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© www.i-study.co Paper 3 Revision
Paper 3 Higher Level Booklet Revision
Unit 1 Unit 2 Unit 3 Unit 4
Linear Equations GDP Tariffs, Quotas, Subs Incidence of Tax/Sub Multiplier Effect Calculate BOP Price Controls Taxation Ex Rates w/L-Function Theory of a Firm Inflation Terms of Trade Unemployment Points to remember: 1.
If you are asked to calculate a
rate
, think: it is a % and must be calculated OUT of something else (then x100) 2.
Be
very
specific with your axis and labels. If it talks about barrels of oil, label your axis ‘Price per barrel of oil $US’. Label Demand as ‘Demand for oil’ and Supply likewise 3.
Blank pages
do not
always mean End of Question.
Always
turn the page. 4.
‘Sketch’ a diagram means it does not have to be specific 5.
Give any decimal answers to
two decimal places and always show your workings
6.
Choose two
questions out of three. You have 1 hour so that is 30 minutes on each
Linear Equations
The equations below show the Qs and Qd for fish in Hong Kong.
Qs = -40+20p Qd = 160 - 5p
Given that Qs and Qd are given in thousands of kilos and P is the price per kilo in US$ a)
Calculate Qs and Qd at a price of US $6 per kilo [2marks] b)
Construct a Demand and Supply curve for the above equations
the easiest way to do this is by finding equilibrium and then working out what Qs or Qd is when P = 0.
c)
Identify the Q intercept for the Demand Curve and the P intercept for the supply curve. [4marks] Calculate equilibrium price and quantity [4marks] d)
A tax on income causes a decrease in demand by 25 000 kilos. Show the incidence of tax on your diagram. e)
What is the new equation for Qd? f)
Instead
of the income tax, a government imposes a tax of $2 per kilo. Illustrate the effect on a new graph. g)
What is the quantity demanded at $8? h)
Calculate the revenue earned by the government from the tax
© www.i-study.co Paper 3 Revision
Linear Equations
Qd = 2100-100P Qs = 300 + 150P Calculate: a)
Equilibrium price b)
Equilibrium quantity c)
State the p intercept for the supply curve (remember intercepts are written with the X axis first (Qty) , then the Y axis(Price)) e.g. (4,0) d)
State the q intercept for the demand curve e)
Calculate Qs and Qd at $21 f)
What is the excess/shortage at this price? g)
Using the concept of Price Elasticity of Demand, examine what happens when the price falls by 50% from equilibrium. h)
With this knowledge, who would pay the greater burden if the government imposed a direct tax on this product? i)
If wishing to revenue maximize, what should this shop owner do? Qd = a-Bp a)
What is a? What happens if all else remains constant and it changes? b)
What is B? What happens if all else remains constant and it changes? Qs = c+ Dp a)
What is c? What happens if all else remains constant and it changes? b)
What is D? What happens if all else remains constant and it changes?
Theory of a Firm Output Price per unit TR AR MR TC MC
1 150 75 2 145 85 3 140 100 4 135 120 5 130 145 6 125 175 7 120 210 8 115 250 9 110 295 10 105 345
© www.i-study.co Paper 3 Revision
1)
Complete the table above [4] 2)
What is the profit maximizing level of output? [1] 3)
How much profit/loss is made? [1] 4)
What is the price elasticity of demand between 9 and 10 units? [2] 5)
What information would you need to know to calculate shut down price? [2]
Game Theory 1.
Using the table below explain Game Theory [4] 2.
Briefly explain the concentration ratio [2] 3.
What is the concentration ratio for oligopolies? [1] 4.
What is tacit/informal collusion? [2]
GDP NB: A GDP deflator is a measure to adjust GDP figures for inflation between years. It is calculated by nominal/real x100.
Below are the economic growth figures for Utopia from 1999-2001
Year GDP GDP Deflator
1999 US $8billion 100 2000 US $9 billion 110 2001 US $12 billion 150 2002 US $15 billion 155 Calculate: a)
Real GDP in 2000 [2] b)
The rate at which real GDP had changed between 2000-2001 [2] c)
The real GDP per capita in 2002 for Utopia, given that its population was 4 million people. [2]
© www.i-study.co Paper 3 Revision
Inflation
Year Cost of Basket Working Out CPI 2006 $4922 100 2007 $5080 2008 $5361 2009 $6711 1)
Fill in the above table [3] 2)
What is the difference between the CPI and the RPI? [3] 3)
What is a PPI and how is it different from a CPI? [3] Year Inflation Rate Unemployment rate 1982 8% 3% 1983 4% 6% 1984 2% 12% 1985 1% 10% 1)
Label and construct a diagram to explain the relationship in the above table from 1982-1984 [4] 2)
What may be the reason for what occurred in 1985? [3]
Unemployment
Number of Unemployed Labour force Unemployment rate 2012 15 000 50 000 2013 20 000 42 000 2014 22 000 49 000 1)
Calculate the unemployment rate for the years above [3] 2)
What is the difference between unemployment and underemployment? [2] 3)
Give a reason why the country above might be experiencing structural unemployment [2]

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