OCR Economics Past Paper PDF

PART A: KNOWLEDGE / 25 MARKS 25 Minutes Multiple Choice PART B: THINKING / 22 MARKS 30 Minutes Short Answer & Charts/Diagrams PART C: APPLICATION / 26 MARKS 35 Minutes Mo...

PART A: KNOWLEDGE / 25 MARKS 25 Minutes Multiple Choice PART B: THINKING / 22 MARKS 30 Minutes Short Answer & Charts/Diagrams PART C: APPLICATION / 26 MARKS 35 Minutes Modelling and Interpreting Models PART D: COMMUNICATION / 12 MARKS 20 Minutes Short Answers Choice ~ Choose 2 out of 4 options Reviewing your Answers 10 minutes TOTAL MARKS: / 85 MARKS UNIT 1: INTRODUCTION TO ECONOMICS What is Economics? ​ Definition and explanation of “economics”. ○​ A social science that studies human behaviour, especially when making decisions abouts needs and wants. ​ The fundamental problem in economics (scarcity & choice) ○​ Scarcity is the limitedness of resources that can’t satisfy human’s unlimited wants and needs. ​ Distinguish between microeconomics and macroeconomics ○​ Microeconomics - examines the individual, their individual choices, and studies businesses and consumers ○​ Macroeconomics - examines the economy as a whole Economic thinking and decision-making ​ What are the types of cause-and-consequence relationships economists should consider; Be prepared to apply them (Positive/Negative; Direct/Indirect, Local/Global, Short-term/Long-Term; Intended/Unintended, Instant/Delayed, Foreseeable/Unforeseeable) ​ What does it mean to make a rational choice? ○​ Benefit outweighs the cost ​ Concept of Utility ○​ usefulness/satisfaction that consumers gain from consuming something. ​ Distinguish between positive economics & normative economics ○​ Positive - factual statements (firm and not iffy) ○​ normative economics - judgements that are debatable (iffy, key word: should be) ​ Importance of the ceteris paribus assumption ○​ Assumption that all other factors are unchanging and equal. ​ Three most common fallacies (be prepared to identify examples). ○​ Fallacy - something that has been proven false but is still believed to be true ​ Fallacy of composition - good for one person = good for everyone ​ Hoc post Fallacy - something prior to an event logically caused it ​ The fallacy of single causation - oversimplification of something, saying that there was only one cause that made something happen Fundamental Economic Questions ​ Understand and explain opportunity costs ○​ The cost of choosing one option over another ○​ What outweighs the other? ​ Explain problem of Scarcity ○​ Scarcity is the limitedness of resources that can’t satisfy human’s unlimited wants and needs. ​ Three economic questions ○​ What to produce? ○​ How to produce it? ○​ Who should get the resources? ​ What are the Factors of Production? ○​ capital ○​ Labour ○​ Land ○​ entreprenuership ​ Tangible v. Intangible Resources ○​ Tangible - can be seen and held ○​ intangible resources - cannot be seen or touche ​ Effective v. Efficient use of Resources ○​ Effective - gets the job done ○​ Efficient - get the job done in a better way (more productive) ​ Productivity v. Efficiency ○​ Productive - maximize output with the given resources ○​ Efficient - maximize output with the resources available, plus avoid wasting resources Economic & Political Systems ​ Identify and distinguish between 4 economic systems ○​ Traditional economy - production methods are determined by past methods of production ○​ Market economy - free market where businesses and consumers are independent and based off self interest ○​ Command economy - government authority where government determines all factors of production ○​ Mixed economy - both market/command economy where businesses and consumers can make independent decisions and act in self interest, but there are government interventions/limitations. ​ Understand economic systems using three main criteria (private property, profit, competition) ​ Distinguish economic systems and political systems ​ Identify and distinguish between political systems Capitalism citizens, not governments, own and run companies Communism A political system with government/community ownership that takes all goods and equally distributes them among people. Fascism the political idea that the government controls everything Socialism a system based on cooperation where everyone