Unit 1: Introduction to Economic Principles · 2520U10-1
WJEC AS Unit 1, June 2017
All 7 written questions and 15 multiple choice questions from WJEC AS Unit 1 (June 2017), Introduction to Economic Principles. Each question shows its marks and topic, with an examiner insight on 3, and opens the question paper and mark scheme at the right page.
Section A
Q1
Production Possibility Frontier AB has changed to AC. This is most likely to have been caused by: Agricultural Goods A B C Military Goods
- AWar breaking out leading to a reallocation of resources towards military goods
- BDestruction of factories during wartime
- CAn increase in productivity in the military goods industry
- DA population increase
- EA decrease in the number of agricultural goods produced
Show the answer
The answer is C.
TopicThe economic problem and resource allocationCosts, revenues and profit
Q2
Which of the following is a withdrawal from the circular flow of income of an economy?
- ASpending on imports
- BSpending on exports
- CConsumption
- DWelfare payments to households
- EInvestment
Show the answer
The answer is A.
TopicAggregate demandNational income and the circular flowInternational trade and exchange rates
Q3
The largest component part of aggregate demand in the UK is:
- ASpending on imports
- BSpending on exports
- CConsumption
- DWelfare payments to households
- EInvestment Questions 4 and 5 refer to Table 1 (below). Year 2013 2014 2015 Price Index Price Index Price Index Chewing 80p 100 88p X Y 115 Gum Table 1
Show the answer
The answer is C.
TopicAggregate demandInternational trade and exchange rates
Q4
The correct figure for X is: A 88
Show the answer
The answer is D. Open the question paper to read the options.
Q5
The correct figure for Y is:
- A£1.15
- B£1.03
- C98p
- D95p
- E92p
Show the answer
The answer is E.
Q6
Which of the following is an example of investment in the economic sense?
- AA bank deposit account
- BBuilding a new factory
- CBuying a house
- DBuying gold and silver
- ESaving money
Show the answer
The answer is B.
TopicAggregate demand
Q7
An increase in the level of investment in an economy will not lead to:
- AAn increase in aggregate demand
- BA shift outwards of the production possibility frontier
- CImprovements in productivity
- DA shift leftwards of aggregate supply
- EA fall in the costs of production
Show the answer
The answer is D.
TopicAggregate demandAggregate supplyThe economic problem and resource allocation
Q8
A professional rugby players' union negotiates a contract that dramatically increases all players' salaries. How would this influence the opportunity cost for a player who was considering giving up rugby to pursue a career in television and radio broadcasting?
- AIt would increase the opportunity cost of continuing to play rugby
- BIt would increase the opportunity cost of becoming a broadcaster
- CIt would decrease the opportunity cost of becoming a broadcaster
- DIt would not affect the opportunity cost of playing rugby or of broadcasting
- EIt cannot be determined from the given information Questions 9 and 10 refer to the maximum price diagram below. Price £ 20 S 5 Max Price D 80m 120m 160m 200m Quantity
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The answer is B.
TopicThe economic problem and resource allocationGovernment intervention in markets
Q9
Calculate producer surplus before the imposition of the maximum price at £5:
- A£2 000 m
- B£1 200 m
- C£1 000 m
- D£800 m
- E£600 m
Show the answer
The answer is E.
TopicDemand, supply and elasticityGovernment intervention in markets
Q10
Calculate consumer surplus after the imposition of the maximum price at £5:
- A£2 000 m
- B£1 200 m
- C£1 000 m
- D£800 m
- E£600 m Questions 11 and 12 refer to the following extract: During the summer, Iris sets up a lemonade stall on her street. On day one she sells 48 glasses of lemonade at a price of 40p each. That evening, her father tells her that if she wants to make more money she should increase her price to 50p. She takes his advice and on day two she sells 42 glasses.
Show the answer
The answer is C.
TopicDemand, supply and elasticityGovernment intervention in markets
Q11
Calculate price elasticity of demand (PED) for glasses of lemonade between day one and day two.
- A–0.5
- B2
- C–2
- D0.5
- E–1.25
Show the answer
The answer is A.
Q12
What was the difference in revenue between day one and day two?
- A£21.00 increase
- B£19.20 increase
- C£7.20 increase
- D£3.40 increase
- E£1.80 increase
Show the answer
The answer is E.
Q13
Using the data below, which of the following countries has the largest GDP per person? Country GDP Population
- A$50 bn 2.5 m
- B$100 bn 10 m
- C$500 bn 25 m
- D$1 000 bn 40 m
- E$1 500 bn 750 m
Show the answer
The answer is D.
