Explain how economists use the concept of elasticity to distinguish between substitute goods and complementary goods.

Discuss whether supply side policy is more likely to be successful than fiscal policy when an economy is faced with inflation

Discuss which measure of the different types of elasticity of demand is most useful for a business when setting the price for its product.[12]

Indonesia’s output is influenced by its factors of production. A production possibility curve diagram can be used to show this relationship between resources and output. Indonesia does have extensive fishing waters but does not actually catch many fish. Most of its fishing firms are small and they compete against much larger foreign firms. These larger foreign firms have been attracted into Indonesia’s waters because of increasing demand for fish. The price elasticity of demand for different types of fish has changed in the last few years.

Analyse why demand for a product may become more elastic over time. [6]

Indonesia’s output is influenced by its factors of production. A production possibility curve diagram can be used to show this relationship between resources and output. Indonesia does have extensive fishing waters but does not actually catch many fish. Most of its fishing firms are small and they compete against much larger foreign firms. These larger foreign firms have been attracted into Indonesia’s waters because of increasing demand for fish. The price elasticity of demand for different types of fish has changed in the last few years.

Discuss whether small firms can compete successfully against large firms.

Explain the difference between fiscal policy and monetary policy. Show how each can be used to increase aggregate demand. [8]

Discuss two methods of increasing the provision of merit goods in a mixed economy. Consider which is more likely to be effective. [12]

Explain the role of the factor enterprise in allocating resources in a market economy when there is an increase in the demand for a good. Use a diagram to support your answer.

A relatively high proportion of people from the Philippines either work in call centres or abroad. Call centres employ 1.2 million people in the Philippines and account for 8% of the country’s Gross Domestic Product. Due to the time difference with the US, the main market for call centre services, many Filipinos have to work at night. The call centres are introducing new technology including robots.

Analyse how advances in technology can affect demand and supply.[6]

Discuss the policies that a government might adopt to increase the price elasticity of supply of agricultural goods in an economy and consider which policy is likely to be most effective. [12]