Component 1: Economic Principles · A520U10-1
Eduqas A-level Component 1, June 2024
All 6 written questions and 20 multiple choice questions from Eduqas A-level Component 1 (June 2024), Component 1: Economic Principles. Each question shows its marks and topic, and opens the question paper and mark scheme at the right page.
Section A
Q1
Which one of the following shows a relationship between income tax rates and income tax revenue?
- APhillips curve
- BProduction possibility frontier diagram
- CAggregate demand curve
- DMarshall-Lerner condition
- ELaffer curve
Show the answer
The answer is E.
TopicMacroeconomic objectives and policyGovernment intervention in marketsInternational trade and exchange rates
Q2
Following a change in the pattern of demand, an economy starts to produce more agricultural goods and fewer manufactured goods. There are no other changes in the economy. Which of the following production possibility frontier diagrams best shows this change? (Options A to E are diagrams: see the question paper.)
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The answer is E. Open the question paper to read the options.
Q3
The table below contains estimates of price elasticity of demand and income elasticity of demand for cigarettes in Greece. Price elasticity of demand (PED) −0.44 Income elasticity of demand (YED) +1.04 Which of the following is true for cigarette demand in Greece?
- ACigarettes are an inferior good with inelastic PED
- BPED is inelastic and cigarettes are a normal good
- CCigarettes are an inferior good with elastic YED
- DChanges in price and income both cause a more than proportional change in the demand for cigarettes
- EYED is inelastic and PED is elastic
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The answer is B.
Q4
A firm in perfect competition is in long run equilibrium. If that firm increased its output, which of the following would show the effects on its marginal cost, price and profit?
- AMarginal cost: Fall; Price: Fall; Profit: Rise
- BMarginal cost: Rise; Price: Fall; Profit: Fall
- CMarginal cost: No change; Price: Fall; Profit: Rise
- DMarginal cost: Rise; Price: No change; Profit: Fall
- EMarginal cost: Fall; Price: No change; Profit: Fall
Show the answer
The answer is D.
TopicCosts, revenues and profitMarket structuresDemand, supply and elasticity
Q5
A rational individual will consume a product which has a zero price up to the point at which:
- AMarginal utility is maximised
- BTotal utility = marginal utility
- CMarginal utility = 0
- DMarginal utility begins to diminish
- ETotal utility exceeds marginal utility
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The answer is C.
Q6
The chart in the question paper shows Azerbaijan's budget/fiscal balance (millions of manat) between 2017 and 2021, with surpluses in some years and deficits in others. Which of the following charts best represents what would have happened to Azerbaijan's government/national debt in manat? (Options A to E are diagrams: see the question paper.)
Show the answer
The answer is A. Open the question paper to read the options.
TopicPublic finances and the role of the stateMacroeconomic objectives and policy
Q7
According to the Phillips curve, in the short run:
- AHigher inflation leads to higher unemployment
- BHigher inflation leads to lower unemployment
- CLower unemployment leads to higher inflation
- DHigher unemployment leads to higher inflation
- EUnemployment has no effect on the level of inflation
Show the answer
The answer is C.
TopicMeasuring economic performanceMacroeconomic objectives and policy
Q8
A driver paid £90 for unleaded petrol, including 20% VAT. How much would the petrol have cost before VAT was added?
- A£18
- B£70
- C£72
- D£75
- E£78
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The answer is D.
Q9
The table below shows Consumer Prices Index (CPI) data for five countries (May 2021, May 2022). Brazil: 5740, 6410. Chile: 109, 122. Honduras: 355, 387. UK: 110, 120. USA: 269, 292. Which of the countries in the table had the highest rate of inflation over the period shown?
- ABrazil
- BChile
- CHonduras
- DUK
- EUSA
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The answer is B.
Q10
The diagram in the question paper shows the marginal product of labour for a firm at different levels of employment. Which of the following total product curves would be consistent with that marginal product curve? (Options A to E are diagrams: see the question paper.)
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The answer is C. Open the question paper to read the options.
Q11
A firm produces 3 products, X, Y and Z. The firm cuts the price of X from £20 to £16. At £20, annual demand is 150 million for X, 250 million for Y and 80 million for Z. At £16, it is 165 million for X, 300 million for Y and 60 million for Z. The cross price elasticity of demand (XED) between product X and its complement is:
- A−0.5
- B−1.0
- C−1.25
- D+1.0
- E+1.25
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The answer is B.
Q12
In 2021 smartwatches were added to the basket of goods used to calculate the Consumer Prices Index (CPI), but white chocolate was removed. Which of the following is the most likely explanation for this decision?
- ASmartwatches have been on sale for some years
- BSales of white chocolate have fallen to zero
- CThe price of smartwatches has risen
- DThe tax on chocolate has increased
- EThere has been a change in the pattern of demand
Show the answer
The answer is E.
Q13
The chart in the question paper shows expenditure on research and development (R&D) as a percentage of GDP in different countries and regions in 2014 and 2018. For the countries and regions shown, which of the following can be concluded from the chart?
- AAustralia spent less in total on R&D in 2018 than it did in 2014
- BIn total, Israel spends the largest amount on R&D
- CTotal spending on R&D is lowest in the Caribbean
- DSpending on R&D as a percentage of GDP rose in all countries between 2014 and 2018
- EWest Asia had the fastest proportional growth in R&D spending as a percentage of GDP between 2014 and 2018
Show the answer
The answer is E.
