (2) IGCSE ECONOMICS : SECTION A - REVISION QUESTIONS- MARK SCHEME 19 Ms.Dharshani Perera IGCSE ECONOMICS : SECTION A - REVISION QUESTIONS- MARK SCHEME Q8. 20 Ms.Dharshani Perera IGCSE ECONOMICS : SECTION A - REVISION QUESTIONS- MARK SCHEME 21 Ms.Dharshani Perera IGCSE ECONOMICS : SECTION A - REVISION QUESTIONS- MARK SCHEME 22 Ms.Dharshani Perera IGCSE ECONOMICS : SECTION A - REVISION QUESTIONS- MARK SCHEME Ms.Dharshani Perera CROSS ELASTICITY OF DEMAND The quantity of demand of a particular good varies according to the price of other goods. A rise in price of a good such as beef would increase the quantity demanded of a substitute such as pork. On the other hand, a rise in price of a good such as cheese would lead to a fall in the quantity demanded of a complement such as macaroni. CROSS ELASTICITY or CROSS PRICE ELASTICITY OF DEMAND measures the proportionate change in the price of another. For instance, it is a measure of the extent to which demand for pork increases when the price of beef goes up, or the extent to which the demand for macaroni falls when the price of cheese increases. The formula for measuring cross elasticity of demand for good is : Percentage change in quantity demanded of good X Percentage change in price of another good Y Positive Cross Elasticity Two goods which are substitutes will have a positive cross elasticity. An increase (positive) in the price of one good, such as gas, leads to an increase (positive) in the quantity demanded of a substitute such as electricity. 23 IGCSE ECONOMICS : SECTION A - REVISION QUESTIONS- MARK SCHEME Ms.Dharshani Perera Negative Cross Elasticity Two goods which are complements will have a negative cross elasticity. An increase (positive) in the price of one good such as sand leads to a fall (negative) in demand of a complement such as cement. 24