works together to provide equally for everyone else Use of Economic Models a)​ Circular Flow Model ​ Be able to explain how the Circular Flow Diagram describes a simple economy ​ Understand the flows illustrated by the model ​ Be prepared to draw/label the model ​ Explain leakages and injections ​ Explain how the size of the circular flow may change over time b)​ PPC Curve ​ What is a PPC and what does it tell us about an economy? ​ How might the PPC curve explain important economic concepts? ​ Key Assumptions ​ Be prepared to interpret a PPC provided with data ​ Distinguish between consumer goods and capital goods ​ What does the shape of the PPC indicate? ​ How does the PPC illustrate inefficiency; attainable and unattainable production possibilities ​ Constant Opportunity Cost v. Increasing Relative Cost ​ Law of Diminishing Returns v. Law of Increasing Returns to Scale UNIT 2: BUSINESS ORGANIZATIONS & FINANCE Income Management ​ Money’s changing purchasing power ○​ The true value of money (value in trade) ​ Importance of budgeting ○​ Helps organize and allocate money efficiently Saving & Investing ​ Comparing and contrasting saving and investing ○​ Savings - Putting money aside for the future ○​ Investing - using savings to earn extra income ​ Benefits/Disadvantages of saving and investing ○​ Savings - loses purchasing power over time (unless the interest rate is the same as inflation) ○​ Investing - risky and can lose lose money instead of gaining. ​ Identifying and describing savings options ○​ RRSP - registered retirement savings plan ○​ RESP - registered education savings plan ​ Identifying and describing investment options ○​ ​ Calculations of interest Banking & Credit ​ How credit cards work ​ Bad v. Good credit ○​ Credit is good if you pay your bills on time and can prove to the bank that you are responsible client (can build credit and get loans). Credit is bad if you fail to pay your bills on time and they become hard to repay. ​ Five Cs of Credit Identify the five “C”s Briefly Explain what it is and why it may be important Character A lender’s opinion of a borrower’s general creditworthiness. Capacity Your ability to repay the loan. Capital The amount of money invested in a business by its owner or management team Conditions The condition of your business — whether it is growing or faltering — as well as what you’ll use the funds for. Collateral Assets that are used to guarantee or secure a loan. Types of Industries ​ Four main industries ○​ Primary - extracting resources ○​ Secondary - processing (primary manuf.) and manufacturing(secondary manuf.) products from raw materials ○​ Tertiary - services  ○​ Quaternary - knowledge ​ Main characteristics of each main industry Forms of Business Ownership ​ Identify and understand key characteristics of the main forms of business ownership ​ Understand advantages and disadvantages of each form of business ownership Corporate Expansion ​ Ways a business can expand ○​ Merger - two firms merge fully to operate as a single and more efficient entity ○​ Acquisition - the purchase of controlling interests of another company ○​ Corporate alliance - two firms agree to form a business network and thus form like a mega company ○​ Corporate integrations: ​ vertical integration - two firms are different stages of production merge to make one product or service. ​ Horizontal integration - two firms merge to make one product or service. ​ Common Forms of Investments ○​ Common stock - general ownership, voting privileges ○​ Preferred stock - no voting rights ○​ Mutual funds - give money to investors who will manage your money for you along with other people’s. ​ Common v. Preferred Stock ○​ Common stock - general ownership, voting privileges ○​ Preferred stock - no voting rights ​ Bonds v. Stocks ○​ Bond - loaning money to a company, which will be refunded plus interest ○​ Stocks - a fraction of ownership in a company UNIT 3: MICROECONOMICS Demand ​ Demand v. Quantity Demanded ○​ Demand - how much is demanded at each price ○​ Quantity demanded - a single point which indicates the demand at a certain price ​ Completing and interpreting Demand Schedules ​ Graphing Demand Curves ​ Non-Price Factors of Demand (CAPIT) ○​ Income ○​ Tastes ○​ Population/number of consumers ○​ Alternatives