A LEVEL ESSAY QUESTIONS BY TOPICS (1998-2008)

MICROECONOMICS
Topic 1 Central Economics Problems and Resource Allocation
TYS N2005
(a) Explain two ways in which an economy might move from a point within its production
possibility curve (PPC) to a point on it. [10]
(b) Discuss the most effective economic policies to move the PPC outwards. [15]
TYS N2004
Illustrating your answer with examples, assess the policies that the Singapore government
currently adopts to achieve an efficient allocation of resources when externalities are present,
and consider whether some new policies should be introduced. [25]
TYS N2002
(a) Explain how scarcity, choice and cost are related to the problems of consumers and
producers. [12]
(b) Assess whether these concepts are of relevance for governments when making
macroeconomic policy. [13]
TYS N2001
Discuss whether the price system is the best mechanism for the allocation of economics
resources. [25]
TYS N2000
(a) What is meant by the basic economic problem of scarcity? [12]
(b) Discuss whether economic growth solves the problem of scarcity. [13]
TYS N1999
Discuss whether it is necessary to have government intervention in order to achieve an
efficient allocation of resources. [25]
Topic 2 Demand and Supply & Concepts of Elasticity
TYS N2008
Developments in modern technology, such as faster broadband internet connections, portable
DVD players, iPods and MP3 players, have had major impacts on the demand for and supply of
recorded music and associated products.
Assess how the markets involved might be affected by these developments. [25]
TYS N2007
In 2005 the rate of Goods and Services Tax (GST) in Singapore rose from 3% to 5%. Incomes
rose by approximately 4.5% in 2005.
(a) Explain the likely impact of this change in GST on expenditure by consumers on different
types of goods. [10]
(b) Discuss whether the combined effect of the rise in incomes and the rise in GST is likely to
cause the quantities of different types of goods sold to rise or fall. [15]
TYS N2005
Discuss how the Singapore government might use the concepts of price elasticity of demand
and income elasticity of demand to determine the impact of a fall in exchange rates and a rise
on worldwide incomes on the current account of the Singapore balance of payments. [25]
TYS N2004
The terrorist attack on New York on 11 September 2001 caused a worldwide recession and an
increased fear of flying, both of which severely affected the demand for travel by air. This led
to the closure of some of the major airlines in the world.
(a) With the aid of the diagrams, explain how the recession and the closure of some of the
major airlines of the world affected the market for air travel. [10]
(b) Assess the relevance of price elasticity of demand, income elasticity of demand, crosselasticity of demand and price elasticity of supply, in explaining the effects of these events on

the airline industry. [15]

TYS N2004
(a) Using appropriate examples, explain the difference between internal and external
economies of scale. [10[
(b) Discuss the view that the profit motive will always lead to a few large firms dominating the
market for each and every type of product. [15]
TYS N2003
(a) Explain the concepts of price elasticity of demand and income elasticity of demand,
indicating why elasticities are different for different products. [12]
(b) Discuss how a supplier of a product that is currently fashionable might use both of these
concepts in making price and output decisions. [13]
TYS N2002
'In a free competitive market, a shortage causes price to rise, a surplus causes price to fall. In
some markets this does not happen because a minimum price is fixed by producers.'
(a) With the aid of diagrams and examples, explain why prices rise when there are shortages
ad fall when there are surpluses. [10]
(b) Discuss the factors that a group of companies might consider when deciding to fix a
minimum price in a market. [15]

TYS N2001
(a) Explain price elasticity of demand and income elasticity of demand. [10]
(b) A government is proposing to increase the tax on petrol. Examine the relevance of price
elasticity of demand and income elasticity of demand for this proposal. [15]
TYS N2000
(a) Explain price elasticity of demand, income elasticity of demand and cross elasticity of
demand. [12]
(b) In 1998 an airline offered very cheap flights from UK to other parts of Europe. However,
the service was not very frequent, tickets could not be booked at agencies but only directly
with the airline, and no meals were offered on the flights.
Discuss whether the different elasticity concepts could be useful in explaining this airline's
pricing policy for its flight. [13]
TYS N1999
a) Use the concept of elasticity to distinguish between a normal good and an inferior good.
[12]
b) Discuss how a knowledge of price elasticity and income elasticity might be of practical use
to a firm. [13]
TYS N1998
(a) What are the factors that influence the market demand for a product such as mobile
telephones. [10]
(b) Explain how price elasticity of demand, income elasticity of demand and cross elasticity of
demand might be of use to the manager of a company selling mobile telephone. [15]
Topic 3 Cost & Production
TYS N2004
(a) Using appropriate examples, explain the difference between internal and external
economies of scale. [10]
(b) Discuss the view that the profit motive will always lead to a few large firms dominating the
market for each and every type of product. [15]

