Q1.

Problems of overpopulation:
Overpopulation in Bangladesh resulted in overcrowded areas with traffic congestion as there are too many
vehicles on the roads, especially in cities such as Dhaka. Vehicle emissions, industrial discharge and
burning of fossil fuels have resulted in air pollution, while the groundwater has been polluted due to arsenic.
Furthermore, shortage of food led to over cultivation on the floodplains of the Ganges river, causing lower
yields and soil exhaustion. Another major problem is the widespread deforestation for firewood on the
slopes of the Himalayas.
The capital of Bangladesh, Dhaka, also suffers from severe housing shortages due to mass urbanisation.
 
(a) Define the term ‘Market Failure’. [2 marks]

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(b) What are the consumption externalities observed above? [4 marks]

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(c) What are the production externalities observed above? [4 marks]

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(d) Suggest ways in which the government can intervene to prevent the negative production & consumption
externalities. [8 marks]

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(e) In particular, explain the effect of laws & regulations in curbing the externalities. [4 marks]

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(f) Define the term ‘Social Costs’. [2 marks]

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(g) Define the term ‘Social Benefits’ [2 marks]

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(h) List the personal benefits & costs of vehicle owners & industrialists in Dhaka.

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Q2. China: One Family One Child Policy
Anti-natal population policy
China is the world's most populous country with more than 1.3 billion people in 2014. Representing 20% of
the world’s people, China suffers from extreme overpopulation.
In 1965 the birth rate had grown to 40 births per 1000 until politicians realised the growing problem and
launched the One Family One Child Policy in 1979.

Encouragements to limit to one child Penalties

· 5-10% salary bonus · fines: US$ 400-US$ 1400

· free education and health · 10% salary reduction

care

· free contraceptives · no free education

· preferential employment · no free access to health care

· preferential housing · forced abortion

  · not allowed to buy a house

 
(a) What kind of market structure is referenced above? Give reasons for your answers. [4 marks]

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(b) Distinguish between market & mixed economies. [4 marks]

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(c) What are the benefits & limitations of a market economic system? [6 marks].

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(d) State the benefits & limitations of a mixed economic system. [6 marks].
 
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Q3. Below is the Renting / Housing Market of Victoria:

 
(a) Define the term ‘market equilibrium. [2 marks].

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(b) What is the equilibrium price & quantity in the above diagram? [2 marks].

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(c) Assume that 3000 landlords decide to switch from renting to Airbnb, explain its impact on the market
equilibrium with the help of a diagram. [6 marks]

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(d) Assume 9000 new renters enter the market instead of mortgaging homes, explain its impact on the
market equilibrium due to the Airbnb business and the introduction of the new renters. [6 marks]

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(e) Is there market failure in this case? Justify your answer. [2 marks]

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(f) How can government intervention help the consumers acquire a rented property? [4 marks]

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Q4. The United Nations’ World Tourism Organisation has estimated that the proportion of the world’s
population who have visited another country will have reached only 7% by 2020. Increasing international
travel might create jobs and influence incomes. However, it would also put pressure on finite resources and
would create external costs. 
 
(a) Define ‘resources’. [2] 

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(b) Explain how international travel may create external costs. [4] 

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(c) Analyse how an increase in international travel may influence incomes. [6] 

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(d) Discuss whether demand for international travel is likely to continue to increase. [8]

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(e) Define the terms ‘external cost’ & ‘external benefit’. [4]

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(f) What are the private costs & benefits of international travel? [2]

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(g) What are the external costs & benefits of international travel? [2]

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Q5. A heatwave in July 2013 in the United Kingdom resulted in sales of ice cream more than doubling.
Extra workers were taken on to meet the higher demand. In recent years, the demand and supply
conditions of ice cream have changed, leading to demand and supply becoming more elastic. The market
has also been influenced by government policies and by changes in the country’s economic growth rate. 

(a) Define ‘supply’. [2] 

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(b) Explain two ways a government could influence the price of a product. [4] 

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(c) Analyse why demand for a product may become more price elastic. [6]

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(d) Which sector of the industry is referenced above? Define the same. [2]

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Q6. It is hard to believe that any government of a country is promoting alcohol consumption among its
citizens, especially young adults. You might not trust it but Japan has launched a campaign to promote
alcohol consumption in the country. The youths in the age group of 20 and 39 have been asked to
purchase Japanese alcoholic drinks such as sake, shochu, awamori, beer, whisky and wine. The country’s
National Tax Agency (NTA) announced a campaign namely ”Sake Viva!” to promote drinking in its younger
population. The campaign aims to revitalise the liquor industry and solve its problems. It also demands
youngsters to share business ideas that might help to boost Japanese alcoholic drinks, as mentioned
above.
 
(a) Define the terms ‘merit goods’ & ‘demerit goods’ with supporting examples. [4 marks].

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(b) Distinguish between public goods & economic goods. [4 marks]

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(c) What contradictory government interference is referenced above? [2 marks]

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(d) What are the private costs of alcohol consumption? [2 marks].

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(d) What are the social costs & benefits of alcohol consumption? [4 marks]

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Q7. During the COVID 19 pandemic, the fixed consumption was that of food & electricity. Other consumer
goods such as branded clothes, accessories, cosmetics etc. saw severe decline in sales. The government
ensured that food was listed as an ‘essential service’. In order to ensure that the lockdowns were lifted, the
government ensured that free of cost vaccinations were administered to its adult populations.
 
(a) Define the term ‘subsidy’.

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(b) With reference to the food, explain with the help of a diagram, its price elasticity of demand.

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(c) Explain any 4 factors which affect the price elasticity of demand for a product. 

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(d) What is meant by the term price elasticity of supply?

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(e) What are factors affecting the elasticity of supply of vaccinations?

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(f) With the help of graphs, explain the degrees of price elasticity of demand. [8]

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(g) With the help of graphs, explain the degrees of price elasticity of supply [8]

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(h) Will it make sense for the government to increase the corporate tax applied on Blackberry Mobile Phone
handsets? Justify your answer in context with price elasticity. [4]

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Q8. Draw the appropriate demand curve for the following:
a. Company A produces strawberries. The price increases from $100 to $200 per box. The change in
demand is from 1500 units to 1000 units. 

b. The price of Pepsi increases. Draw the change in demand for Coca-Cola.

c. The price of petrol increases. Draw the change in demand for Honda Civic Cars.
 
Q9. Draw the appropriate supply curve for the following:
a. Company A produces strawberries. The price increases from $100 to $200 per box. The change in
supply is from 1500 units to 2000 units. 

b. Price Elasticity sums: Calculate the PE & state its type:

 
1. Yesterday, the price of envelopes was $3 a box, and Julie was willing to buy 10 boxes. Today,
the price has gone up to $3.75 a box, and Julie is now willing to buy 8 boxes. Is Julie's demand for
envelopes elastic or inelastic? What is Julie's elasticity of demand?
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2.  Katherine advertises to sell cookies for $4 a dozen. She sells 50 dozen, and decides that she
can charge more. She raises the price to $6 a dozen and sells 40 dozen. What is the elasticity of
demand? 
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3. A producer offers to sell 400 units of a commodity when its price is 10 per unit, while only 200 units are
offered if the price reduces to 5 per unit. Find elasticity of supply.
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