Sample Exam for Economics

Topics: Economics, Supply and demand, Price elasticity of demand Pages: 6 (921 words) Published: February 22, 2013
FUNDAMENTALS OF ECONOMICS 11th December 2011 EXAMINATION PAPER Section A Section B Answer ALL questions in SECTION A. Answer TWO questions in SECTION B. Clearly cross out surplus answers.

Time Allowed: 2.5 Hours
Candidates are allowed to bring in a scientific calculator for this module. Graph paper will be provided by the Centre.

© NCC Education Ltd 2011


Question 1 a) Explain what is meant by the opportunity cost of producing a good. (2 marks)

b) Define each of the following models and explain the differences between the two. i. ii. the free market model (2 marks)

the command economy model
(2 marks)

c) Briefly define the following terms: i. ii. iii. iv. positive economics (1 mark)

normative economics
(1 mark)

(1 mark)

(1 mark)

Total: 10 marks

Question 2 a) Define the following concepts: i. ii. iii. Demand (2 marks)

(2 marks)

Equilibrium price
(1 marks)

b) Explain what forces lead to markets tending to move towards their equilibrium price. (5 marks)

Total: 10 marks

Fundamentals of Economics

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© NCC Education Ltd 2011

Question 3 a) Discuss the main features of the following forms of organisation: i. ii. sole trader (3 marks)

(3 marks)

b) Identify reasons why public limited companies’ businesses may not in practice maximise profit. (4 marks)

Total: 10 marks

Question 4 a) Draw a simple two sector circular flow diagram of the macro-economy, labelling both the two groups participating in this simple model of the economy and the flows of activity and money between them. (5 marks)

b) Define the term ‘gross domestic product’.
(2 marks)

c) Briefly explain the problem posed by ‘double counting’, when seeking to measure gross domestic product. (3 marks)

Total: 10 marks

Question 5 a) In general terms what are the main determinants of aggregate demand in a model of the macro-economy with no international trade? (5 marks)

b) Draw and label a diagram which shows how Keynesian economists suggest consumption demand tends to change as an economy’s income changes. You should include the equation that represents the graph. (5 marks)

Total: 10 marks Total for Section: 50 marks Section B on next page

Fundamentals of Economics

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© NCC Education Ltd 2011


Question 6 a) Define the term ‘price elasticity of demand’. (3 marks)

b) Explain the meaning of the following terms: i. ii. elastic demand (3 marks)

inelastic demand
(3 marks)

c) Calculate price elasticity of demand, showing your workings in full, for the following examples: i. The price of a product rises from £5 to £8 and its sales fall from 750 to 600 units a week, all other things remaining equal. (4 marks)


The price of a product falls from £10 to £8.50 and weekly sales rise from 500 units to 850, other things remaining equal. (4 marks)

d) What are the main determinants of price elasticity of demand? (8 marks) Total: 25 marks

Question 7 a) With respect to the analysis of the behaviour of costs of factors of production: i. ii. Identify the main factors of production used by firms (3 marks)

Explain what is meant by the long run and the short run.
(3 marks)

b) Define in detail exactly what is shown by the following: i. ii. long run total cost curve (3 marks)

long run marginal cost curve
(3 marks)

c) Draw and label a typical long run average cost curve showing the existence of both economies and diseconomies of scale. (2 marks)
Fundamentals of Economics Page 3 of 5 © NCC Education Ltd 2011

d) Explain the main causes of: i. ii. economies of scale
(6 marks)

diseconomies of scale
(5 marks)

Total: 25 marks

Question 8 a) What are the main features of a monopolistically competitive model of market structure? (6 marks)

b) Draw and label a diagram for a monopolistically...
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