TYS N2003
In 2001 there was a world-wide reduction in airline business. Smaller airlines with lower costs
and cheaper discount fares suffered less than the high-cost larger airlines such as Air France,
Swissair and Lufthansa.
(a) Explain why, according to economic analysis, there are benefits from large scale
organisations. [12]
(b) Discuss to what extent the above extract concerning costs disproves that economic
analysis. [13]
TYS J1999
In 1997, a merger was proposed between two of the worlds largest telecommunication
companies.
Analyse the possible effects when a merger of two large companies occurs and discuss why
there is sometimes opposition to such mergers. [25]
TYS N1998
The Coffee Marketing Board of Uganda controls 50% of the country's export of coffee. Its main
asset is a large efficient processing and storage unit located in the heart of an industrial area
which enables economies of scale and a consistent superior blend.
Discuss the possible benefits of the above arrangement. [25]
TYS N1997
(a) Explain how economies of scale affect the production costs of a firm. [13]
(b) Economies of scale are said to be beneficial. Does that mean that mergers of small firms
should be encouraged? [12]
Topic 4 Market Structures
TYS N2008
Firms pricing and output decisions depend on barriers to entry and behaviour of competitors.
(a) Explain why barriers to entry are a key determinant of a firms pricing behaviour. [10]
(b) Discuss the extent to which the behaviour of firms depends in reality on the actions of
their competitors. [15]
TYS N2007
(a) Explain how, in economic theory, a monopolist would determine the price that would
maximise the profits. [8]
(b) Discuss whether firms in the real world set prices at profit-maximising levels. [17]
TYS 2006
(a) Explain what factors affect price and output in an oligopolistic market. [10]
(b) Discuss whether this model of market structure is the most appropriate to explain the
behaviour of firms in Singapore. [15]
TYS N2005
(a) Explain the type of market structure in which each of the following is likely to operate in
Singapore:
i) Hawker food stalls and
ii) 5-star luxury hotels [10]
(b) Discuss how a fall in market demand for hotel accommodation is likely to affect both 5-staf
luxury hotels and other types of hotel. [15]

TYS N2004
(a) Using appropriate examples, explain the difference between internal and external
economies of scale. [10]
(b) Discuss the view that the profit motive will always lead to a few large firms dominating the

market for each and every type of product. [15]

TYS N2002
(a) Explain what is meant by productive and allocative efficiency. [12]
(b) A firm should be encouraged to maximise profits because this makes the firm efficient.
Assess whether this argument is true for a firm operating in an imperfect market. [13]
TYS N2002
In the UK, train tickets may be obtained more cheaply if they are bought in advance. In
August 2000 the railway companies jointly announced that these cheap tickets would be
available only at major stations. Passengers living near smaller stations would, therefore,
have to pay the full cost of the ticket.
(a) Explain what is meant by price discrimination and discuss whether this is an example of
price discrimination. [10]
(b) Identify the type of market structure that enables companies to practise price
discrimination, and discuss whether that market structure is ever beneficial to consumers.
[15]
TYS N2001
(a) Explain how monopolies can discriminate between buyers by charging different prices for
the same product or service. [10]
(b) Discuss the circumstances in which a monopoly could be beneficial. [15]
TYS N2001
(a) Contrast the features of perfect competition with those of oligopoly. [10]
(b) Discuss why oligopoly is a more common market structure than perfect competition. [15]
TYS N2000
In 1998 two petrol companies, Shell and Texaco, stated that they proposed to co-operate with
each other to bring greater efficiency in a competitive market.
(a) Distinguish productive efficiency and allocative efficiency. [10]
(b) Discuss what advantages and disadvantages might occur when large companies in the
same industry co-operate with each other and the industry becomes more monopolistic. [15]
TYS N2000
Many companies, recognising the increase in environmental awareness among consumers,
now advertise that they have invested in research to ensure that their products are
environmentally friendly. They hope that this will increase the demand for their products and
lead to higher profits.
(a) Explain the difference between fixed and variable costs and suggest what might happen to
the fixed and variable costs in the above companies in the short run. [12]
(b) Discuss whether the above statement supports the view that it is producer who dictates
what happens in the market with the sole aim of maximising profits.
TYS N1999
(a) What are the main characteristics of a monopoly market? [12]
b) To what extent is it true that monopolies are bad for the consumers? [13]
TYS J1999
(a) Distinguish between monopolistic competition and oligopoly. [12]
(b) Explain why oligopoly is a common market structure in many economies. [13]

