ib eco paper sl

7/24/2019 IB Eco Paper SL

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Microeconomics SL

1. (a) Carefully distinguish between merit goods, demerit goods and publicgoods.(b) Evaluate the view that governments should always intervene in markets

for such goods as cigarettes and alcohol.[ay !""#$

!. (a) E%plain the importance of price in allocating scarce resources.(b) Evaluate the possible conse&uences of implementing ma%imum and

minimum price controls.['ov !""$

. (a) *he basic economic problem is one of scarcity of productiveresources. E%plain how resources are allocated between competing uses in amarket economy.

(b) +iscuss the view that there is strong usti-cation for governmentintervention in the market for health care.

[ay !""#$

. (a) E%plain why underprovision of merit goods in an economy isconsidered to be a market failure.

(b) Evaluate the possible measures that a government might use tocorrect such a market failure.

['ov !""#$

. (a)E%plain the signalling and incentive functions of price in a marketeconomy.(b) Evaluate the proposition that government intervention in the market

for tobaccois usti-ed.

[ay !""/$

#. (a) 0sing supply and demand analysis, e%plain why the price ofagricultural goodstends to uctuate more than the price of manufactured goods.

(b) Evaluate the possible role of price controls in agricultural markets.

['ov !""/$

/. (a) 2*he price elasticity of demand and the price elasticity of supply formany primary commodities tend to be low.3 E%plain what is meant by thisstatement, and how this contributes to the problem of price instability forprimary commodity producers.

(b) Evaluate the view that it is best to allow primary commodity prices tobe determined purely through the free interaction of market forces.

[ay !""4$

4. (a) 0sing an appropriate diagram, e%plain how negative e%ternalities area type of market failure.


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(b) Evaluate the measures that a government might adopt to correctmarket failure arising from negative e%ternalities.

[ay !""5$

5. (a) 6ith the aid of at least one diagram, e%plain the di7erence betweena movement along an e%isting demand curve for a good and a shift of thedemand curve for a good.

(b) Evaluate the view that the market forces of demand and supply willalways lead to the best allocation of resources.

[ay !"1"$

1". (a) 26orld food prices have increased sharply over the past -ve years.36ith the aid of at least one diagram, e%plain how one possible demand factorand one possible supply factor may have caused this increase.

(b) Consider the following two conicting views829ood prices are best left to market forces.32:overnment should intervene to control rising food prices.3

Evaluate whether rising food prices should be left to market forces or controlledby government.

[ay !"1"$

11. (a) E%plain how ta%es and subsidies di7er in their e7ect on the marketprice and &uantity of a good.

(b) 2;t is essential that a government supports its farmers by subsidi


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(b) Evaluate the e%tent to which market forces should be used to lessenthe problem of environmental pollution.

[ay !"11$

1#. (a) E%plain the di7erences between price elasticity of demand (?E+) andcross=elasticity of demand (@E+).

(b) +iscuss the usefulness of price elasticity of demand (?E+) and cross=elasticity of demand (@E+) to businesses trying to increase their sales revenue.

['ov !"11$


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Microeconomics HL

1. (a) E%plain how a monopolist may be able to earn supernormal (abnormal)pro-ts in the long run.(b) A?roduction by a monopolist will always be against the interests of

consumersB. +iscuss.[>pec$

!. (a) E%plain how pro-t is determined in perfect competition.(b) A6hatever the type of market structure, pro-t ma%imi


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5. (a) ;n the theory of the -rm, a distinction is made between short=run costcurves and long=run cost curves. 0sing appropriate cost curve diagrams,e%plain this distinction.

(b) Evaluate the view that greater economic eciency will always beachieved in perfect competition as compared to monopoly.

[ay !""5$1". (a) 0sing an appropriate diagram, e%plain how a monopolist might beable to make supernormal (abnormal) pro-ts in the short=run, and why thesepro-ts might continue to be earned in the long=run.

(b) Evaluate the view that monopolistic competition is a moreeconomically desirable market form than monopoly.

[ay !"11$

11. (a) 0sing at least one diagram, e%plain why a -rm in perfectcompetition might only be able to make supernormal (abnormal) pro-ts in theshort=run and not in the long=run.

(b) Evaluate the view that perfect competition is a more desirable marketformthan oligopoly.

[ay !"11$1!. (a) E%plain the di7erent obectives that a -rm in an oligopolistic marketstructure might try to achieve.

(b) Evaluate the view that an oligopolistic market is an inecient marketstructure.

['ov !"11$


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Macroeconomics SL/HL

1. (a) 6hat are the possible causes of inationD(b) Evaluate possible policies that might be used to lower the natural rate

of unemployment[>pec$

!. (a) +escribe the main causes of ination.(b) 2;f ination is a maor problem faced by governments it must follow

that the opposite, deation, is desirable.3 *o what e%tent do you agreewith this statementD

[ay !""$. (a) E%plain the costs of ination and the costs of deation.

(b) Evaluate demand=side policies as a means of reducing ination.['ov !""$

. (a) E%plain the relationship between the oren< curve and the :inicoecient.(b) Evaluate the e7ectiveness of the various methods that governmentmay use to redistribute income .

['ov !""$

. (a) E%plain the di7erence between demand=side and supply=side policies.(b) BFigher economic growth can only be achieved through theimplementation of supply=side policies.B +iscuss.

[ay !""#$

#. (a) ;dentify the components of aggregate demand and briey e%plain twofactors which might determine each of these components.(b) Evaluate the likely impact on an economy of a substantial rise in thelevel of interest rates

[ay !""#$/. (a) E%plain the following di7erent types of unemployment8

frictional unemployment

cyclicalGdemand=de-cient unemployment

real wageGclassical unemployment(b) Evaluate the e7ectiveness of the di7erent measures available to

governments todeal with the types of unemployment in (a).

