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June 2012 Ec1

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Past paper from June 2012. EC1
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  • 1131

    0100

    01

    ADDITIONAL MATERIALS

    In addition to this examination paper, you will need a calculator.

    INSTRUCTIONS TO CANDIDATES

    Use black ink or black ball-point pen.

    Write your name, centre number and candidate number in the spaces at the top of this page.

    Answer all the questions in the spaces provided. You may use continuation paper on page 12 if necessary, taking care to number the continuation correctly.

    INFORMATION FOR CANDIDATES

    Mark allocations are shown in brackets. This paper has a total of 50 marks.

    SJJ*(S12-1131-01)

    Surname

    Other Names

    CandidateNumber

    2

    CentreNumber

    GCE AS/A level

    1131/01

    ECONOMICS EC1

    P.M. FRIDAY, 18 May 2012

    1 hour

    DO NOT OPEN THIS BOOKLET UNTIL YOU ARE TOLD TO DO SO.

    For Examiners use only

    Question MaximumMarkMark

    Awarded1. 2

    2. 2

    3. 6

    4. 4

    5. 6

    6. 8

    7. 8

    8. 6

    9. 8

    Total 50

  • 2(1131-01)

    Examineronly

    Answer all the questions in the spaces provided.

    1. NHS could have employed 10,000 nurses with the 314m it spent on management advisors.

    Use the above information to explain the concept of opportunity cost. [2]

    Total mark

    2. The price of crisps in a school canteen rose from 40p per bag to 50p and as a result sales fell from 200 bags to 180 bags per day. Calculate the price elasticity of demand for crisps at the school. [2]

    Total mark

    /2

    /2

  • (1131-01) Turn over.

    1131

    0100

    03

    3 Examineronly

    /6

    With reference to the data and using a diagram, explain why petrol retailers are able to shift a large proportion of the tax on petrol onto consumers. [6]

    Total mark

    3.

    01 03 05 07 09 20110

    20

    40

    60

    80

    100

    120

    140

    Years

    The price of petrol per litre

    Price per litre ofunleaded petrol

    Tax per litre

    Pence

  • 4(1131-01)

    Examineronly

    4. Between 2000 and 2010 hospital admissions for obesity and alcohol related conditions rose sharply. The combined cost of treating alcohol and obesity is around 6.5bn per year.

    Define external costs and using the data explain why there are external costs resulting from excessive alcohol and food consumption.

    [4]

    Total mark /4

    1,000

    42,38069,360

    45,100

    1999/2000

    2009/2010

    1999/2000

    2009/2010

    INCREASING HOSPITAL ADMISSIONS(Numbers of people)

    Alcohol-related Obesity-related

  • (1131-01)

    5.

    Turn over.

    1131

    0100

    05

    5 Examineronly

    /6

    According to a report by the Game and Wildlife Conservation Trust, government grants to farmers to preserve wildlife were a waste of money. The report found that farmers were given payments for measures that were easy to implement but had no real benefit for wildlife. According to the report farmers can choose options like maintaining hedgerows which often fail to meet the needs of wildlife.

    To what extent are these government grants an example of government failure? [6]

    Total mark

    1965 75 85 95 05

    120100806040200

    500

    400

    300

    200

    100

    0

    Subsidising declineFarmers receive 446m a yearin wildlife grants but birdpopulations have slumpedVanishing speciesPopulation declines 1970-2007 Wildlife

    grants to farmers (m)

    Bird population(1965 = 100)

    Tree sparrow

    Skylark

    Linnet

    -93%

    -53%

    -57%

    Source: Adapted from British Trust for Ornithology

  • 6(1131-01)

    Examineronly

    6. The diagram below shows the average wage of bricklayers in the UK economy.

    Using the diagram, evaluate the likely effects of a rise in mortgage interest rates and the arrival of bricklayers from eastern Europe seeking employment in the UK. [8]

    Total mark

    Market for bricklayers

    Wagerateper

    hour

    Quantity ofbricklayers

    SL

    DL

    q0

    w

    /8

  • (1131-01)

    BLANK PAGE

    Turn over.

    7

  • 8(1131-01)

    Examineronly

    7.

    (a) Using an aggregate demand and aggregate supply diagram explain why, according to the data, inflation has been above target in recent years. [4]

    2005 2006 2007 2008 2009 2010 2011 20122010

    2005 2010

    6bn

    164bn

    820bn2

    1

    0

    1

    2

    3

    4

    5

    90

    0

    40

    80

    120

    160

    100

    120

    130

    110

    $

    Inflation has risen well abovethe 2% target...

    Why Rising oil prices Falling pound/higher import prices Return of 17.5% VAT

    ... but the Bank predictsit will come back down

    Why Higher taxes and lower public spending will damp down the economy Shortage of credit Spare capacity in economy

    Ups and downs

    Oil prices$ per barrel

    Import pricesIndex 2005 = 100

    InflationPercentage increaseon a year earlier

    The Bankscentralforecast

    Target rate: 2%

    immediate cuts inpublic spending

    governmentborrowing last year

    total nationaldebt

    The Times, 13 May 2010

    Sources: Bloomberg;Bank of England: ONS

  • (1131-01)

    (b) Using an aggregate demand and aggregate supply diagram explain why, according to the data, inflation is predicted to come down in 2012. [4]

    Total mark

    Turn over.

    9 Examineronly

    /8

  • 10

    (1131-01)

    Examineronly

    8. 50% top income tax rate could be scrapped by the next election

    George Osborne, the Chancellor of the Exchequer, has announced an official review of the higher earners tax rate which could be scrapped in 2012.

    Discuss the view that the abolition of the 50% tax rate would be beneficial to the UK economy. [6]

    Total mark /6

  • (1131-01)

    9. In recent years the UKs trade deficit in goods has continued to worsen despite a fall in the value of the pound since 2007.

    UK - Trade deficit in goods 2001-2010 (monthly)

    Turn over.

    11 Examineronly

    /8

    To what extent can a fall in the value of a currency such as the pound be expected to improve the trade balance? [8]

    Total mark

    10

    8

    4

    2

    0

    6

    2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Years

    bn

  • (1131-01)

    12 Examineronly

    For continuation only.


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