TYS N1998
In August 1996, for what was thought to be the first time in the African sub-continent, a
private company was contracted by the government to manage electricity Distribution in
Northern Namibia.
(a) Explain why governments throughout the world have been involved in the supply of
services such as electricity. [12]
(b) Discuss whether economic efficiency is likely to be improved by the provision of such
services by a private company. [13]
TYS N1995
(a) With reference to the characteristics of market structure, explain why a video rental shop
is an appropriate example of monopolistic competition and the car manufacturing industry is
an appropriate example of oligopoly. [12]
(b) Discuss how these businesses might compete in their respective market structures.[13]
Topic 5 Market Failure
TYS N2008
(a) Explain why imperfect information and immobility of factors of production may lead to
market failure. [10]
(b) Evaluate policies currently used by the Singapore government to correct these causes of
market failure. [15]
TYS N2007
With reference to examples, discuss whether there is a need to change the current policies
adopted by the Singapore government to deal with market failure caused by externalities.
[25]
TYS N2006
Discuss, with economic reasons to support your arguments, whether the Singapore
government currently adopts the most appropriate economic policies in the provision of
education. [15]
TYS N2005
(a) Explain why pollution and congestion caused by cars are likely to cause market failure.
[10]
(b) Discuss whether the Singapore government currently adopts appropriate policies to
overcome this market failure. [15]
TYS N2004
Illustrate your answer with examples, assess the policies that the Singapore government
currently adopts to achieve an efficient allocation of resources when externalities are present,
and consider whether some new policies should be introduced. [25]
TYS N2002
(a) Use examples to distinguish between
(i) a private good and public good
(ii) a social cost and a negative externality. [12]
(b) 'In March 2000 Hong Kong's air pollution index was the highest it had ever been.
Clouds of thick yellow smog remained a fixture of the city's skyline'
[Far Eastern Economic Review, 11 May 2000]
Discuss what economic policies might be used to deal with this situation. [13]
TYS N2001
In Indonesia during 1999 plantation companies cleared huge areas of the rain forest for
rubber production and caused large fires, choking people and killing some endangered
species of animals. A state emergency was declared as air pollution reached dangerous
levels.
Discuss how economic analysis could find a solution to prevent these problems happening
again. [25]

TYS N2000
It was reported that in Egypt private sector companies were being offered the chance to
invest in the development and operation of airports and roads.
(a) Explain and illustrate what is meant by
(i) an externality,
(ii) a public good, and
(iii) a private benefit. [12]
(b) Discuss whether the above concepts are of any use in explaining why it is often the
government and not private enterpise that is responsible for the development and operation
of airports and roads. [13]
MACROECONOMICS
Topic 6 NIA
TYS N2003
It was reported in October 2001 that industry in Singapore was facing a sharp recession. GDP
grew by 10% in 2000, but in 2001 it was predicted to decline. The Singapore Chamber of
Commerce petitioned the government for reductions in personal and corporate tax rates.
(a) Explain what might happen to national income if a government were to reduce personal
and corporate tax rates. [10]
(b) Discuss whether the decline in GDP mentioned above necessarily meant that the standard
of living for the average person in Singapore also sharply declined. [15]
TYS N2001
It was reported that in the last 10 years there has been an improvement in the standard of
living of the average person in Namibia.
(a) If you were asked an economist to show that the average person in Namibia is better off
than ten years ago, explain what information your would need. [12]
(b) Comment on the difficulties of comparing living standards between countries. [13]
TYS N2000
(a) Explain how the three concepts National Output, National Income and National
Expenditure can have identical values although measured in different ways. [10]
(b) How useful are measures of GDP for indicating changes in living standards within a
country? [15]
TYS N1999
Calculations of Gross National Product (GNP), especially in developing countrises, are largely
guesswork and, even if they were accurate, GNP can be a very poor measure of welfare.
Discuss the problems for a developing country of measuring its GNP and interpreting these
statistics. [25]
TYS N1995
The Singapore economy grew by 9.2% per annum in the 3rd quarter of 1993, inflation was
2.4% per annum and 19 000 jobs were created. (Straits Times, 13 Nov 1993)
How far can this information lead you to conclude that there is a rising standard of living in
Singapore? [25]
Topic 7 NID (Focus will be on multiplier)
TYS 2004
(a) Explain what determines the size of the national income multiplier. [10]
(b) To what extent might other macroeconomic problems result from the use of fiscal policy
that is designed to reduce unemployment in an economy? [15]
TYS N2002
(a) Assume there is an open economy with a government sector. Explain the conditions for
equilibrium in the circular flow in such an economy. [10]

