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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.