Filetype PDF | Posted on 14 Oct 2022 | 3 years ago
Authentication
digital resources
212x Filetype PDF File size 0.62 MB Source: www.hoddereducation.co.uk
Cambridge IGCSE and O Level
Economics Workbook Answers
● 1 The basic economic problem
1 The correct answer is Option B. Resources in and therefore represent maximum output in the
an economy are scarce and needs and wants economy. Point E is unattainable given the current
(of individuals, firms and governments) are resources in the economy.
unlimited. Option A states that wants are limited 6 Country X could invest in machinery and/or
and resources are unlimited which is incorrect technology and this will increase the productive
as wants are unlimited and resources limited. capacity of the economy as more oil and wheat
See pages 2–3 in the textbook for a more detailed can be produced with the same amount of
explanation of the basic economic problem. resources.
2 The correct answer is Option A. Public domain Country X could train workers to increase their
web pages are available to anybody with access skills and this may increase their productivity as
to the internet. Access therefore is unlimited. workers become more efficient at producing oil
The other options (running shoes, housing and and wheat.
tennis rackets) are all limited in supply and are
therefore economic goods. See page 2 in the Award 2 × 2 marks for stating and explaining
textbook for more examples of economic and two ways to increase the productive capacity of
free goods. Country X.
3 The correct answer is Option C. Selling and See pages 132–133 and 217–218 in the textbook
distributing olive oil is in the tertiary sector of the for more information on how to increase the
economy. Options A and D are in the secondary productive capacity of the economy.
sector as both are part of the manufacturing 7 Examples of capital-intensive industries: car
process. Option B (growing of olive trees) is in the manufacturing and glass making.
primary sector. See pages 5–6 in the textbook for
more detailed information on the three sectors of Examples of labour-intensive industries: garment
industry. manufacturing and teaching.
4 The correct answer is Option C. To increase Award 1 mark for each relevant example of each
production of wheat from W to W it is necessary type of industry, up to the maximum of 2 marks.
2 1
to decrease production of oil from O to O . This is 8 Opportunity cost is the cost of the next best
2 1
because the PPF represents the maximum amount of alternative foregone when making a decision.
wheat and oil that can be produced at each level of For example, if a school spends money on a new
output, with all resources used efficiently. Options sports hall, the opportunity cost might be a new
A and B are incorrect because to increase production science laboratory which could have been built
of wheat it is necessary to decrease oil production. instead. See page 7 in the textbook for a more
Option D requires an increase in the productive detailed explanation of opportunity cost.
capacity of the country. See pages 7–9 in the 9 The agricultural sector has become less valuable
textbook for more detailed information on PPFs. as a percentage of GDP for Country Y because
5 The correct answer is Option B. It is possible the price of goods being produced may have
to increase production within the economy fallen or people may be leaving the agricultural
without incurring an opportunity cost, i.e. it is industry. Instead, with economic development,
possible to increase both production of wheat these people have entered the manufacturing or
and oil without any opportunity cost. Options service sector because earnings are higher in these
C and D are on the production possibility curve industries.
® 1
Cambridge IGCSE and O Level Economics Workbook Answers
Answers
The service sector may have increased in value The introduction of the internet café causes
due to growth in the tourism industry and related the PPF curve for the village to shift outwards,
trades. For example, an increase in tourism will from PPC to PPC .
1 2
bring about income for the hotel industry, airlines, Award 2 × 1 marks for drawing and correctly
restaurants, retail outlets (shops) and tourist labelling the axes.
attractions. Award 1 mark for drawing the original PPF
The change in the structure of industry in curve.
Country Y could be due to economic growth Award 1 mark for drawing the new PPF curve
caused by an increase in the tourism industry to the right of the original PPF curve.
typical of a less economically developed country See pages 7–9 in the textbook for further
such as Cambodia or Laos. information about production possibility curves.
Award 2 × 2 marks for stating and explaining two b The shift is due to the increased productivity
reasons for the change in the structure of industry. of farmers who can now get the best price
10 a for their produce and increase yields of their
crops due to improved production techniques.
