Cambridge O Level Economics Paper 2

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Questions and Answers

Identify two variable costs of producing palm oil.

  • Casual labour (correct)
  • Cost of machinery
  • Rent of land
  • Fertiliser (correct)
  • Maintenance of irrigation systems
  • Palm oil seeds

Explain two external costs of the destruction of forests in Indonesia.

  • Release of harmful gases (correct)
  • Loss of revenue from tourism
  • Loss of biodiversity (correct)
  • Soil erosion
  • Flooding

Define trade in goods balance.

The trade in goods balance is the difference between the value of a country's exports and imports of goods.

Explain two benefits producers may gain from free trade.

<p>Lower input costs (C), Access to larger markets (E)</p> Signup and view all the answers

Define demerit good.

<p>A demerit good is a good which is considered to be harmful to the individual consumer and society, for example cigarettes or alcohol.</p> Signup and view all the answers

Explain the difference between an extension in demand and an increase in demand.

<p>An extension in demand occurs when there is a movement along a demand curve due to a change in the price of the good. An increase in demand occurs when there is a shift in the demand curve due to non-price factors such as changes in income, tastes, or prices of substitute goods.</p> Signup and view all the answers

State two functions of a commercial bank.

<p>Commercial banks act as intermediaries between savers and borrowers, and also provide a range of other services such as cheque processing, foreign exchange, and financial advice.</p> Signup and view all the answers

Explain two reasons why emigration from a country may increase.

<p>Higher wages in other countries (A), Political instability (D)</p> Signup and view all the answers

Define wages.

<p>Wages are the payments received by workers in return for their labour.</p> Signup and view all the answers

Flashcards

Palm Oil Production

Indonesia is the largest global producer of palm oil.

Variable Costs

Costs that change with production volume, like seeds and labor.

Opportunity Cost

The loss of potential gain from conserving forests.

External Costs

Costs affecting third parties, such as pollution from deforestation.

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Fires for Palm Oil

Fires are used to clear land for palm oil plantations.

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GDP per Head

Total economic output per person in a country.

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HDI Ranking

Human Development Index ranking, indicating quality of life.

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Emigration

The act of leaving one's country to live in another.

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Stubble Burning

Burning leftover crop residue to improve soil fertility.

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Foreign Exchange Rate

The value of one currency for the purpose of conversion to another.

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Trade in Goods Balance

The difference between a country's exports and imports of goods.

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Free Trade

International trade without tariffs or restrictions.

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Indirect Taxes

Taxes imposed on goods and services rather than on income.

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Demand and Supply Diagram

A graphical representation of the relationship between demand and supply.

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Price Elasticity of Demand (PED)

A measure of how much the quantity demanded changes with price changes.

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Investment

When money is put into the economy to generate future returns.

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Wages

Monetary compensation earned by workers for their labor.

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Macroeconomic Performance

The performance of the economy on a large scale, including factors like growth and unemployment.

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Tourism Industry

Economic activities related to travel and tourism.

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Environmental Costs

Costs incurred due to environmental degradation.

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Agricultural Subsidies

Financial support from the government to help farmers.

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Commodity Exports

Goods sold abroad, often raw materials.

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Crisis In Economy

A significant disruption in the economy, affecting stability.

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Local Employment

Jobs available within a region rather than outside it.

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Economic Growth

An increase in the production of goods and services in an economy.

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Market Demand

The total demand for a product or service in the market.

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Tariff

A tax imposed on imported goods.

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Inflation Rate

The percentage increase in the price level of goods and services over time.

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Production Possibility Curve (PPC)

A graph showing the trade-offs between two goods’ production.

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Consumer Goods

Products bought for personal use.

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Demerit Goods

Goods deemed undesirable that can harm consumers.

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Demand Extension

A rise in quantity demanded due to factors other than price.

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Community Impact

Effects of economic activity on the local community.

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Study Notes

Cambridge O Level Economics Paper 2

  • Exam taken in October/November 2020
  • 2 hours and 15 minutes long
  • Paper 2 is structured questions
  • Answer booklet is enclosed
  • Students need a calculator
  • Total marks for the paper are 90
  • Instructions include answering four questions in total. Section A: answer Question 1. Section B: answer three questions.
  • Follow instructions on the front cover.
  • Ask invigilator for continuation booklet if needed.
  • The document has 8 pages; blank pages are indicated.

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