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Evangel College
2011/2012 Term 1
Economics – Revision Exercise Final 11
Name:______________________________(
Market intervention
1. D
9. C
17. D
25.
2. C
10. B
18. D
26.
3. B
11. B
19. B
27.
4. A
12. A
20. D
28.
5. A
13. D
21. C
29.
6. C
14. A
22. B
30.
7. C
15. B
23. A
31.
8. D
16. A
24. A
32.
)
B
D
B
B
A
D
B
D
Class:S.6 _______
33.
34.
35.
36.
37.
38.
39.
40.
C
B
B
C
B
C
B
B
41.
42.
43.
44.
45.
46.
47.
48.
HKCEE 2006CQ
Answer
(i)
Diagram:
- Sept. price > equilibrium price (1)
- ab = excess supply in Sept. (1)
Verbal Elaboration:
- initial excess supply in Sept. (1)
(ii)
Diagram:
- demand curve shifts to the right to position D'D'
in the golden week (1)
- price raised to a new level (there is an excess supply at the new price) (1)
- excess supply in the golden week = a'b' (1)
- a'b' < ab (1)
Verbal Elaboration:
- an increase in demand (1)
- smaller excess supply in the golden week (1)
HKCEE 2006CQ
Answer
- (a) No because (1)
- PA is above the equilibrium price. (1)
Diagram
- original total expenditure = area 0 Pe E Qe 0 (1)
- new total expenditure = area 0PB E'QB 0 (1)
OR: indication of the decrease in total
expenditure, e.g., the shaded area (2)
Verbal Elaboration:
- price decreases from Pe to PB and quantity
transacted decreases
from Qe to QB (1)
- total expenditure of consumers decreases (1)
A
A
D
B
B
C
B
B
49.
50.
51.
52.
53.
54.
55.
56.
C
A
C
B
C
B
B
A
57. A
58. D
59. A
HKCEE 2005CQ
Answer
- Indicate on the diagram: price (P1) is below the equilibrium
price (1)
- rightward shift of the demand curve (1)
- excess demand increases from a to b (1)
Verbal elaboration :
- Cross Harbour Tunnel is a substitute of Western Harbour
Tunnel (1)
- demand for Cross Harbour Tunnel service increases (1)
- (with a fixed price,) excess demand for the Cross Harbour
Tunnel service would increase (1)
HKCEE 2004 CQ
Answer
- Outbreak of SARS
=> a decrease in demand for airlines services (1)
=> quantity transacted decreased at the constant price (1)
=> total revenue decreased (1)
Indicate in the diagram :
- demand curve shifted to the left (1)
- P remained constant (1)
- Q decreased from Q1 to Q2 (1)
- excess supply (1)
- TR (= P x Q) decreased from PQ1 to PQ2 / loss in revenue (1)
HKCEE 2004CQ
Answer
(i) Condition : The elasticity of demand for cars is greater
than the elasticity of supply. (2)
Indicate in the diagram:
- supply curve shifts from S1 to S2 (1)
- sellers' tax burden = area a c P1d (1)
- buyers' tax burden = area c b P2P1 (1)
- area acP1d > area c b P2P1 (2)
(ii) Indicate in the diagram:
Area 0Q2 a d is the net total sales revenue. (1)
HKCEE 2001CQ
Answer
Indicate in the graph:
- a vertical supply curve (1)
- the price is set below the equilibrium price (1)
- excess demand (1)
- P x Q is the amount of capital raised (2)
Verbal explanation:
-selling price is fixed at a level below the equilibrium price (1)
-(at P ,) Qd > Qs / excess demand (1)
HKCEE 1999CQ
Answer
Graphic showing:
- P1 < PE (1)
- P1 < P2 < PE (1)
- Correct change in the quantity transacted (from 0 Qt1 to 0 Qt2) (1)
- total revenue increases from P1 x Qt1 to P2 x Qt2/ addtional revenue = P1P2BC + ACQt2Qt1 (1)
Verbal explanation:
- excess demand at P1 (1)
- still an excess demand or still below equilibrium price after P1→P2 (1)
- quantity transacted increases (1)