Existing and new businesses can communicate
more easily with suppliers and customers,
e.g. by using email and Skype. They can
Goods also research the market, their competitors
PPC2 and potentially access finance available for
PPC investment.
1 Award 2 × 2 marks for identifying and
O Services explaining two possible reasons for increased
productivity.
● 2 Economic systems
1 The correct answer is Option C. See page 12 in options are disadvantages of operating a planned
the textbook for an overview of the three main economy. See pages 14–15 in the textbook for an
types of economic systems. Refer to Chapter 1 in explanation of these disadvantages.
the textbook for details about the basic economic 5 The correct answer is Option C. Production
problem (Option A) and scarcity (Option B). takes place to fulfil people’s needs and wants,
Economic agents (Option D) refers to households irrespective of the prevailing economic system.
and firms involved in economic activities. Hence, why production should take place is
2 The correct answer is Option B. In a mixed not a fundamental economic question. See
economy there is both a private sector page 13 in the textbook for an explanation of
(comprising of both households and firms) and a why the other options are key questions that
public sector (the government). See pages 17–18 economists ask.
in the textbook for an explanation of a mixed 6 Features of a planned economic system include:
economy. ● production decisions are made by the
3 The correct answer is Option B. In a planned government
economy, the government oversees production ● production schedules are devised on a long-term
decisions (what, how and for whom production basis
should take place). See page 12 in the textbook for ● wage differentials are minimal
an explanation of the various types of economic
systems. ● the economy prefers to be self-sufficient.
4 The correct answer is Option D. In a free market See pages 13–14 in the textbook for an explanation
economy, resources are allocated on the basis of of the above features of a planned economy.
demand and supply, e.g. highly skilled workers 7 An explanation that prices are determined by the
are paid more than those with a lack of desirable interacting forces of demand (consumers) and
work skills. This can result in huge inequalities supply (producers). Prices are determined when
in income and wealth (Option D). The other
2 ®
Cambridge IGCSE and O Level Economics Workbook Answers
Answers
the demand for and supply of a product are equal 9 A planned economic system enables basic needs
(in equilibrium). See page 15 in the textbook for to be met for everyone in society. By contrast,
an explanation. An appropriate example must be production is disproportionately geared towards
provided for full marks. those with high incomes and wealth in market
8 a An economic system that comprises both a economies. See page 16 in the textbook for a more
public sector and a private sector. detailed explanation.
Alternatively, a combination of planned and 10 Arguments in favour of a free market economy,
free market economies. include:
See page 12 in the textbook for a definition ● greater efficiency
of a mixed economy, and pages 17–18 for an ● freedom of choice/more competition
explanation of mixed economies. ● incentives to work and to innovate.
b Reasons why most countries operate mixed Possible disadvantages of a free market economy
economies include: include:
● misallocation of resources under a free ● environmental issues
market economy (see Chapter 5 in the
textbook to read more about market ● income and wealth inequalities
failures), e.g. merit goods, demerit goods, ● social hardship, i.e. inequalities in the
public goods and externalities distribution of income and wealth
● government intervention is required for ● wasteful competition
numerous reasons, e.g. environmental ● the existence of unregulated monopolies.
protection and to redistribute income and
wealth (through the tax system) See pages 16–17 in the textbook for an explanation
● government intervention is also required to of the advantages and disadvantages of market
regulate and control the activities of private economies.
sector firms in mixed economies, e.g. Award up to 5 marks for a one-sided answer.
employment rights and anti-competitive Award up to 8 marks for a balanced answer that
business activities. considers both advantages and disadvantages of a
Award 1–3 marks for a brief explanation which free market economic system.
shows a limited understanding.
Award 4–6 marks for an explanation which
shows a good level of understanding. The
use of appropriate examples should be
demonstrated.
