HKDSE Economics Practice Paper with Answers | 14 questions, 60 minutes, 100 marks

2026-10-28

Practice paper · HKDSE Economics

HKDSE Economics practice paper: 10 MC and 4 structured questions, 60 minutes, 100 marks, covering opportunity cost, elasticity, GDP, CPI and unemployment, with worked answers and PDFs.

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Paper details　Level: S6 (HKDSE) | Subject: Economics | Time: 60 minutes | Total: 100 marks | Questions: 14

Section A: Multiple choice (20 marks)

1. Two marks each. Choose the best answer.

#	Question	Answer and marking notes
1	Ming spends 2 hours watching a film with a $90 ticket, when he could have earned $150 per hour. What is his opportunity cost?	Opportunity cost = lost income + ticket = 150 × 2 + 90 = $390. (2 marks; $90 alone scores 0.)
2	The price of a good rises from $10 to $12 (+20%) and quantity demanded falls from 100 to 80 (-20%). What is the price elasticity of demand (absolute value)?	Ed = %ΔQd / %ΔP = 20% / 20% = 1.0. (2 marks)
3	A person’s income rises by 10% and the quantity demanded of a good rises by 20%. What is the income elasticity of demand?	YED = 20% / 10% = 2.0; greater than 1, so it is a luxury good. (2 marks)
4	An economy has consumption 400, investment 150, government spending 120, exports 300 and imports 250 (in $ billion). What is its GDP?	GDP = C + I + G + (X – M) = 400 + 150 + 120 + (300 – 250) = 720. (2 marks)
5	The nominal GDP index is 132 and the price index is 120 (base year = 100). What is the real GDP index?	Real index = 132/120 × 100 = 110. (2 marks)
6	The labour force is 4.0 million and 0.2 million are unemployed. What is the unemployment rate?	Unemployment rate = 0.2/4.0 × 100% = 5%. (2 marks)
7	The population aged 15 and over is 6.0 million and the labour force is 4.2 million. What is the labour force participation rate?	Participation rate = 4.2/6.0 × 100% = 70%. (2 marks)
8	The consumer price index rises from 105 to 109.2. What is the inflation rate?	Inflation = (109.2 – 105)/105 × 100% = 4%. (2 marks)
9	Banks hold $200 billion of excess reserves and the required reserve ratio is 20%. What is the maximum deposit creation?	Deposit multiplier = 1/0.2 = 5; maximum deposits = 200 × 5 = $1000 billion. (2 marks)
10	A country exports $1200 billion and imports $1400 billion in a year. What is its trade balance?	Trade balance = 1200 – 1400 = -$200 billion, i.e. a trade deficit of $200 billion. (2 marks)

Section B: Structured questions (80 marks)

2. Answer all questions. Show your working.

#	Question	Answer and marking notes
11	The price of a good falls from $50 to $40 and quantity demanded rises from 200 to 260 units. (a) Calculate the price elasticity of demand by the percentage method (absolute value). (b) What happens to total revenue? (c) Use elasticity to explain the change in total revenue. (20 marks)	(a) %ΔP = (40 – 50)/50 × 100% = -20%; %ΔQ = (260 – 200)/200 × 100% = +30%; Ed = 30/20 = 1.5, so demand is elastic. (7 marks) (b) Old revenue = 50 × 200 = $10000; new revenue = 40 × 260 = $10400; revenue rises by $400 (+4%). (7 marks) (c) With Ed greater than 1, the percentage rise in quantity (30%) is larger than the percentage fall in price (20%), so revenue rises by about 30% – 20% = 10% before rounding effects (in this case +4% on the exact figures). (6 marks)
12	An economy has three production stages only: a farmer sells wheat for $300 (no intermediate input), a miller turns it into flour and sells it for $500, and a bakery turns the flour into bread and sells it for $800. (a) Calculate GDP by the value-added method. (b) Calculate GDP by the final-product method and explain why the two agree. (c) If $100 of bread is unsold at year end, what is GDP? (20 marks)	(a) Farmer adds $300; miller adds 500 – 300 = $200; bakery adds 800 – 500 = $300; GDP = 300 + 200 + 300 = $800. (7 marks) (b) The only final product is bread worth $800, so GDP = $800. They agree because intermediate goods are netted out in the value-added method, so nothing is counted twice. (7 marks) (c) The unsold $100 is treated as inventory investment: GDP = 800 + 100 = $900. (6 marks)
13	A basket contains only two items: 40 lunch boxes and 20 bus rides. In the base year a lunch box costs $30 and a ride costs $10; in year 2 they cost $33 and $11. (a) With the base year = 100, find the CPI and the inflation rate in year 2. (b) A person’s nominal income rises from $14000 to $15120. What happens to real income? (c) Name one group hurt and one group helped by inflation. (20 marks)	(a) Base-year spending = 40 × 30 + 20 × 10 = $1400; year-2 spending = 40 × 33 + 20 × 11 = $1540; CPI = 1540/1400 × 100 = 110; inflation = 10%. (7 marks) (b) Nominal income rises 8%; real income = 15120/1.10 = $13745.45, about 1.82% below the original $14000, so real income falls. (7 marks) (c) People on fixed incomes (retirees, workers without a pay rise) are hurt because their purchasing power falls; borrowers gain because the real value of their debt falls. (6 marks)
14	In an economy the population aged 15 and over is 5.0 million, the labour force is 3.0 million and employment is 2.85 million. (a) Find the number of unemployed and the unemployment rate. (b) Find the labour force participation rate. (c) If 0.1 million full-time students graduate and immediately look for work but do not find it, what is the new unemployment rate? (20 marks)	(a) Unemployed = 3.0 – 2.85 = 0.15 million; rate = 0.15/3.0 × 100% = 5%. (7 marks) (b) Participation rate = 3.0/5.0 × 100% = 60%. (6 marks) (c) They join the labour force: labour force = 3.0 + 0.1 = 3.1 million and unemployed = 0.15 + 0.1 = 0.25 million; rate = 0.25/3.1 × 100% = 8.06%, i.e. 3.06 percentage points higher. (7 marks)

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