Q14
Which of the following trade policies is unlikely to reduce the number of imports into a country?
- AAppreciation of the exchange rate
- BIncrease the tariffs on imports
- CImpose an embargo on imports
- DIncrease subsidies to domestic firms
- EIntroduce import quotas
Show the answer
The answer is A.
TopicInternational trade and exchange ratesGovernment intervention in markets
Q15
"Once a public good is produced, anyone can enjoy it, even those who did not pay for its consumption." This statement describes which economic concept?
- AAn absence of private property rights
- BFree-rider problem
- CGovernment failure
- DPerfect factor substitutability
- EAsymmetric information
Show the answer
The answer is B.
TopicMarket failureAggregate demandGovernment intervention in markets
Section B
Q16
Using the data, compare the likely income elasticities of demand (YED) for milk and alcohol.
Q17(a)
Using examples from the data, define the concept of private costs and external costs of alcohol consumption.
TopicAggregate demandMarket failure
Q17(b)
Using an appropriate diagram, discuss the extent to which public health campaigns alone can solve the market failure problem associated with alcohol consumption.
Mark splitKnowledge 1Analysis 3Evaluation 4
TopicAggregate demandMarket failure
Examiner insight
- What to cover
- Show alcohol as a demerit good with external costs, then explain how an awareness campaign works: better information shifts demand left towards the social optimum. Use the campaign described in the stem, not policies in general.
- Diagram
- Negative externality in consumption: MPB above MSB, the welfare loss triangle at the free market quantity, and demand shifting left to the socially optimal output.
- Evaluation
- Judge the campaign itself: addiction and habit make demand inelastic, information takes years to change behaviour, young drinkers may ignore it, and the cost is funded from tax revenue. A comparison with tax or minimum pricing is only worth marks as a benchmark for the campaign.
- Watch out
- The single biggest mark loser was evaluating other policies instead of the awareness campaign named in the question. Those answers could not reach the top AO4 band.
- How it went in the exam
- Examiners said candidates generally handled the AO1 and AO3 parts well, so the whole difference was in evaluating the named policy.
Q18(a)
(i) Calculate the % of the teacher's gross annual income paid in income tax. (ii) How much would a person earning £10 000 per year pay in income tax?
Mark splitKnowledge 1Application 1
Q18(b)
Using the data, outline why income tax is generally considered to be progressive.
Mark splitKnowledge 2Application 2
Q18(c)
Using a Laffer Curve diagram, discuss whether increasing the additional rate of income tax can successfully reduce income inequality in the UK.
TopicPoverty and inequalityPublic finances and the role of the stateGovernment intervention in markets
Examiner insight
- What to cover
- Link the two ideas explicitly. Use the Laffer curve to explain what a higher additional rate does to revenue, incentives, avoidance and migration of high earners, then say what each of those does to the gap between rich and poor.
- Diagram
- Laffer curve with the additional rate marked before and after the rise, and the revenue maximising rate identified.
- Evaluation
- Make two or three arguments either way: more revenue funds redistributive spending, versus avoidance and lower effort meaning little extra revenue and no fall in inequality. Judge where the UK rate sits on the curve.
- Watch out
- Drawing and explaining a Laffer curve with only a passing mention of inequality scored about 3 out of 8. The question tests the link between the two.
- How it went in the exam
- Examiners called this the most demanding question in Unit 1 and said it polarised candidates. The best answers gave two or three inequality arguments built on the curve.
Q19
Discuss how the introduction of the National Living Wage is likely to affect investment within the Welsh economy.
TopicAggregate demandThe labour market
Examiner insight
- What to cover
- Take the National Living Wage as a cost shock to Welsh firms and trace two or three routes to investment: lower retained profit, substitution of capital for labour, higher consumer spending raising expected demand and the accelerator.
- Diagram
- Labour market with a wage floor above equilibrium, or an AD and AS diagram if the argument runs through spending and expected demand.
- Evaluation
- Weigh the routes against each other, using the Welsh data on low pay areas such as Dwyfor Meirionnydd. Consider the size of the rise, the share of low paid staff in a firm's costs, and the state of business confidence.
- Watch out
- Most candidates made one or two points in context but did not develop them. Depth, not breadth, is what reaches the top AO3 and AO4 bands here.
- How it went in the exam
- The mean was 4.7 out of 8. Examiners called this the most open question on the paper, with several valid lines of analysis.
Question text is quoted from the question papers, © WJEC CBAC Ltd, for students’ private study. Open the official papers and mark schemes from the links on each question. Examiner insights are written with AI assistance and moderated by Finn.