Tuesday, May 22, 2018

Popular Questions for Section A of 9708/22 (CIE) (CAIE) A-Level Economics

Important updates:
1. Do not evaluate/ provide conclusion just because the question is an 8-marker (Section B, part (a) of each essay). High marks do not automatically indicate that the question is evaluative in nature. By contrast, low marks also do not necessarily imply that there won't be any evaluation. In A2, there were instances where a question is a 5-marker and yet evaluation and conclusion are expected from students. Instead, interpret/ watch out the keywords that they use such as:
(i) Discuss (most common one) ....
(ii) Explain whether ....
(iii) How far ....
(iv) To what extent ....
(v) Do you agree ....
(vi) Is this the most important feature ....

2. Evaluations and conclusion come in a package. You can only have something to conclude or weigh upon after considering both advantages and disadvantages/ pros and cons. It is somewhat illogical to provide conclusion where no arguments/ discussions prior take place (to conclude against what?)
After a 'chronic' two hours, this is what I found:

Microeconomic questions
a) Calculating percentage of change. You may be asked to find the new price or the original price

b) Identify one demand reason and one supply reason which may explain for the rise/ fall in the price of a particular commodity

c) Using demand and supply diagram to show how equilibrium price and quantity will be affected when an indirect tax/ subsidy is being introduced. It can also be applied to show how an exchange rate has risen or fallen in value. Please take note of the keyword 'show'. It means that you do not have to provide analysis/ explanation. The diagram on its own is suffice to earn you a full 2 marks. Only provide analysis when the instruction is 'explain'. Alternatively, watch out for the marks allocated. If it is a 4-marker, then you have to explain

d) Maximum/ minimum price. Normally, you will be asked to draw a diagram. Then you need to include analysis e.g. expansion in demand but contraction in supply which leads to shortage. Likely to be a 4-marker

e) Production possibility curve e.g. whether it will shift inward or outward based on the information provided e.g. recession, peace talk with rebels, economic recovery and others. There will be analysis marks for this. Usually, it would be a 4-marker

Macroeconomic questions
a) Current account balance. Compare between two given years of whether it has improved or worsened. Likely to have minor calculations here

b) What other information would be needed to determine the current account balance e.g. you may be given 'balance of trade in goods' and so, you have to state the others like 'net trade in services', ' net investment income' and 'net transfers'

c) How a depreciation may cause demand-pull and cost-push inflation

d) Conditions necessary for a depreciation to turn a current account deficit into surplus e.g. PEDx > 1 or/ and PEDm > 1, there is no parallel devaluation, inflation rates must not increase by the full extent as depreciation, trading partners do not impose protectionist measures and others (very, very, very popular!)

e) Whether protectionism is justified. To some extent e.g. protect sunrise industries, safeguard sunset industries, ensuring survival of strategic industries and prevent dumping. No since it will promote complacency, lead to trade war and cause cost-push inflation

f) How components of the aggregate demand are affected when there is a rise/ fall in the price of a particular commodity. Consider the case of falling oil prices. Oil typically has low PED. So, when the price of oil falls, total revenue from oil exports will also decline. Ceteris paribus, (X-M) will fall and so there will be a decline in AD. Second, oil firms will reduce their investment e.g. oil exploration activities. That will also reduce the AD. Then, government revenue from oil exports will also be adversely affected. Spending into the economy e.g. schools, hospitals, roads and bridges is likely to be cut. Again this is a fall in AD. What about C? In an oil-dependent economy, it is safe to assume that many people are employed in the oil and gas sector. In this case, employment will be axed and so C will fall. Alternatively, the government may raise taxes or introduce new ones to cover up shortfall in revenue. This will again reduce C into the economy. All these reflect a fall/ leftward shift of AD

g) Whether currency appreciation/ depreciation is more desirable

h) Whether fixed exchange rate system is reliable. Yes as this may promote international trade, encourage investment and avoid speculation which may destabilise local financial market. No, as it requires huge amount of foreign reserves, speculations will always be there and interest rates can no longer be altered to achieve certain macroeconomic aims  

i) Which category of spending that has the greatest impact onto price index. Here you need to watch out for largest price change or/ and component with biggest weighting assigned

Easy-to-follow tips which may increase your ability to score tomorrow:
a) If you cannot finish the 'discuss' question in Section A, list out all the points and evaluations. You may still gain 2 marks for listing. Obviously, this is better than nothing

b) Before you hand up your paper, please check all the diagrams and ensure that they are in satisfactory condition e.g. label of axes, label of curves, whether you accidentally put price and quantity instead of price level and real output (most common mistake). Ignoring this may cause you to lose up to 4 marks, depending on how many diagram questions are there in the paper

c) Write concisely. Do not provide evaluations or/ and conclusion for an 8-marker. It is a pure waste of time as the instruction is 'EXPLAIN'. There is no provision of marks for these two, no matter how well you have written them. While it is not wrong to do so, do bear in mind that they will certainly take away some precious time from other sections/ parts. Inability to finish the paper = lower marks

d) Use lots of paragraph to distinguish your ideas/ evaluations, one from another (especially for candidates whose writing skills are still in the development/ formation stage). It also gives the examiner a pleasant marking experience which may translate into higher marks (how significant I wouldn't know, but it does bear some weight. More so in A2 essays)

e) Use diagrams wherever possible in case if you do not know how to explain a particular concept. Perhaps, the diagram may do some 'talking' on behalf of you

All da best peeps!!