● 3 Demand and supply
1 The correct answer is Option A. Effective demand for an explanation of why an increase in interest
is used to suggest that demand is backed by both rates will affect borrowing, spending and saving.
the ability and the willingness of customers to pay 4 The correct answer is Option A. Customers who
a certain price to buy a particular good or service. buy shampoo are likely to need conditioner
See page 20 in the textbook for further guidance. too. Option C is incorrect as sugar is not jointly
2 The correct answer is Option D. If consumers demanded with tea (indeed, not all tea drinkers
become more aware of the health issues related use sugar, and it really depends on the type of tea
to sugar, they are less likely to buy sugar, shifting being considered). Options B and D are examples
the demand curve to the left. See pages 23–24 of substitute products.
in the textbook to read about the differences 5 The correct answer is Option D. At $10 per unit,
between shifts and movements in demand. supply is 21 000 units whilst demand is only
3 The correct answer is Option C. Higher interest 18 000 units, i.e. there is excess supply (a surplus,
rates in China make it more expensive to borrow rather than a shortage) of 3000 units.
money to buy cars and encourage more saving 6 A movement along the demand curve is caused
rather than spending. See page 104 in the textbook by changes in the price of a good or service.
® 3
Cambridge IGCSE and O Level Economics Workbook Answers
Answers
Higher prices cause contractions in demand, Award up to 2 marks for an answer that does not
whereas lower prices cause expansions in include a diagram but shows understanding of
demand. However, a shift in demand is caused by excess demand.
changes in non-price factors that affect demand, Award up to 5 marks for a correct explanation
e.g. changes in income, advertising and the price of excess demand, with an accurately labelled
of substitute products. See pages 23–24 in the diagram that shows excess demand exists at all
textbook for further guidance. prices below the equilibrium.
7 A normal supply curve is upwards sloping, See page 31 in the textbook for an explanation of
showing a positive correlation between price and excess demand.
the quantity supplied. This is because at higher
prices, firms are more willing and more able to 10 The imposition of a tax on suppliers causes an
supply at each given price level. See page 25 in increase in their costs, thus shifting the market
the textbook for further guidance. supply curve to the left from S to S . This raises the
1 2
equilibrium price from P to P and subsequently
8 Equilibrium price occurs where demand and 1 2
reduces the quantity traded from Q to Q .
supply are equal, i.e. surpluses and shortages do 1 2
not exist, so there is no pressure on the price to
change. By contrast, disequilibrium price exists S S
when demand and supply are not equal: there 2 1
is a surplus when price is above the market P
2
equilibrium and a shortage when price is below P Tax per unit
the equilibrium. Price ($) 1
Note: the demands of the question do not require D
students to draw a demand and supply diagram,
although if students choose to do so they should O Q2 Q1
be credited accordingly. Quantity traded
9 Excess demand occurs when demand exceeds Imposition of a tax on oil suppliers
supply because the price is lower than the market
equilibrium, resulting in a shortage. See page 30 in the textbook for an explanation
of how the imposition of taxes affects market
equilibrium.
S
A shortage occurs
when demand exceeds
supply because the
Price ($)P price is lower than the
e Excess market equilibrium
P demand
1
D
O Qs Qe Qd
Quantity traded
● 4 Price elasticity
1 Price elasticity of demand 3 The correct answer is Option B. Knowing the
=percentage change in quantity demanded PED for a particular product enables firms to
percentage change in price know more about how consumer spending
%∆QD −5 is likely to change following a change in the
PED = %∆P = +10 = −0.5 price of the product. For example, if demand
Hence, the correct answer is Option C. is price inelastic, then an increase in the price
2 Price elasticity of demand will not cause consumers to change their
percentage change in quantity demanded spending by very much due to the lack of
= percentage change in price substitutes.
%∆QD −2 4 The correct answer is Option B. In the short run,
PED = %∆P = +8 = −0.25
hairdressers could work overtime if the market
Hence, the correct answer is Option A.
4 ®
Cambridge IGCSE and O Level Economics Workbook Answers
no reviews yet
Please Login to review.
