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IGCSE
Economics Question Leave
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Paper 2H 1
Higher Tier 2
Monday 3 November 2008 – Morning 3

Time: 2 hours 15 minutes 4


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Instructions to Candidates
In the boxes above, write your centre number, candidate number, your surname, initial(s) and signature.
Check that you have the correct question paper.
Answer ALL the questions. Write your answers in the spaces provided in this question paper. Do not
use pencil. Use blue or black ink.

Information for Candidates
The marks for individual questions and the parts of questions are shown in round brackets: e.g. (2).
There are 4 questions in this question paper. The total mark for this paper is 100.
There are 20 pages in this question paper. Any blank pages are indicated.
Calculators may be used.

Advice to Candidates
Write your answers neatly and in good English.

You are advised to spend the same amount of time on each of the 4 questions.


Total
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©2008 Edexcel Limited.
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M32113A_IGCSE_Economics_Higher_P1 1 05/08/2008 08:55:31


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Answer ALL the questions.

Question 1

Figure 1a shows the demand and supply of rice. The original demand curve is D1 and the
original supply curve is S1.

Figure 1a

Price S3 S1 S2

D2

D1
D3


Quantity

(a) (i) Indicate on the diagram the original price P1 and original quantity Q1.
(2)

Using the diagram, identify the new demand curve (D2 or D3) or the new supply
curve (S2 or S3) when the following changes take place. (The same answer may
be used more than once.)

(ii) Rice farmers are given a government subsidy.

New curve = ......................................


(1)

(iii) Medical research shows that rice consumption helps people live longer.

New curve = ......................................


(1)


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(iv) Examine reasons why wages paid to agricultural workers might be lower than
those of office workers.

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(5)

Figure 1b

Annual income $ Demand for Product A Demand for Product B


10,000 200 200
20,000 500 160

(b) (i) What is meant by the term income elasticity of demand?

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(2)

(ii) Which of the goods in Figure 1b is an inferior good?

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(1)

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(iii) Using the data in Figure 1b, explain your answer given in (b)(ii).

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(2)

(iv) What is the economic term used to describe the other product shown in
Figure 1b?

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(1)

Figure 1c

Price $ Demand for Product C Demand for Product D


5 10 10
6 9 7

Study the information in Figure 1c

(c) (i) What is meant by the term price elasticity of demand?

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(2)

(ii) Which product, C or D, has an inelastic price elasticity of demand? Explain your
answer using the information given in Figure 1c.

Product . ..................................................................................................................
(1)

Explanation . ...........................................................................................................

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(2)


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(iii) Examine the importance of price elasticity of demand or income elasticity of
demand in the decision making process of firms.

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(5) Q1

(Total 25 marks)


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Question 2

Figure 2a

:RUOGPDUNHWIRUVDOHVRIPRELOHSKRQHV
World sales of mobile phones

2WKHUV
6LHPHQV
/*

6RQ\(ULFVVRQ

6DPVXQJ
0RWRUROD
1RNLD

       
PDUNHWVKDUH

(a) Using Figure 2a, name the manufacturer of mobile phones which had

(i) the largest share of the market in 2005

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L «««« LLL ««««««««
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(1)

(ii) the smallest share of the market in 2005

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(1)
         
(iii) the greatest increase in its market $share from 2004 to LL «««« 2005.

.................................................................................................................................

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(1)

(iv) Calculate the increase in the market share of the company identified in (iii).

.................................................................................................................................

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(1)



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(v) With reference to Figure 2a, what is the market structure of this industry? Give
reasons for your answer.

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(3)

(b) In 2006, Nokia merged with Siemens. Mergers between firms can bring about
economies and diseconomies of large scale production, shown on Figure 2b.

Figure 2b
Costs Long run average costs

A Quantity

Study Figure 2b. Briefly explain

(i) one reason for the shape of the curve to the left of A

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(2)

(ii) one reason for the shape of the curve to the right of A.

