AS Level Economics doubts

[Crimson-Saint]

so i am new to this foroum....and was wondering if some of u could help clear most of my doubts that i got in economics mcq and essays......so these are the doubts of mcq that i have got currently after doing 5 past papers

 

[Crimson-Saint]

anyone?

 

[TheZodiac]

1) B
2) B
3) C
4) C

Let me know the answers are correct or not, if so, I'd explain you the reason.

 

[Crimson-Saint]

all correct except for the last one which is A

 

[TheZodiac]

all correct except for the last one which is A

Oh yes, sorry I misread it. It was asking for Oppurtunity cost in capital goods, which means that the answer would be OH - OM = MH

Now let me explain:

 

[TheZodiac]

2)

 

[TheZodiac]

9) This is again the tax concept. To better understand this question, let's forget about the last column. What would be the market equllibrium if there was no last column? It would be at Price = $16 because there, the demand 340 units is equals to supply of 340 units. (D=S)
Now again, if the consumer still wants to consume 340 units of good, how much should he pay? The answer lies in the 3rd column where at price = $19, the demand is 340 units. Therefore to find the amout of tax, just minus ($19 - $16) and that would give you $3

 

[TheZodiac]

Hope this helps, please pardon me for vague diagrams, I've a mid term exam tomorrow so did it in a hurry.

 

[Crimson-Saint]

wow that helped ALOT m8 and the graphs are more than enough.....now i gotta doubt on the imposition of tax.....why does the consumer wish to buy the same number of quantity he purchased before the tax? like for the answer of the first question why isn't the answer WX isn't that the diff between the s1 and s2?....and again thx

 

[TheZodiac]

wow that helped ALOT m8 and the graphs are more than enough.....now i gotta doubt on the imposition of tax.....why does the consumer wish to buy the same number of quantity he purchased before the tax? like for the answer of the first question why isn't the answer WX isn't that the diff between the s1 and s2?....and again thx

I'm glad I could help.

You see, that's an assumption just to study the effect of imposition of tax. A consumer can buy any quantity he wishes to. (You'd learn more about this in A2) WX isn't right because there's a change in quantity demanded. If you wanted to observe it with 'W', then diagram would be something like this:

If you notice, you'd see that WX highligts price from P1 to P2 but actually, due to the imposition of tax, the price is P3, which is above P2. This means that WX is wrong to be assumed as tax price on the commodity.

 

[Crimson-Saint]

1)explain the effects of the removal of indirect tax in the market for a product? (8)
2)discuss whether an indirect tax is a satisfactory way to tackle negative externalities like air pollution?(12)

i kinda know the structure on how to answer this but can anyone share with me how they would answer this question in a way to achieve the maximum of marks?

 

[TheZodiac]

1)explain the effects of the removal of indirect tax in the market for a product? (8)
2)discuss whether an indirect tax is a satisfactory way to tackle negative externalities like air pollution?(12)

i kinda know the structure on how to answer this but can anyone share with me how they would answer this question in a way to achieve the maximum of marks?

1) First of all, you've to explain what an indirect tax is and why it is imposed on certain types of good. Draw the graph and show how price is decreased when an indirect tax is abolished. Now you've to emphasize on the analysis and evaluation so therefore comment on how indirect tax affects certain types of product with different elasticity of demand. In case of +1 PED, the consumption of the good would increase by high propotion, however, if it's < 1 then there would be little effect on quantity demanded. Give examples for such product.

2) As you've already told examiner what an indirect tax is, you should now start up your answer by defining externality and now it arises. Draw the graph for negative externality and point out 'dead weight loss' in case of over production. Now explain how an indirect tax can be imposed to restrict production. However, again, in the analysis and evaluation part, you've to tell the examiner that the production would be affected by indirect tax only if the PED is greater than 1 and the tax burden is more on producer than on consumer. In case if PED is in-elastic, the imposition of indirect tax would ultimately result in market expliotation. Also, you can explain that externalities are very hard to calculate; example, it's almost impossible to calculate how much air is being polluted by production of 1 unit of good so therefore the amount of tax would not be accurate in order to eliminate negative externality fully.

 

[Crimson-Saint]

wow.....good answers

 

[TheZodiac]

wow.....good answers

Thanks.

 

[AlphaBeta]

in an opean economy ,the domestic money supply is increased at a rate in excess of the growth of the country
to maintain fixed exchange rate it will be necessary to
A)the central bank to sell foreign currency and buy domestic currency
B)the central bank to buy foreign currency and sell domestic currency
C)the rate of intrest to be reduced
D)An outflow of capital to be encouraged