نمونه سوال 1

University of London Extra Mural Examinations
Economic Principles


Students should complete THREE questions. At least one of which should be
from Part A and one from Part B. Students are asked not to answer questions
which are substantially the same as coursework submitted for examination

Section A:
What is the difference between price elasticity, cross elasticity and income elasticity of demand

If the market for Big Mac Meals had the following elasticities what would it mean and what would your advice to MacDonald’s management be?

Price elasticity = -0.2
Income elasticity = -0.8
Cross elasticity with respect to Pizza Hut Meals = 1.0

2. Recently the market for coffee has seen both increasing production and declining demand. Use supply and demand analysis to show how these factors will affect the price of coffee.

What steps might be taken by coffee producers to improve their situation?

3. With the aid of examples explain what is meant by an externality? With reference to the introduction of congestion charging in Central London explain how the market mechanism can be used to address externalities. Apart from the market mechanism how else could environmental problems generated by externalities be addressed?

4. What defines a perfectly competitive industry? How does a firm operating in a perfectly competitive industry determine what level of out put to produce? If there is a sudden increase in demand for the industry’s output how will this effect the firm’s output, price and profitability?

5. Why are monopolies regulated? How are they regulated in the UK? Are there any economic arguments in favour of tolerating low levels of competition in certain UK industries?

6. In what sort of circumstances do free markets not provide the best way of allocating scarce resources? Illustrate your answer with some relevant examples.





Turn over
Section B:

7. Using a Keynesian macroeconomic model in which prices are fixed explain what will happen to the level of national output if:
· There is a collapse in investment
· There is a boom in exports
· There is an increase in government spending
· The government cuts the tax rate
What are the limitations of this model?

8. Using the aggregate demand and supply model analyse the impact of:

a) a decline in world trade
b) a fall in labour costs
c) a government policy of consistently running fiscal deficits

Your answer should consider both the short-run and the long-run impacts of these factors.

9. What is money? For what reasons are people prepared to hold money rather than interest-bearing assets? If the Bank of England cut interest rates what would this do to the demand for money? If the money supply remained unchanged what would happen?

10. What is the Phillip’s curve? Why do economists argue that there is no long run trade-off between the level of inflation and unemployment? What are the relative economic costs of inflation and unemployment?

11. What do economists mean when they distinguish between involuntary and voluntary unemployment. If you thought that most unemployment was involuntary what sort of policies would you recommend a government should adopt to promote full employment?

12. Britain should join the Euro at the earliest opportunity. What are the economic arguments for and against this statement
.