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(2)


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(iii) There are benefits and disadvantages to consumers as a result of the merger
between Nokia and Siemens in 2006. Are the benefits to consumers likely to be
greater than the disadvantages? Give reasons for your answer.

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(5)

(c) (i) Explain what economists mean by the regional problem in a country.

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(3)

(ii) Identify two ways in which a government can address the regional problem.

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(2)


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(iii) Which of the two methods identified in (c)(ii) has been more successful in
overcoming the regional problem in a country of your choice? Give reasons for
your answer.

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(4) Q2

(Total 25 marks)


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Question 3

Figure 3a shows economic growth in Algeria, Gambia and Malta in 2003 and 2004.

Figure 3a

(FRQRPLFJURZWK




  



–
$OJHULD *DPELD 0DOWD

(a) Insert the missing words to complete the definition of economic growth below.

 Economic growth is measured by the rate of change in

(i) .............................. Gross (ii) ............................. Product over a period of time.


)LJXUHE (2)

(iii) With reference to the level of economic growth shown in Figure 3a, describe the
([FKDQJHUDWH
likely state of the economy of Malta in 2003.
&1<DQG=$5
.................................................................................................................................

.................................................................................................................................


.................................................................................................................................

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(3)

(iv) Which country experienced greatest economic


4 4 growth in 2004?
4XDQWLW\
.................................................................................................................................
D

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(1)

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(v) In your opinion does economic growth always lead to an increase in the standard
of living? Give reasons for your answer.

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(5)

Figure 3b Figure 3c

-
-
-
-
-
-

(b) Study the information given in Figure 3b and 3c above.

(i) Describe what is happening to the rate of inflation and the current account
balance in Malta between 2003 and 2004.

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(2)

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(ii) Briefly explain two ways in which rising inflation might influence the current
account of the balance of payments.

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(4)

(c) (i) Identify and briefly explain one monetary measure a government can use to
control the rate of inflation.

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(3)

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(ii) Examine the extent to which an increase in income tax is likely to affect the
current account of the balance of payments.

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(5) Q3

(Total 25 marks)

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Question 4

Figure 4a

Exchange rate
ZAR = South African Rand
January 2006 1 ZAR = 1.3 CNY
CNY = Chinese Yuan
January 2007 1 ZAR = 1.1 CNY

Figure 4b shows the demand and supply curves of South African Rands (ZAR) between
January 2006 and January 2007.

Figure 4b

Exchange rate: S
CNY and ZAR S1

1.3

1.1

Q1 Q2 Quantity (ZAR)

(a) Study Figures 4a and 4b.

A South African tourist wishes to exchange 100 South African Rands for Chinese
Yuan. State how many Chinese Yuan the tourist would receive in

(i) January 2006

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(1)

(ii) January 2007.

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(1)

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(iii) The change in the exchange rate was caused by the shift in the supply curve of
South African Rands from S to S1. Briefly explain one possible reason for this
shift in the supply curve.

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(2)

(iv) Show on the Figure 4b the effect of an increase in South African exports on the
exchange rate of South African Rands.

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(2)

Figure 4c

South Africa: Current Account Balance of Payments

South African Rands (bn).


2004 2005
–57.05 –78.43

(b) (i) Define the term Current Account Balance of Payments.

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(2)

(ii) What do the data in Figure 4c show has happened to the South African Current
Account Balance of Payments between 2004 and 2005?

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(2)

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Briefly explain

(iii) one method a government could use to increase exports

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(2)

(iv) one method a government could use to decrease imports.

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(2)

(v) To what extent has The World Trade Organisation (WTO) succeeded in promoting
free trade?

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(5)

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(c) Many developing countries borrow money from foreign governments and institutions.
Do the advantages of borrowing and international debt outweigh the disadvantages?
Give reasons for your answer.

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(6) Q4

(Total 25 marks)
TOTAL FOR PAPER: 100 MARKS

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