(b) Discuss how an increase in injections may affect the equilibrium level of national income.
[15]
TYS N1999
(a) Explain what is meant by the equilibrium level of national income. [10]
(b) Analyse the effect on the equilibrium level of national income of
(i) an increase in the level of saving and (ii) an increase in the level of exports. [15]
Topic 8 Public Finance and Fiscal Policy
TYS 2007
(a)To be considered successful, an economy needs to achieve low unemployment, low
inflation and stable economic growth. Explain this statement. [12]
(b)Discuss whether fiscal policy is the most effective way for Singapore to sustain a successful
economy. [13]
TYS N2004
(a) Explain what determines the size of the national income multiplier. [10]
(b) To what extent might other macroeconomic problems result from the use of fiscal policy
that is designed to reduce unemployment in an economy? [15]
TYS N2001
Keyness solution to unemployment was higher public spending which through multiplier
process would generate income and more jobs.
(a) Explain how this solution works. [12]
(b) Are there any other solutions to the problem of unemployment? [13]
TYS N1996
In recent years some government have relied increasingly on indirect taxation rather than
direct taxation in their budgets.
(a) Distinguish between these two types of taxes. [8]
(b) Discuss the advantages and disadvantages of a switch towards a greater reliance on
indirect taxation. [17]
Topic 9 Interest Rate and Monetary Policy
TYS N2006
The annual inflation rate in Singapore rose from 0.5% in 2003 to 1.7% in 2004.
(a) Explain how monetary factors can cause inflation. [10]
(b) Discuss whether an increase in the rate of inflation is more likely to cause problems for the
domestic or the external sector of the Singapore economy. [15]
TYS N2005
Between 2000 and 2003 interest rates fell to record low levels in many advance countries of
the world.
(a) Explain the likely reasons why interest rates fell to record low levels in many advanced
countries of the world. [10]
(b) Discuss the likely impact of this fall in interest rates on the Singapore economy. [15]
TYS N2004
(a) Explain how changes in the money supply might affect the general level of prices in an
economy. [10]
(b) Discuss the view that monetary policy is the best method of controlling inflation in an
economy. [15]
TYS N2002
Discuss the consequences for an economy of an increase in interest rates. [25]
TYS N2001
Discuss the effect that a rise in interest rates in a country might have on consumers,
producers and international financial speculators. [25]

TYS N2000
Discuss how a significant fall in the level of interest rate might affect the components of
aggregate demand. [25]
TYS J1998
In the UK, the growth of retail sales in the year ending June 1996 was higher than expected.
As a result, it was suggested that the Chancellor should consider raising interest rates to
prevent inflation.
(a) Would you support the implication of this statement that inflation is caused by consumer
spending? [12]
(b) Discuss whether interest rates alone are likely to be an effective method of controlling
inflation. [13]

Topic 10 Economic Growth and Supply-side Policies

TYS 2008
Discuss the most appropriate policies that a government could adopt to encourage both
actual and potential growth. [25]
TYS N2006
In the fourth quarter of 2004 Singapores unemployment rate rose to 3.7%.
Discuss whether supply-side policies are the best way of achieving full employment in
Singapore. [25]
TYS N2005
(a) Explain two ways in which an economy might move from a point within its production
possibility curve (PPC) to a point on it. [10]
(b) Discuss the most effective economic policies to move the PPC outwards. [15]
Topic 11 Macroeconomic objectives/polices/conflicts
TYS 2008
Discuss the relative significance of the multiplier, the price elasticities of demand for imports
and exports, and crowding-out in influencing macroeconomic policy decisions. [25]
TYS N2005
Discuss the possible impact of world-wide recession on Singapore and the policy options that
the government could adopt to reduce the most harmful effects of this impact. [25]
TYS N2003
Explain the key macro-economic aims of the Singapore government, and discuss which policy
measures might best be used to overcome the most significant macro-economic problem that
is currently being experienced by the Singapore Economy. [25]
TYS N2002
A government's macroeconomic aims are low inflation, low unemployment, balance of
payments equilibrium and economic growth.
Which of these aims do you consider most significant for Singapore and why? [25]
TYS N2001
(a) Explain what causes inflation. [10]
(b) Discuss whether a low rate of inflation should be the economic priority of a government.
[15]
TYS N2000

Full employment should be the macroeconomic priority of a government.

