Share Economics SA Paper 2 Section B Review
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Define price-inelastic demand
When demand changes by a smaller percentage than the change in price and when PED is less than 1.
Explain two causes of a shift of demand curve to the left.
decrease in the price of a substitute, if a substitute becomes cheaper people will switch to it
Analyse how a government could promote the purchase of merit goods
Subsidise merit good producers, reducing production costs, lowering price, improving quality, making them more affordable
Discuss whether governments should discourage demerit goods consumption.
Yes, they may cause external costs e.g. pollution, global warming, damaging people’s health, reducing living standards, damaging local economies
Discuss whether governments should discourage demerit goods consumption.
No, industry employs large numbers, may reduce the output/revenue from them, reducing GDP/economic growth and causing unemployment
Define opportunity cost.
opportunity cost is the (next) best alternative forgone
Explain two reasons university graduates usually earn more than they have not gone to university.
graduates are more likely to be skilled and this makes them more productive
Analyse, using a production possibility curve, effect an increase in the number of graduates will have on an economy
with a higher quality of labour, a country will be capable of producing more/there will be economic growth
Discuss whether graduate should pay the full cost of their university education.
Yes, they will learn new skills/gain qualifications, their employment opportunities are likely to increase, they are likely to earn a high wage
Discuss whether graduate should pay the full cost of their university education.
No, poor families may not be able to afford the cost, this could reduce the number of graduates, lowering potential output, increasing income inequality
Define social benefit
The total benefit to society of an economic activity or external benefit + private benefit
Explain two advantages of conserving natural resources
resources will last longer / decrease rate of depletion, future generations will be able to benefit from the resources
Analyse how taxation could reduce market failure.
Tax revenue can be used to e.g. subsidise products with external benefits example buses
Discuss the advantage of a market economic system.
Prices may be low, quality may be high, high efficiency due to competition and the profit motive
Discuss the disadvantage of a market economic system.
Poor consumers will have little influence on what is produced as they have little purchasing power
Define demerit goods
A product which is more harmful to consumers than they realise / the government considers, It is over-consumed / overproduced it creates external cost
