MICROECONOMICS
PAST PAPER ESSAY QUESTIONS
THE BASIC ECONOMIC PROBLEM
SPQ1a
Explain what is meant by scarcity and why it is the basic economic problem.
2007Q1a
8
Explain what is meant by “scarcity” in economics.
2009Q1a
Explain why resources are scarce.
2010Q1a
Explain the difference between scarcity and shortages.
2011Q1a
Explain, using examples, the difference between:
(i) economic goods and free goods;
(ii) private goods and public goods.
2012Q1a+b
Explain why the basic economic problem means that choices will always have to be made by individuals, firms and the government.
Explain, using production possibility diagrams:
(i) productive efficiency;
(ii) opportunity cost.
DEMAND
2007Q2a
5
5
6
8
7
8
A recent survey revealed that people on lower incomes smoke more cigarettes than people on higher incomes. Using the information in this sentence, explain:
(iii) the difference between positive and negative income elasticity of demand;
(iv) the difference between progressive and regressive taxation.
2007Q2b
10
Describe 3 factors that can affect a product’s price elasticity of demand. 6
Higher Economics 1 Knox Academy

MICROECONOMICS
PAST PAPER ESSAY QUESTIONS
2009Q4a
(i) Describe the law of diminishing marginal utility and explain how it influences the slope of a normal demand curve.
(ii) Explain, using examples, why the demand curve for some goods slopes upwards from left to right.
7
8
2011Q45b-d
Explain, using an example and a formula, what is meant by price inelastic demand. 6
Explain why the income elasticity of demand for some goods is positive and for other goods is negative. 5
Describe 3 factors which can affect the price elasticity of demand for a product. 6
2012Q4a
Explain the shape of a normal demand curve.
Explain 2 reasons why some demand curves are abnormal.
SUPPLY
SPQ3a+b
The market for houses includes the demand for both owner-occupied housing and rented accommodation.
6
4
Explain how increases in interest rates affect the market for rented accommodation in the short term. (A diagram will be useful when answering this question.)
Explain, how an increase in the supply of rented accommodation in
London may influence the level of labour shortages in London.
SPQ5a+b
Using a diagram, explain the relationship between short run average total costs and marginal costs.
Explain what is meant by long run average total costs and explain why long run average costs usually fall as output increases.
2007Q5b
Explain why:
12
5
8
10
Higher Economics 2 Knox Academy

MICROECONOMICS
PAST PAPER ESSAY QUESTIONS
(i) short run average total cost curves are usually U-shaped;
(ii) long run average total cost curves are usually U-shaped. 15
2009Q4b
Explain how the law of increasing and diminishing returns and explain how it can be used to account for the shape of a marginal cost curve. 10
2010Q6b
Explain what is meant by long run average costs.
Describe the reasons why a long run average cost curve falls and then rises.
2011Q2b+c
10
Describe and account for the shape of an average fixed cost curve and an average variable cost curve.
Explain why a firm might continue to produce when its price (average revenue) is well below its average total cost.
2012Q3a+b
7
10
Explain, using a diagram, what happens to a firm’s average total costs in the short run.
Explain, using examples, what is meant by internal and external
7
10 economies of scale.
THE OPERATION OF MARKETS
SPQ1b
Explain, using a diagram, how the setting of a maximum price can create a shortage in a market.
2007Q2c
Explain why governments may intervene in the market for some goods and services.
2009Q1b-d
Describe how the price mechanism allocates resources.
Suggest reasons for the increased use of the price mechanism as a method of allocating resources.
7
9
6
6
Higher Economics 3 Knox Academy

MICROECONOMICS
PAST PAPER ESSAY QUESTIONS
Describe some of the problems which can arise from allowing the price mechanism to allocate resources.
2010Q2
Define technical and economic efficiency and explain the relationship between them.
Explain, using examples, what is meant by market failure.
Describe ways in which governments intervene to try to correct market failure.
Identify one method of allocating resources, other than the price mechanism, and briefly explain how it works.
2012Q6a+b
Describe 4 examples of “market failure”.
Explain how the government intervenes to correct market failure.
TYPES OF MARKET
2007Q5a
Compare and contrast the characteristics of perfect competition and monopoly.
2011Q2a
Explain, using examples, what is meant by “barriers to entry”.
2012Q6c
Describe the characteristics of an oligopolistic market.
8
6
9
6
4
8
6
10
8
5
Higher Economics 4 Knox Academy