['ov !""#$

4. (a) E%plain how interest rates can be used to bring about an increase ineconomic activity.(b) +iscuss the strengths and weaknesses of demand=side policies.

['ov !""#$

5. (a) 6hat are the causes of ination.

(b) Evaluate the possible e7ects of a persistently high ination rate on acountryBs current account balance and its e%change rate.


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['ov !""#$

1". (a) E%plain why a government might -nd it dicult to maintain a low rateof ination as the economy approaches full employment.(b) Evaluate the proposition that the priority in economic management

should be the maintenance of low unemployment.[ay !""/ F$

11. (a) 0se H+GH> (aggregate demandGaggregate supply) diagrams toe%plain the causesof ination.

(b) Evaluate the view that governments should make the control ofination theirhighest priority.

[ay !""/$

1!. (a) 0sing one or more diagrams, e%plain the di7erence between thee&uilibrium level of national income and the full employment level ofnational income.(b) Evaluate the policies a government may use to increase the fullemployment level of national income.

['ov !""/$1. (a) +istinguish between cost push ination and demand pull ination.

(b) Evaluate the view that the conse&uences of ination are more harmfulto aneconomy than the conse&uences of unemployment.

['ov !""/$

1. (a) B*he e7ect of a decrease in aggregate demand on output and the pricelevel depends on the shape of the aggregate supply curveB. E%plain thisstatement.(b) Evaluate the likely e7ects of a falling rate of ination on the

performance of an economy.[ay !""4$

1. (a) E%plain how -scal policy could be used to increase aggregatedemand.

(b) 2;n the long=run, a countryBs economic performance can only beimproved through the implementation of supply=side policies.3 Evaluate thisstatement.

[ay !""4$

1#. (a) E%plain the di7erence between progressive ta%ation and regressiveta%ation. (1" marks)(b) Evaluate the possible e7ects of a decrease in direct ta%ation on acountryBs ination rate, unemployment rate and balance of payments. (1marks)

['ov !""4$1/. (a) 6ith the aid of diagrams, e%plain the causes of ination.


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(b) Evaluate the e7ectiveness of demand=side policies in reducingination.

['ov !""4$14. (a) E%plain the possible causes of a rise in the rate of ination in aneconomy.

(b) Evaluate the possible impact on economic performance that mayresult from a government decision to bring ination under control.

[ay !""5$15. (a) *here are various types of unemployment. E%plain how any threetypes of unemployment may cause a rise in the unemployment rate of aneconomy.

(b) Evaluate the view that the unemployment rate can be moste7ectively reduced through the use of measures designed to increaseaggregate demand in an economy.

[ay !""5$

!". (a) Hggregate demand consists of consumption, investment, governmentspending and net e%ports (e%ports minus imports). E%plain two factors thatmay inuence consumption and two factors that may inuence governmentspending.

(b) Evaluate the possible impact of an increase in consumptione%penditure on the performance of an economy.

[ay !"1"$

!1. (a) Hggregate demand consists of consumption, investment, governmentspending

and net e%ports (e%ports minus imports). E%plain two factors that mayinuence investment and two factors that may inuence net e%ports.(b) Evaluate the e7ectiveness of an increase in investment e%penditure

on the performance of an economy.[ay !"1"$

!!. (a) E%plain why a country may wish to reduce its rate of ination.(b) Evaluate the likely impact on the economy of relying on higher

interest rates to reduce the rate of ination.[ay !"1"$

!. (a) E%plain why a country may wish to reduce its unemployment rate.(b) Evaluate the likely e7ects on the economy of relying on demand=side

policies to reduce the unemployment rate.[ay !"1"$

!. (a) E%plain how supply=side improvements to an economy may beachieved through the use of ta%es and government spending.

(b) Evaluate the use of supply=side policies to reduce unemployment.['ov !"1"$

!. (a) 0sing appropriate diagrams, e%plain the di7erence between demand=side and supply=side economic policies.


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(b) Evaluate the use of supply=side policies to improve the performanceof an economy.

['ov !"1"$

!#. +uring the global -nancial crisis of !""4I!""5, there was a fall in

consumer spending in many countries.(a) E%plain the factors which might be responsible for causing consumer

spending to fall.(b) Evaluate the possible conse&uences of falling consumer spending for a

countryBs macroeconomic performance.[ay !"11$

!/. (a) E%plain two policies a government might use to redistribute income.(b) 2easures to promote greater income e&uality should be a key

feature of government economic policy.3 Evaluate this proposition.[ay !"11$

!4. (a) 0sing appropriate diagrams, e%plain how an increase in governmentspending could a7ect both aggregate demand and aggregate supply in aneconomy.

(b) 2*he lower the level of government spending, the better.3 Evaluatethis view.

[ay !"11$

!5. (a) 0sing appropriate diagrams, e%plain how a reduction in income ta%could a7ect both aggregate demand and aggregate supply in an economy.(b) 2*he lower the level of both direct and indirect ta%ation, the better.3

Evaluate this view.[ay !"11$

". (a) E%plain what the multiplier is and, using a numerical e%ample,demonstrate how it can be calculated.

(b) Evaluate whether real :ross +omestic ?roduct (:+?) can be increasedby the use of demand=side policies.

['ov !"11 F$

1. (a) E%plain three factors that could cause an economy to go intorecession.

(b) Evaluate the e7ectiveness of governments using demand=sidepolicies to take an economy out of a recession.

['ov !"11$

ib eco paper sl

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