Wednesday, May 16, 2018

Forecast Essay Questions for Section B of 9708/22 (A-Level Economics) (CAIE) (CIE)

Highly anticipated essay questions for 9708/22 this coming Friday (25th May):

1. How a production possibility curve can be used to illustrate economic ideas like opportunity cost, rising opportunity cost (these two are different and the latter is becoming more popular in the recent), unemployment, economic growth and unattainable position
2. Whether market economy or planned economy is more desirable/ likely to improve consumer well-being/ better in making decisions/ better in allocating resources
3.  Functions of money and whether money is able to perform all the four functions in an economy that is experiencing high rate of inflation
4. What is meant by equilibrium price and quantity and how a change in demand/ supply would alter both equilibriums

5. The right type of elasticity to determine whether two goods are substitutes or complements/ normal goods or inferior goods

6. Whether PED/ XED/ YED would be useful for firms and governments (I won't do these essays if I were you!)

7. Whether the problem of demerit goods can be dealt with an indirect tax and banning/ better information/ minimum price

8. Whether the problem of merit goods can be dealt with subsidies and maximum price

9. Whether the imposition of maximum price would be able to help low income families 

10. Using AD/ AS diagrams, explain how a fall in exchange rate/ depreciation can cause both demand-pull and cost-push inflation

11. Inter-relationships between the inflation rate, exchange rate and balance of payments

12. Whether floating or fixed exchange rate system is more desirable

13. Terms of trade and whether a fall/ increase in terms of trade is beneficial to an economy

14. Comparative advantage and how an economy can consume outside its own PPC. Illustrate with trading possibility curve

15. Fiscal/ monetary/ supply-side policies to achieve macroeconomic objectives like higher growth, lower unemployment and lower inflation

16. Expenditure-dampening vs. expenditure-switching policies in reducing current account deficit

Several important observations:
a) There is somewhat an observable trend in Paper 2. When the examination board found a new method/ technique or even question to ask, they will 'toy around' with the new concept for several exams/ years before moving on to other new techniques or questions. For instance 'increasing opportunity cost' makes its first appearance in W16 (V3). Then it was asked again in W17 (V3) and now in Feb/ March 2018 (V2)

(b) There is also an indicator that questions may no longer be asked according to chapter/ cluster. This may pose some challenges for candidates that tend to specialise in micro/ macro (which I strongly forbid!!) In W17 (V3), part (a) was about PPC (Chapter 1). However its part (b) was about supply-side policies (Chapter 5). Another one is the recent Feb/ March 2018 paper. Part (a) was about price elasticity of supply (Chapter 2) but its part (b) was regarding supply-side policies (Chapter 5)

(c) Effectiveness of fiscal/ monetary/ supply-side policies to achieve price stability is extremely popular in recent years (let's hope that the trend stays until your exam)

Suggested Solutions for 25 marks Efficiency-Related Essays (9708/42) (CIE) (CAIE)

October/ November 2011 (V1)
Question 2
The removal of imperfections in the market leads to an increase in efficiency in the allocation of resources. Discuss whether you agree with this view (25m)

P1 - define and explain social efficiency, productive efficiency and allocative efficiency (both are subset of social efficiency) (3 diagrams)

P2 - define and explain market failure 

P3 - demerit good and its relationship with negative production and consumption externalities (2 diagrams) 

P4 - merit good and its relationship with positive production and consumption externalities (2 diagrams)

P5 - monopoly and why it is a market failure (1 diagram)

P6 - using indirect tax to deal with demerit goods (1 diagram) and evaluation e.g. difficulty to estimate negative externalities accurately and also prevalence of black market

P7 - using subsidies/ direct provision of merit goods and evaluation e.g. very costly where taxes may have to be increased

P8 - deregulation to promote competition in an industry/ competition authority may break down a monopoly e.g. how British Airport Authority was forced to sell Gatwick and Stansted Airport in the UK and evaluations e.g. unable to enjoy EOS so becomes productively inefficient and also fall in profits means unable to invest in new products and so allocatively inefficient

P9 - government interventions may not completely improve resource allocation but better than without any

May/ June 2013 (V1)
Question 2
It is important that an economy makes the most efficient use of its resources. This can only be done if firms are allowed to increase in size. Government regulation of firms should, therefore, be minimised

Discuss whether you agree with this statement (25m)

P1 - define and explain social, productive and allocative efficiency (worth noting that the other two are subset of social efficiency) (3 diagrams)

P2 - big firms may enjoy EOS and hence become productively efficient 

P3 - evaluate e.g. may experience DEOS and so the opposite may happen too

P3 - big firms have higher profits which can be reinvested and this may lead to breakthrough discoveries and so become allocatively efficient

P4 - no worthwhile competition and so may not have the incentive to invest

P5 - reason for the existence of mixed economy. Government needs to intervene to improve resource allocation

P6 - Government may deregulate the industry to introduce more competition. Prices will fall and so firms have to become productively efficient

P7 - May no longer enjoy EOS and so becomes productively inefficient

P8 - Competition will automatically force firms to invest in products. Give back values to consumers. Allocatively efficient

P9 - However, extreme competition may reduce profits and hence inability to invest. Becomes allocatively inefficient instead

P10 - Neither government nor private sector on its own can ensure efficiency. Thought that both may complement one another