and their price ○​ Complements ​ Analyzing and graphing changes in Demand ○​ Movements and Shifts ○​ Price v. Non-price Factors Supply ​ Supply v. Quantity Supplied ○​ Supply - how much is supplied at every price ○​ Quanitity supplied - a specific point that indicates how much is supplied at a certain point ​ Completing and interpreting Supply Schedules ​ Graphing Supply Curves ​ Non-Price Factors of Supply (TRECC) ○​ Cost ○​ Technology ○​ Competition (number of firms/sellers) ○​ Related products ○​ Enviornment ​ Analyzing and graphing changes in Supply ○​ Movements and Shifts ○​ Price v. Non-price Factors Equilibrium ​ Market Equilibrium ○​ When demand and supply meet ​ Identifying the Equilibrium Point, Equilibrium Price and Equilibrium Quantity from Schedules and Graphs ​ Calculating Shortages and Surpluses ​ Graphing Equilibrium, Shortages and Surpluses ​ Changes in Equilibrium in Competitive Markets Market Structures ​ What is economic profit? ​ Theory of the Firm ​ Profit Maximizing (i.e. profits are maximized when marginal revenue = marginal cost) ​ Market Structures ○​ Five criteria (or factors) to help determine market structures ○​ Spectrum of competition ○​ Distinguish between Perfect Competition, Monopolistic Competition, Oligopoly and Monopoly  Term Definition Capital Goods Goods used to produce other goods/services (e.g., machinery). Consumer Goods Goods for direct consumption (e.g., food, clothing). Ceteris Paribus Latin for "all other things being equal"; used to isolate variables. Constant Opportunity Costs Opportunity cost remains the same as production of one good increases. Economics Study of how scarce resources are allocated. Economic System Framework for production, distribution, and consumption of goods/services. Command Economy Government makes all economic decisions (e.g., North Korea). Market Economy Decisions are guided by supply and demand with minimal government intervention. Mixed Economy Combines market and government control (e.g., Canada). Traditional Economy Relies on customs and traditions for economic decisions. Economies of Scale Cost per unit decreases as production increases. Economize Use resources efficiently to maximize output. Economic Efficiency Maximizing output while minimizing waste. Factors of Production Resources for production: land, labor, capital, entrepreneurship. Land Natural resources (e.g., minerals, forests). Labour Human effort and skills. Capital Tools, equipment, and facilities. Entrepreneurship Innovation and risk-taking to create businesses. Fallacy Misleading or false reasoning. Fallacy of Composition Assuming what is true for one is true for the whole. Fallacy of Single Causation Over-simplifying by attributing one cause to an outcome. Post Hoc Fallacy Assuming causation because one event follows another. Increasing Relative Costs Opportunity costs increase as resources are shifted. Intangible Resources Non-physical assets (e.g., knowledge, brand reputation). Law of Diminishing Returns Adding inputs eventually yields smaller increases in output. Law of Increasing Costs Producing more of one good raises the opportunity cost. Law of Increasing Returns Output increases more than proportionally to inputs. Microeconomics Study of individual markets and decision-making. Macroeconomics Study of the economy as a whole. Normative Economics Value-based economic statements (e.g., "should" or "ought"). Opportunity Costs The next best alternative foregone when making a choice. Political System Structures of governance (e.g., democracy, dictatorship). Capitalism Economic system based on private ownership and profit. Communism Collective ownership; central planning. Democracies Rule by elected representatives. Dictatorships Rule by one person or small group with absolute power. Fascism Authoritarian nationalism with centralized control. Socialism Public ownership of key resources with some market elements. Political Orientation Beliefs about the role of government and economic systems. Positive Economics Objective analysis of facts. Production Possibilities Curve Graph showing trade-offs and efficiency in production. Productivity Output per unit of input. Scarcity Limited resources relative to wants. Tangible Resources Physical assets (e.g., equipment, raw materials).