Explain the significance of cross elasticity of demand values that are negative, positive and zero.

UK students often take jobs during their holidays and some save part of their income to pay their tuition fees. UK graduates earn, on average, £8500 a year more than non-graduates. Economics graduates had the second highest average earnings of all UK graduates in 2016. The top 10% of economics graduates earned £115 000 a year.

Discuss whether or not people in developed countries are likely to save more than people in developing countries.[8]

Analyse how fiscal policy and monetary policy could be used to solve the problem of deflation. Assess which policy is likely to be more effective. [12]

Consider whether wages are only determined by the market forces of supply and demand. [25]

Swaziland is a small African country where six in ten people live in poverty and most firms are small and use little capital equipment. In October 2015 it opened a new airport. Some economists suggest that the building of the airport involved a high opportunity cost and caused a range of external costs. The building of the airport is part of the government’s plan to turn the country from a developing into a developed country

Discuss whether people would prefer to buy a product from a small firm or a large firm.

A free market economy operates to the benefit of both consumer and producer to achieve the most efficient outcome, and therefore there is no role for a government to play in controlling the market. Consider the extent to which this statement is correct. [25]

Discuss the effectiveness of supply-side policies in increasing the supply of enterprise to the economy.

Explain how a high rate of inflation and a rise in an economy’s exchange rate can each cause a deficit in an economy’s current account of the balance of payments. [8]

With the use of diagrams, explain how the price elasticity of demand for a product influences the incidence of an indirect tax on that product. [8]

Farms in the USA are getting larger. One dairy farm in the state of Indiana has over 38 000 cows. Farms in the USA compete with farms in both developed and developing countries. The value of the farms’ exports of milk appears in the trade in goods section of the current account of the USA’s balance of payments

Analyse the economies of scale from which a farm may benefit.