Section A

One or two of your chosen questions must be from this section

1. A brighter economic picture and lower airfares are keeping demand for travel strong. But
as costs rise, this stimulus of lower fares is likely to fade. This is exacerbated by uncertainties
such as Brexit. Nonetheless, the airline industry is still expected to see growth.
Source: Global Travel Media
Discuss the effects of the above changes on different types of airlines and the other related
markets. [25]

2. An economist said Adaptability is more important than economies of scale and corporate
process efficiency. Companies need to shift their focus towards being more agile and sensitive
to changing consumer preferences.
(a) Explain how firms can reap internal economies of scale. [10]
(b) To what extent should large firms focus on economies of scale to boost profit? [15]

3. Universities in Australia might be hit with $1.2 billion in funding cuts under the new budget
proposals, with data showing some institutions are set to lose up to $57 million over the next
four years.
Source: Various
(a) Explain why the government intervenes in the market for education. [10]
(b) Discuss the view that the reductions in subsidies for university education are justified. [15]
 Section B
One or two of your chosen questions must be from this section
1. An economist said Its easy for a country to move outward towards the production
possibility frontier. Its much harder to push the frontier outward.
Source: The Economist
(a) Explain how elasticity concepts assists us in understanding the effects of macroeconomic
policies. [10]
(b) Discuss policies that a government can use to move an economys production possibility
curve (PPC) outwards. [15]

2. Germanys inflation rate rose from 0.8% in 2015 to 1.7% in December 2016. Much of this is
because of the oil price, which fell below $30 a barrel in the early months of 2016 but has
recently risen above $50.
Source: The Economist
(a) Explain why a country might experience a persistent rise in its general price level. [10]
(b) Discuss whether reducing inflation is the most important task for a government. [15]

3. There have been many arguments for and against protectionism. One argument against it
is that tariffs raises prices for consumers .

(a) Explain the methods a government might use to protect its national industries from foreign
competition. [10]
(b) Discuss whether protectionism can ever be justified. [15]
Discuss whether reducing inflation is most important task for a government.

- Harming international competitiveness

- More unequal distribution of income

- Lesser planning capability for firms as they cannot predict cost and revenue structures

- Importance to other government objectives

EV: Rate of inflation, its comparative level relative to trading partners, and seriousness of other
economic problems may indicate alternative emphasis.

Explain why a country might experience a persistent rise in its general price level.

Tariffs, quotas and embargoes or subsidies

Yes - infant industry, anti dumping, bop deficit etc

No - goes against comparative advantage