Paper 1: Introduction to Economics

The central economic problem is caused by:

Which one of the following is an economic agent?

The reward to the factor of production 'capital' is:

The primary sector includes:

Which one of the following is a characteristic of a mixed economy?

Which factor would cause the demand curve for electric cars to shift right?

Equilibrium price is where:

Excess demand will tend to cause the price to:

Price elasticity of supply measures the responsiveness of:

Which one of the following is a feature of perfect competition?

Which one of the following is a fixed cost for a bakery?

A firm's revenue is £50,000 and its costs are £56,000. It makes:

The labour market determines:

Which one of the following would increase the supply of nurses?

A trade union aims to:

Which one of the following is a function of money?

A commercial bank:

If the interest rate on savings rises, people are likely to:

A share gives its owner:

Which one of the following is a source of market power for a firm?

Extract A (data are illustrative, written for this paper): Gym memberships in the UK grew strongly after budget gyms entered the market. In one city, three budget gyms charge £20 a month, while a premium gym charges £60. When a budget gym raised its price from £20 to £24, membership fell from 2,000 to 1,500. Calculate the price elasticity of demand for the budget gym.

State what your answer to (a) shows and one reason why.

Explain one reason why budget gyms can charge lower prices than premium gyms.

Explain how the entry of budget gyms affected the premium gym.

Evaluate whether competition between gyms is good for consumers.

Extract B (data are illustrative, written for this paper): There is a shortage of nurses in the UK. Average pay for a newly qualified nurse is about £29,000 a year. Training takes three years. Some nurses are leaving for better-paid jobs abroad, while the government has increased recruitment from overseas. Define 'wage'.

State two factors that affect the supply of labour to an occupation.

Explain why the supply of nurses is wage inelastic in the short run.

Explain how an increase in nurses' pay might reduce the shortage.

Evaluate whether raising pay is the best way to solve the nurse shortage.

Extract C (data are illustrative, written for this paper): Maya, aged 17, has £1,000 in savings. A bank offers 4% interest a year on a savings account. Maya also wants a £400 phone and could buy it now on a credit plan charging 20% a year. Calculate the interest Maya would earn in one year if she saves £1,000.

State two functions of a commercial bank.

Explain one reason why the interest rate on borrowing is higher than on saving.

Explain the opportunity cost to Maya of buying the phone using her savings.

Evaluate whether Maya should buy the phone now on credit or save and buy it later.