- total revenue↑from P1 x Qt1 to P2 x Qt2/additional revenue is P2 x Qt2 – P1 x Qt1 (1)
or
An alternative answer
P1 = prevailing taxi fare
PE = equilibrium taxi fare
P2 = the taxi fare after a rise
Graph showing:
- P1 < PE (1)
- P1 < P2 < PE (1)
- No change in Qt (1)
- total revenue increases from P1 x Qt to P2 x Qt /additional revenue = P1P2BC (1)
Verbal explanation:
- excess demand at P1 (1)
- still an excess demand or still below equilibrium price after P1→P2 (1)
- no change in quantity transacted (1)
- total revenue↑from P1 x Qt to P2 x Qt / additional revenue is P2 x Qt – P1 x Qt (1)
HKCEE 1999CQ
Answer
(i) - profits after tax will rise (1)
- incentive to invest will increase/investment↑ (1)
- (derived)demand for labour is likely to increase (1)
(=> other things being equal, unemployment would tend to fall)
(ii)
diagram (3)
- (law of demand : ) a downward sloping demand curve (1)
- (law of supply : ) an upward sloping supply curve (1)
- unemployment : the fixed wage rate > equilibrium wage rate (1)
- (derived) demand for labour : demand curve shifts upward (1)
- since wage rate remains unchanged, excess supply or
unemployment from U0 to U1 (1) (max : 3)
HKCEE 1998CQ
Answer
Diagram (2)
- supply of imports increases (1)
- market price falls (1)
HKCEE 1997
Answer
(b) Indicate in the diagram :
- original supply curve AB (1)
- quota  Q1→Q2 (1)
- new supply curve (AK +) KF / quota quantity (1)
- new market price P2 (1)
Elaboration :
- effective quota  the quota quantity is smaller than the initial
equilibrium quantity (2)
- market price↑ (1)
- import volume↓ (1)
HKCEE 1997
Answer 1
Indicate in the diagram :
- wage rate W > equilibrium wage rate (1)
- S→S’ (1)
- unemployment drops from U0 to U1 (1)
Elaboration :
-initial unemployment problem  wage rate>equilibrium wage rate (1)
- S↓ (1)
- some workers have to leave the industry and find jobs in other
(growing) industries (1)
OR
Answer 2
Indicate in the diagram :
- initial wage rate W0 > equilibrium wage rate (1)
- W0 falls (to W1) (1)
- unemployment drops from U0 to U1 (1)
Elaboration :
- initial unemployment problem  initial wage rate > equilibrium
wage rate (1)
- excess supply / qs > qd / workers of the industry have to accept lower
wage rates (1)
- wage rates fall (1)
Answer 3 (see also the other two suggested answers)
Indicate in the diagram :
- wage rate W > equilibrium wage rate (1)\
- D→D’ (1)
- unemployment drops from U0 to U1 (1)
Elaboration:
- initial unemployment problem  wage rate > equilibrium wage rate (1)
- D (1)
- more business (derived demand)or labour productivity of the industry (1)
HKCEE 1995
Answer
(i) Candidates should indicate on the graph :
- a vertical supply curve (1)
- with a downward sloping demand curve, the rental price P was below the equilibrium price/ at rental price P,
there is a shortage of AC or quantity demanded 0Qd > quantity supplied 0Q (1)
(ii)
(ii) Correct indication of the rental income increase on the
graph. (2)
- P increases to the equilibrium price P’ (1)
- no change in the quantity transacted (1)
- rental income increases / a change from rental income
OPAQ to rental income 0P’BQ. (1)
HKCEE 1993
Answer
Correct graph
- Vertical supply curve (1)
- AB = excess demand at P1 (1)
- A’B’=excess demand at P2 (1)
Correct verbal explanation
- SS : perfectly inelastic (at maximum capacity) (1)
- excess demand at P1 < PE (2)
- smaller excess demand at P2 < PE (2)