There are TWO sections in the exam paper, section A and section B.
Section A – NUMERICAL QUESTIONS 1 to 4: Answer THREE questions.
Section B – ESSAY QUESTIONS 5 to 6: Answer ONE question.
Numerical Questions: 3 out of 4 numerical questions. 25 marks each and 75 marks total.
The numerical questions are taken mainly from problem sets and additional problem sets. Some
sub-questions require a short essay-type answer (one paragraph). Carefully revise the following
topics and associated problem sets (numbering of weeks may not be consistent with published
timetable):
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Week 2: Demand and supply. Practice sketching demand and supply diagrams. Understand
what shifts demand and supply. Be able to explain price adjustments to equilibrium market
price.
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Week 3: Elasticity. Learn how to calculate price elasticity (mid-point method) and cross-price
elasticity using mid-point method. You should be able to advise a hypothetical firm whether
they should change price of a product or not given the elasticity of demand for their product.
Understand the relationship between total revenue and price elasticity of demand.
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Week 5: Costs. You should be able to calculate the values of AC, AC, MC and MR using the
given details. You should also be able to draw the graph of these variables. Be able to
interpret the cost/revenue curves and the numerical results.
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Week 6: Perfect competition & Monopoly. Be able to draw various cost and revenue curves.
Be able to impart information from diagrams and tables. Be able to apply profit maximisation
rule. Be able to differentiate between monopoly and perfect competition.
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Weeks 8-9: GDP by expenditure method and aggregate demand (AD) and aggregate supply
(AS). Be able to explain factors that shift AD and AS. You should also be able to calculate
national income, and withdrawals and injections.
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Weeks 10 - 11: Macroeconomic policy. Marginal propensity to consume and spending
multiplier. A good overall review of this topic helps with answering the essay question too
(see below).
You should also practice with the exam prep numerical problem set provided in exam revision tab.
Essay questions: 1 out of 2 topics. 25 marks.
Choose one only!
• Topic 1. Market failure, case for government intervention.
• Topic 2. Macroeconomic policy analysis.
Topic 1. Market Failure (week 4) – chapter 7, 3rd Edition. Refer to QMPlus course page for
information about relevant chapters in older editions of Mankiw text.
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Be able to explain with examples positive or negative externalities in production or
consumption. Be able to demonstrate your answer with graphs/diagrams.
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You should also be able to use graphs/diagrams to describe how externalities are
internalised through government intervention.
You should be able to discuss the instruments with which government may intervene i.e.
taxes, subsidies, regulations, property rights etc. using graphs.
Read chapter 7, and do problem set 4 and associated additional problem set.
Topic 2. Macroeconomic policy and AD – chapter 20 and 21, 3rd Edition. Refer to QMplus course
page for information about relevant chapters in older editions of Mankiw text.
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Review the concepts/topics related to short run Aggregate Supply and Aggregate Demand.
Be able to explain, in words and in graphs, how government can affect AD/AS using various
policy tools.
Be able to explain government’s use of expansionary/contractionary policy tools in times of
recession/boom and how this action affects the AD/AS and money market.
Review chapter 20 and read chapter 21; do related problem sets.