Q14
Some countries have much higher GNP/GNI than GDP. One possible reason for this might be:
- ALarge numbers of multinational corporations producing in these countries but sending profits abroad
- BCitizens of these countries working abroad but sending some of their salary back home
- CCountries such as these having large budget/fiscal surpluses
- DCountries such as these having large current account deficits
- EThese countries often pay large amounts of foreign aid to other countries
Show the answer
The answer is B.
TopicMeasuring economic performanceInternational trade and exchange ratesGrowth and development
Q15
The diagram below shows the production possibilities for two fictional countries, Gondwana and Laurasia, producing Product X and Product Y. The theory of comparative advantage would suggest that: (The diagram is in the question paper.)
- ATrade is possible at a rate of exchange of 1X for 1Y
- BTrade is not possible because Laurasia has an absolute advantage in the production of both X and Y
- CLaurasia has comparative advantage in the production of Y
- DGondwana has absolute advantage in Y
- EGondwana will sell X to Laurasia
Show the answer
The answer is A.
TopicInternational trade and exchange ratesThe economic problem and resource allocation
Q16
The diagram below shows the results of government action to reduce the consumption of a demerit good. Supply shifts from S1 to S2 and demand shifts from D1 to D2; the price rises from P1 to P2 and the quantity falls from Q1 to Q2. Which of the following policies are best represented by the diagram?
- AA subsidy for a substitute and regulations that increase the cost of the ingredients
- BA maximum price for the product and an information campaign outlining the dangers of consumption
- CAn increase in a specific indirect tax on the product
- DA reduction in the legal age at which the product can be bought by consumers
- EA minimum price for the product and a subsidy for a substitute
Show the answer
The answer is A.
TopicGovernment intervention in marketsDemand, supply and elasticityAggregate demand
Q17
In 2021 Amazon purchased film studio MGM, which has a film catalogue of more than 4000 films that can be streamed on Amazon Prime. This is an example of
- ABackward vertical integration
- BForward vertical integration
- CConglomerate integration
- DHorizontal integration
- EDiseconomies of scale
Show the answer
The answer is A.
TopicBusiness growth and objectivesCosts, revenues and profit
Q18
An economy is experiencing a sharp fall in aggregate demand (AD). Which of the following sets of policies would be consistent with trying to reverse this?
- ATaxes: Increase; Government spending: Increase; Central bank interest rate: Increase; Central bank bond purchases/sales: Increase purchases; Currency purchases/sales: Buy own currency
- BTaxes: Decrease; Government spending: Increase; Central bank interest rate: Decrease; Central bank bond purchases/sales: Increase sales; Currency purchases/sales: Sell own currency
- CTaxes: Decrease; Government spending: Increase; Central bank interest rate: Decrease; Central bank bond purchases/sales: Increase purchases; Currency purchases/sales: Sell own currency
- DTaxes: Decrease; Government spending: Decrease; Central bank interest rate: Increase; Central bank bond purchases/sales: Increase sales; Currency purchases/sales: Buy own currency
- ETaxes: Increase; Government spending: Decrease; Central bank interest rate: Decrease; Central bank bond purchases/sales: Increase sales; Currency purchases/sales: Buy own currency
Show the answer
The answer is C.
TopicThe financial sectorMacroeconomic objectives and policyAggregate demand
Q19
The diagrams in the question paper show different demand curves for different firms (A-E). Which firm would gain higher revenue from a small increase in price? (Options A to E are diagrams: see the question paper.)
Show the answer
The answer is D. Open the question paper to read the options.
Q20
The diagram below shows the effect on the market for a product following the imposition of a maximum price of £20. The values of consumer surplus and producer surplus if price is at £20 are: (The diagram is in the question paper.)
- AConsumer surplus: £400; Producer surplus: £1200
- BConsumer surplus: £400; Producer surplus: £300
- CConsumer surplus: £1600; Producer surplus: £1200
- DConsumer surplus: £3025; Producer surplus: £300
- EConsumer surplus: £1800; Producer surplus: £300
Show the answer
The answer is E.
TopicDemand, supply and elasticityGovernment intervention in markets
Section B
Q21
Using the data, explain the link between the two charts.
TopicThe financial sectorMacroeconomic objectives and policy
Q22
The diagram below illustrates the costs and benefits involved in the provision of a merit good such as healthcare services. Using the diagram, discuss whether societies should provide healthcare services free at the point of use (like the National Health Service in the UK).
TopicMarket failure
Q23
Use the data to explain where the Nash equilibrium is in this matrix.
Q24
Using the data, discuss whether a rise in interest rates decided by the Monetary Policy Committee of the Bank of England will bring down inflation to its target level.
TopicMacroeconomic objectives and policyMeasuring economic performance
Q25
Discuss whether it is reasonable to say that Gabon has a higher level of human development than Tajikistan.
TopicGrowth and developmentMeasuring economic performance
Q26
Using a supply and demand diagram(s), discuss whether the data suggests that copper prices are more likely to rise or fall in the future.
TopicMacroeconomic objectives and policyEconomic growth and the economic cyclePublic finances and the role of the state
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