Explain the different ways in which resources are allocated in a market economy and in a mixed economy [8]

Discuss whether a high rate of inflation or a deficit on the current account of the balance of payments is the more serious problem for an economy. [12]

‘Indirect taxes reduce consumer surplus and should therefore never be imposed in a mixed economy.’ Discuss this view. [12]

Nauru is one of the smallest countries in the world with a population of only 10 000. Fifty years ago the population was one of the richest per head in the world, largely the result of exporting the phosphate created over many centuries by sea-bird droppings. This labour-intensive industry has declined significantly. Now incomes are much lower and one third of workers are jobless.

Discuss whether having a relatively small population is an advantage or a disadvantage for an economy. [8]

In Pakistan there is a limited choice of cars to buy. The country has a population of approximately 190 million but only about 120 000 cars a year are produced there. The firms producing cars in Pakistan are protected from foreign competition by a range of methods of trade protection.

Discuss whether demand for cars is likely to increase in the future.

Singapore is usually ranked as one of the best countries in which to do business. It is an open economy engaging in free trade. It has a history of strong entrepreneurship, low unemployment, low average costs and relatively low tax rates. Its example may encourage other countries to remove trade restrictions.

Discuss whether low unemployment in a country will encourage multinational companies (MNCs) to set up there. [8]

Explain how economists use the concept of income elasticity of demand to distinguish between different types of goods.

Show the difference between a movement along, and a shift in, a production possibility curve. Explain what might cause each to occur. Use diagrams to support your answer. [8]

In Pakistan there is a limited choice of cars to buy. The country has a population of approximately 190 million but only about 120 000 cars a year are produced there. The firms producing cars in Pakistan are protected from foreign competition by a range of methods of trade protection.

Analyse the social costs created by car production and car use. [6]

Describe the four components of the current account of the balance of payments. Explain what might cause a deficit in this account. [8]