EoC tests
IB1
Mon 25 Aug 2014
1. Define ”correlation” and ”causality”. (2p)
2. Explain, using a PPF, how an increase in government spending on
education might affect an economy. (4p)
3. Evaluate the statement “A market economy solves the ‘basic
economic problem’ perfectly!” (4p)
Time: 25 minutes
End: 08:31
Correctives
Note: anything that is reasonable/valid/relevant will earn marks – no matter if
I happen to have remembered it in the correctives are not! Also: the hazily
written is assumed to be hazily understood.
1. a) “…two variables show a pattern….” or “…a change in one variable
coincides with a change in another variable…” – 1p; b) “…when a
change in one variable causes a change in another variable…” – 1p
2. For diagr showing a fully-labelled PPF (axes have goods, dotted lines,
Q0 and Q1…etc) where the PPF shifts outwards, 2p. For explanation
that any increase in the quality/quantity/availability of FoPs →
increase in potential output, up to 2p; for basic assumptions, 1p; for
distinguishing between de facto and potential output, 1p. (Yes, the
sum is more than 4p. I am giving you some room for genius – you still
cannot receive more than 4p.)
3. The basic answer is to outline the basic econ question…adress its
successes…and think your way to a reason why the market system
might fail. That is correct; you need to THINK here since I have not
given you a pre-regurgitated answer.
a. Basic outline of basic econ problem, 1p
b. Reasonable use of “resource allocation” or “price
mechanism”, 1p
c. Basic outline of how a market addresses the issue (supply and
demand, “invisible hand”…), up to 2p
d. Eval, up to 2p for something along the following lines;
 Pollution and income distribution are issues not ‘solved’
by markets
 Many goods are under-provided by markets – health care
and street lights for example
 Many goods are over-provided – such as tobacco and
alcohol
 There are issues with sustainability – fish stocks, forests,
fresh water…etc
Thursday 4 Sept 2014 (EoC nr 2): Ch’s 1 – 6
1. Define opportunity cost. (2p)
2. Explain, using a diagram, the difference between “…change in
quantity demanded…” and “…change in demand…” (4p)
3. There are three firms on the market. Here are the individual supply
curves:
Red
Blue Firm
Green Firm
Market
Quantity at diff prices
Firm
0
0
0
0
Quantity supplied at $5
5
10
15
30
Quantity supplied at $10
10
20
30
60
Quantity supplied at $15
Draw a market diagram (2p) and calculate quantity supplied on the
market at a price of $12 (2p). No calculators! Think.
Time: 20 minutes
End: 08:27
Correctives
Note: anything that is reasonable/valid/relevant will earn marks – no matter if
I happen to have remembered it in the correctives are not! Also: the hazily
written is assumed to be hazily understood.
1. The second best alternative foregone in a list of ranked alternatives.
“…alternative foregone…” (1p); “…second best…” (1p)
2. The first is a movement along and caused by a change in prices (1p)
and the second is a shift in the demand curve and caused by a change
in a non-P determinant of demand (1p). Diagram illustrating the
above clearly (2p). Note that a hazy explanation can still merit full
marks for good use of economic terms, such as correlation/causality,
extension/contraction of demand, “…ΔQd at all price levels is a shift
in the D-curve…”…etc.
3. The market supply curve will ‘hit’ (intercept) the P-axis at $5 and
then increase by 30 units per $5 increase in price. Thus, we get three
P&Qs pairs; P=0 and Q=5, P=10 and Q=30; P=15 and Q=60. (2p)
Then the higher order learning; the slope (HL concept really) tells us
that for each $ increase in price, Qs increases by 6 units (Δ↑P of $5
→ Δ↑Qs of 30…so 1/5 of this change in price is 1/5 of the change in
Qs). At a price of $12 we will see Qs = 42 units. (2p)
17 Sept 2014 (EoC nr 3): Ch’s 1 – 6
Time: 20 minutes
End: 08:27
Correctives
Note: anything that is reasonable/valid/relevant will earn marks – no matter if
I happen to have remembered it in the correctives are not! Also: the hazily
written is assumed to be hazily understood.
1. Define “demand”. (2p) “…quantity demanded at a price…” (1p);
“…effective demand…” (1p); “…able and willing to purchase at a
given price…” (2p). For viable diagram well-used in a def, full marks
are possible.
2. Explain, using an appropriate diagram, how increasing oil prices
might affect the market for taxi services. (4p) From oil cometh
gasoline which is a FoP in taxi services (1p) → so any increase in the
price of oil will increase costs (1p) for taxi firms → this decreases
supply (1p) and raises the price whereby the Qd decreases (1p).
3. Explain how a tax on cigarettes might decrease the quantity that
consumers buy and evaluate government’s attempt to reduce smoking
in this way. (4p)Definition of this tax as an indirect or expenditure tax
(1p) → increase in costs for cigarette producers which ↓S + ↑P +
↓Qd (1p) → might not decrease the Qd that much because demand
for cigarettes can be assumed to be highly inelastic (insensitive to a
change in price) which is worth 2p.