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ADDITIONAL MATERIALS
In addition to this examination paper, you will need a calculator.
INSTRUCTIONS TO CANDIDATES
Use black ink or black ball-point pen.
Write your name, centre number and candidate number in the spaces at the top of this page.
Answer all the questions in the spaces provided. You may use continuation paper on page 12 if
necessary, taking care to number the continuation correctly.
INFORMATION FOR CANDIDATES
Mark allocations are shown in brackets. This paper has a total of 50 marks.
SJJ*(S12-1131-01)
Surname
Other Names
Candidate
Number
2
Centre
Number
GCE AS/A level
1131/01
ECONOMICS EC1
P.M. FRIDAY, 18 May 2012
1 hour
DO NOT OPEN THIS BOOKLET UNTIL YOU ARE TOLD TO DO SO.
For Examiners use only
Question
Maximum
Mark
Mark
Awarded
1. 2
2. 2
3. 6
4. 4
5. 6
6. 8
7. 8
8. 6
9. 8
Total 50
2
(1131-01)
Examiner
only
Answer all the questions in the spaces provided.
1. NHS could have employed 10,000 nurses with the 314m it spent on management advisors.
Use the above information to explain the concept of opportunity cost. [2]




Total mark
2. The price of crisps in a school canteen rose from 40p per bag to 50p and as a result sales fell
from 200 bags to 180 bags per day. Calculate the price elasticity of demand for crisps at the
school. [2]




Total mark
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/6
With reference to the data and using a diagram, explain why petrol retailers are able to shift a
large proportion of the tax on petrol onto consumers. [6]
















Total mark
3.
01 03 05 07 09 2011
0
20
40
60
80
100
120
140
Years
The price of petrol per litre
Price per litre of
unleaded petrol
Tax per litre
Pence
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(1131-01)
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4. Between 2000 and 2010 hospital admissions
for obesity and alcohol related conditions rose
sharply. The combined cost of treating alcohol
and obesity is around 6.5bn per year.
Define external costs and using the data
explain why there are external costs resulting
from excessive alcohol and food consumption.
[4]








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/4
1,000
42,380
69,360
45,100
1999/
2000
2009/
2010
1999/
2000
2009/
2010
INCREASING HOSPITAL ADMISSIONS
(Numbers of people)
Alcohol-related Obesity-related
(1131-01)
5.
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/6
According to a report by the Game and Wildlife Conservation Trust, government grants
to farmers to preserve wildlife were a waste of money. The report found that farmers were
given payments for measures that were easy to implement but had no real benefit for wildlife.
According to the report farmers can choose options like maintaining hedgerows which often
fail to meet the needs of wildlife.
To what extent are these government grants an example of government failure? [6]












Total mark
1965 75 85 95 05
120
100
80
60
40
20
0
500
400
300
200
100
0
Subsidising decline
Farmers receive 446m a year
in wildlife grants but bird
populations have slumped
Vanishing species
Population declines 1970-2007 Wildlife
grants to farmers (m)
Bird population
(1965 = 100)
Tree sparrow
Skylark
Linnet
-93%
-53%
-57%
Source: Adapted from British Trust for Ornithology
6
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6. The diagram below shows the average wage of bricklayers in the UK economy.
Using the diagram, evaluate the likely effects of a rise in mortgage interest rates and the arrival
of bricklayers from eastern Europe seeking employment in the UK. [8]
















Total mark
Market for bricklayers
Wage
rate
per
hour
Quantity of
bricklayers
S
L
D
L
q
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w
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(1131-01)
BLANK PAGE
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7.
(a) Using an aggregate demand and aggregate supply diagram explain why, according to
the data, inflation has been above target in recent years. [4]













2005 2006 2007 2008 2009 2010 2011 2012 2010
2005 2010
6bn
164bn
820bn
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90
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80
120
160
100
120
130
110
$

Inflation has risen well above


the 2% target...
Why
Rising oil prices
Falling pound/higher
import prices
Return of 17.5% VAT
... but the Bank predicts
it will come back down
Why
Higher taxes and lower
public spending will
damp down the
economy
Shortage of credit
Spare capacity in
economy
Ups and downs
Oil prices
$ per barrel
Import prices
Index 2005 = 100
Inflation
Percentage increase
on a year earlier
The Banks
central
forecast
Target rate: 2%
immediate cuts in
public spending
government
borrowing last year
total national
debt
The Times, 13 May 2010
Sources: Bloomberg;
Bank of England: ONS
(1131-01)
(b) Using an aggregate demand and aggregate supply diagram explain why, according to
the data, inflation is predicted to come down in 2012. [4]













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8. 50% top income tax rate could be scrapped by the next election
George Osborne, the Chancellor of the Exchequer, has announced an official review of the
higher earners tax rate which could be scrapped in 2012.
Discuss the view that the abolition of the 50% tax rate would be beneficial to the UK economy.
[6]












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9. In recent years the UKs trade deficit in goods has continued to worsen despite a fall in the
value of the pound since 2007.
UK - Trade deficit in goods 2001-2010 (monthly)
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/8
To what extent can a fall in the value of a currency such as the pound be expected to improve
the trade balance? [8]
















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0
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2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Years
bn
(1131-01)
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Examiner
only
For continuation only.

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