Examiner Tips and Tricks

Examiner Tips and Tricks
1. The nature of the economic problem

In Paper 1, MCQ will explore your understanding of a free
good. Often, you will be presented with a list of goods which
have been given to you or provided to you by the
government, free of charge (e.g. government education that
you do not pay for). Remember to differentiate between
something you have received freely - and something that is
abundant in supply. Then it is easy to determine the answer
2. Factors of production
In Paper 1, MCQ frequently require you to apply your
understanding of the factors of production by presenting you
with a short scenario - and then asking you to identify which
factors of production are mentioned in the scenario. Be
careful that you do not identify man-made products as non
man-made products, e,g. fertiliser is a capital good (man-
made) even though it is an ingredient in the production of
many agricultural products.
There will often be questions in which you are asked to

identify the incorrect combination of factors and their
rewards.
The terms 'market' and 'free market' are used

interchangeably. Both mean that there is no government
intervention. There is no economy in the world that is a
completely (free) market economy. Some are more free than
others.
3. Opportunity Cost
Opportunity cost is about the loss of the next best
alternative. It is not a monetary amount. MCQ will frequently
include a monetary amount as one of the options and it is
never the answer! Always look at the options presented and
identify the next best alternative
4. Demand
The difference between a movement along the demand
curve and a shift in demand is essential to understand.
You will be repeatedly examined on this and it is important
that you use the correct language to show that you
understand the difference between a change in quantity
demanded and a change in demand.
When price changes (ceteris paribus), there is a movement

along the demand curve resulting in a change to quantity
demanded. When a condition of demand changes, there
is a shift of the entire demand curve resulting in a change
to demand.
5. Supply
Several of the conditions of supply change the costs of
production. However, be sure to explain each condition as its
own point before linking it to the cost of production (for
example, a change in indirect taxation).
A common error by students is to explain that a subsidy (for

example, £3,000 subsidy for each electric vehicle produced)
shifts the demand curve for electric vehicles to the right. This
is incorrect. The subsidy will shift the supply curve to the
right. Then due to the lower price, there will be a movement
along the demand curve (extension of quantity
demanded) to create a new market equilibrium.
6. Price Determination
Memorise the rule that shortages arise when the price
is below equilibrium whereas surpluses arise when the price
is above the equilibrium.
7. Price Changes
Be systematic in thinking through the order of changes in
market conditions. e.g. an increase in demand (shift in
demand) will cause a rise in price. The higher price will cause
an extension of supply (not a shift of supply)
MCQ frequently requires you to identify the consequences

of dynamic changes in markets, e.g. the new equilibrium
point after a change in the market). Memorise the
conditions of demand and supply; by doing so, you will
save valuable thinking time in the exam.
In structured questions, explaining the steps in the dynamic

change is often referred to as analysis and students
frequently leave out some steps in the explanation
Here is a systematic process to help build your

explanation:
Step 1: From the scenario, identify if the change in condition

is on the demand side or supply side
Step2: State which way the demand or supply curve moves

and use notation, e.g. S1→S2
Step 3: State the disequilibrium that now exists at

the original market price (excess demand or excess
supply)
Step 4: State if sellers raise or lower prices to clear

the disequilibrium
Step 5: Explain the

relevant contraction and extension that occur on the
demand and supply curves due to the change in price
Step 6: State the new market equilibrium points e.g. P2Q2
Step 7: Explain the market outcome (is the new

price/quantity higher/lower than the original?)
8. Price Elasticity of Demand

Use the acronym SPLAT to remind yourself of the five
factors that influence the PED of a good or service
o S - Availability of substitutes
Good availability of substitutes results in a higher value of
PED (relatively elastic)
o P - Price of product as a proportion of income
The lower the proportion of income the price represents, the lower
the PED value will be. Consumers are less responsive to price
changes on cheap products (relatively inelastic)
o L - Luxury or necessity
Luxury goods are more elastic because they are not essential, while
necessities are more inelastic because consumers have no choice
but to buy them.
o A - Addictiveness of the product
Addictiveness turns products into necessities, resulting in a low
value of PED (relatively inelastic)
o T - Time period
In the short term, consumers are less responsive to price increases,
resulting in a low value of PED (relatively inelastic). Over a longer
period of time, consumers may feel the price increase more and will
then look for substitutes, resulting in a higher value of
PED (relatively elastic)
A common error students make is to say that when prices

increase and the product is inelastic in demand, the
quantity demanded does not fall. It does! But it is a less
than proportional fall than the increase in price.
So, when Governments tax demerit goods such as

cigarettes, the increase in price is greater than the decrease
in QD, but QD still falls.
9. Price Elasticity of Supply