(a) What are the difficulties of defining full employment? [10]
(b) Discuss the conflicts that may arise between the pursuit of full employment and other
macroeconomic policy objectives. [15]
TYS N2000
A rise in the price of a major commodity such as oil benefits the producing country in the
short run but causes serious problems in the oil-importing countries. In the long run everyone
is worse off.
(a) Explain the possible short-run consequences of a rise in oil prices. [13]
(b) Discuss the validity of the above statement with regard to the long run. [12]
TYS N1999
(a) In recent years, the rate of inflation in many countries has been low. Suggest possible
reasons why an inflation rate may be low. [12]
(b) Discuss what policy measures a government may adopt if the rate of inflation were to
become unacceptably high. [13]
Topic 12 International Trade and Globalisation
TYS N2008
(a) Explain the determinants of the pattern of trade between Singapore and the rest of the
world. [10]
(b) Discuss whether the Singapore government should change its policies for managing the
balance of payments. [15]
TYS N2007
(a) Explain the potential causes of balance of payments deficit on current account. [10]
(b) Discuss which measures, if any, a government should adopt when confronted with a
current account deficit. [15]
TYS 2007
Discuss whether Singapore is among the economies that have most to gain from
globalisation. [25]
TYS 2006
In October 2005 the Monetary Authority of Singapore stated that its policy of allowing the
Singapore dollar to strengthen against a basket of currencies would be maintained.
(a) Using a diagram, explain what might cause a countrys exchange rate to appreciate in a
floating exchange rate system. [10]
(b) Discuss the extent to which problems are likely to result from an appreciation of
Singapores exchange rate. [15]

TYS 2005
Discuss how the Singapore government might use the concepts of price elasticity of demand
and income elasticity of demand to determine the impact of a fall in exchange rates and a rise
in worldwide incomes on the current account of the Singapore balance of payments. [25]
TYS 2004
Many countries need to import raw materials and component parts, which become more
expensive if the value of their currency falls against the currencies of other countries.
To what extent have the main macroeconomic problems faced by Singapore in recent years
been caused by a weakening of the exchange rate? [25]
TYS N2003

For many years the USA did not conduct normal trading relations with Vietnam. In 2001 a
trade agreement was signed between the two countries which reduced tariffs, encouraged
foreign direct investment and opened up export markets.
(a) How does the theory of comparative advantage explain why a developed country such as
the USA might wish to trade with a developing country such as Vietnam? [12]
(b) Discuss what effect such a trade agreement might have on the economies of the
participating countries.[13]
TYS N2002
Specialisation and international trade have meant that some countries enjoy higher living
standards than others.
(a) Explain why specialisation occurs. [12]
(b) Discuss whether protection offers any advantages over specialisation [13]
TYS N2001
(a) What might cause an appreciation of a floating exchange rate? [10]
(b) Discuss whether an appreciation of a countrys exchange rate will always be beneficial to
that country. [15]
TYS N2001
Discuss the effect that a rise in interest rates in a country might have on consumers,
producers and international financial speculators. [25]
TYS N2000
(a) Explain the theory of comparative advantage. [10]
(b)To what extent does this theory explain the pattern of trade between Singapore and the
rest of the world? [15]
TYS N2000
Discuss the economic information about another country that would be useful to a company
which is considering exporting its products to that country. [25]
TYS N1999
Explain why governments are sometimes concerned about the level of exchange rate of their
country's currency and discuss what policies they might adopt to influence the exchange rate.
[25]
TYS J1998
In 1996, it was anticipated that South African exports should receive a considerable boost
from a weaker exchange rate and the expected increase in world growth.
(a) Explain the above statement. [10]
(b) Discuss the policy options that are available to a government to deal with a balance of
trade deficit. [15]
TYS N1997
It was reported that Thailand had a current account deficit on its balance of payments which it
wanted to reduce. The governments policy aim was to boost domestic savings to try to
support economic expansion and improve competitiveness.
In which circumstances would this policy achieve its objective. [25]
TYS N1995

(a) Explain what is meant by the terms of trade and why it is an important economic statistics.
[12]
(b) What are the possible causes and consequences of a deterioration in the terms of trade of
a developing country producing primary products? [13]
TYS J1995
(a) Discuss what might cause a current account deficit in the balance of payment. [10]
(b) Comment on the policies available to a government faced with a current account deficit.
[15]
TYS N1991
(a) How may a country try to restrict imports? [8]
(b) Explain and evaluate the economic reasons for trying to restrict imports. [17]