A common error students make is to say that when prices
increase and the product is inelastic in demand, the
quantity demanded does not fall. It does! But it is a less
than proportional fall than the increase in price.
So, when Governments tax demerit goods such as

cigarettes, the increase in price is greater than the decrease
in QD, but QD still falls.
Many students confuse PES with PED and inadvertently

answer questions using knowledge from PED. When faced
with PES questions, tell yourself to think like a
producer (and not a consumer!) and it will help you to stay
focused on providing the correct answer.
10. Market Economic System

Multiple choice questions often explore your
understanding of the different characteristics of market and
mixed economic systems.
When answering structured questions that ask you
to discuss/explain the difference between two systems,
ensure that the disadvantages of one system are not
always just the opposite points to the advantages of the
other system. Develop some unique points for each system.
11. Market Failure

Market failure results in the overconsumption of demerit
goods and goods with external costs and
the underconsumption of merit goods and goods with
external benefits. Your understanding of this concept is
frequently tested in MCQ.
When explaining externalities, your syllabus focusses on the

external costs and benefits. It does not specifically refer
to negative/positive externalities of production or
consumption.
The material on this page is frequently examined in the

Paper 2 structured questions. You will be asked
to evaluate the effectiveness of taxes, subsidies, maximum
& minimum prices. To do so:
1. Consider the advantages & disadvantages of each method of

intervention
2. Explain that several methods of intervention are likely to be more

effective than a single method e.g. smoking is taxed & highly
regulated (age restrictions, packaging restrictions, display
restrictions)
3. Consider different market segments and their responsiveness e.g.

wealthy consumers will less responsive (inelastic demand) to tax
increases than poorer consumers (elastic demand)
This further develops the exam tip mentioned above. When

analysing the impact of taxes on a market it is worth
highlighting the elasticity of the product as it influences
who pays more of the tax (producer or consumer).
The more price inelastic the product, the greater the

proportion of the tax will be passed on to consumers by
producers as the QD will fall less proportionately than the
price increase. The more price elastic the product, the
smaller the proportion of the tax will be passed on to
consumers by producers as the QD will fall more
proportionately than the price increase. (See sub-topic
2.7.2 for more on PED)

Examiner Tips and Tricks - Economics

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1. The nature of the economic problem

There will often be questions in which you are asked to

The terms 'market' and 'free market' are used

When price changes (ceteris paribus), there is a movement

A common error by students is to explain that a subsidy (for

MCQ frequently requires you to identify the consequences

In structured questions, explaining the steps in the dynamic

Here is a systematic process to help build your

Step 1: From the scenario, identify if the change in condition

Step2: State which way the demand or supply curve moves

Step 3: State the disequilibrium that now exists at

Step 4: State if sellers raise or lower prices to clear

Step 5: Explain the

Step 6: State the new market equilibrium points e.g. P2Q2

Step 7: Explain the market outcome (is the new

8. Price Elasticity of Demand

A common error students make is to say that when prices

So, when Governments tax demerit goods such as

9. Price Elasticity of Supply

So, when Governments tax demerit goods such as

Many students confuse PES with PED and inadvertently

10. Market Economic System

11. Market Failure

When explaining externalities, your syllabus focusses on the

The material on this page is frequently examined in the

1. Consider the advantages & disadvantages of each method of

2. Explain that several methods of intervention are likely to be more

3. Consider different market segments and their responsiveness e.g.

This further develops the exam tip mentioned above. When

The more price inelastic the product, the greater the

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