S4 Economics Practice Paper: Opportunity Cost, Demand And Supply, Elasticity And National Income (100 Marks)

S4 Economics Practice Paper: Opportunity Cost, Demand and Supply, Elasticity and National Income (100 marks)

2026-11-12

Economics – S4 Practice

S4 economics paper: 6 questions, 25 parts, 100 marks in 60 minutes on opportunity cost, demand and supply, elasticity, price controls and national income, with full answers.

Download　Question paper PDF　|　Answer key PDF

Paper details　

Section A: Basic Economic Concepts and Opportunity Cost (16 marks)

Show your calculation or explanation for every question.

#	Question	Answer and marking notes
1	Ming can take job A paying 18000 dollars a month or job B paying 20000 dollars a month. He chooses job B. Calculate the opportunity cost of his choice.	Answer: 18000 dollars, the value of the best alternative forgone; the 20000 dollars he receives is not the opportunity cost
2	A piece of farmland can grow either rice or vegetables: rice gives 60000 dollars and vegetables give 45000 dollars. The farmer grows rice. What is the opportunity cost?	Answer: 45000 dollars, the income from vegetables that is given up
3	A person has three options: A worth 100 dollars, B worth 120 dollars and C worth 90 dollars. If he chooses B, what is the opportunity cost?	Answer: 100 dollars, because A is the most valuable option forgone
4	Explain the difference between free goods and economic goods, and give one example of each.	Answer: free goods are abundant enough to satisfy all wants at zero cost, such as air; economic goods are scarce and cost something to obtain, such as bread

Section B: Demand, Supply and Equilibrium Price (18 marks)

Questions 1 and 2 use the same pair of functions.

#	Question	Answer and marking notes
5	In a market the demand function is Qd = 120 – 2P and the supply function is Qs = 20 + 2P. Find the equilibrium price and quantity.	Answer: equilibrium price 25 dollars and equilibrium quantity 70 units, obtained by setting 120 – 2P equal to 20 + 2P
6	Using the same functions, if the government sets a price ceiling of 20 dollars, what happens in the market? Calculate the shortfall.	Answer: the ceiling is below the equilibrium price, so a shortage of 20 units appears, with quantity demanded 80 units and quantity supplied 60 units
7	A good is a normal good and consumers income rises. Explain how the equilibrium price and quantity change.	Answer: the demand curve shifts right, so the equilibrium price rises and the equilibrium quantity increases
8	Coffee and tea are substitutes. If the price of tea falls sharply, what happens to demand in the coffee market?	Answer: demand for coffee falls and its demand curve shifts left, because consumers switch to the cheaper tea
9	Give two reasons that shift the supply curve of a good to the left.	Answer: higher costs of production such as rising wages or material prices, and a fall in the number of suppliers

Section C: Price Elasticity and Total Revenue (16 marks)

Use the original price and quantity as the base for elasticity.

#	Question	Answer and marking notes
10	The price of a good falls from 10 dollars to 8 dollars and quantity demanded rises from 100 units to 130 units. Calculate the price elasticity and state its type.	Answer: price elasticity is 1.5, which is elastic, because the 30 percent change in quantity exceeds the 20 percent change in price
11	Using the same data, total revenue before the price cut is 1000 dollars. Calculate total revenue after the cut and explain how it relates to elasticity.	Answer: total revenue after the cut is 1040 dollars; when demand is elastic a price cut raises total revenue
12	What is the shape of a perfectly inelastic demand curve, and what happens to quantity demanded when price rises?	Answer: it is a vertical line, and quantity demanded does not change when price rises
13	The government imposes a per unit tax on cigarettes. If demand is inelastic, who bears most of the tax? Explain.	Answer: consumers bear most of it, because inelastic demand means they cannot cut purchases much, so producers pass most of the tax on

Section D: Market Intervention: Price Ceilings, Floors and Taxes (18 marks)

Question 2 uses the demand and supply functions from Section B.

#	Question	Answer and marking notes
14	A per unit tax of 5 dollars is imposed and the pre-tax equilibrium price is 20 dollars. Consumers bear 3 dollars and producers bear 2 dollars per unit. State the price paid by consumers and the price received by producers.	Answer: consumers pay 23 dollars and producers receive 18 dollars, and the 5 dollar gap is the tax
15	If the government instead sets a price floor of 30 dollars, what happens in the market? Calculate the surplus.	Answer: the floor is above the equilibrium price, so a surplus of 20 units appears, with quantity supplied 80 units and quantity demanded 60 units
16	Explain the difference between an import tariff and an import quota in restricting imports.	Answer: a tariff is a tax on import quantity or value that raises the price of imports; a quota caps the import quantity directly without directly changing price
17	What kind of non-price competition does a price ceiling usually create? Give one example.	Answer: non-price competition such as queuing, balloting or rationing, for example tenants queuing for flats under rent control

Section E: Production and Cost (16 marks)

Fixed cost in questions 1 and 2 is measured in dollars.

#	Question	Answer and marking notes
18	A firm has total fixed cost of 200 dollars, variable cost of 10 dollars per unit and output of 20 units. Calculate total cost, average cost, average variable cost and average fixed cost.	Answer: total cost 400 dollars, average cost 20 dollars, average variable cost 10 dollars and average fixed cost 10 dollars
19	Output rises from 10 units to 12 units and total cost rises from 300 dollars to 348 dollars. Calculate marginal cost.	Answer: marginal cost is 24 dollars, which is 48 dollars divided by 2 units
20	Give two sources of economies of scale.	Answer: bulk buying lowers material costs, and division of labour with specialisation raises efficiency
21	What is the difference between the short run and the long run?	Answer: in the short run at least one factor of production is fixed, while in the long run all factors can be changed

Section F: National Income and Price Level (16 marks)

All values in this section are in hundred million dollars.

#	Question	Answer and marking notes
22	Calculate GDP by the expenditure approach: private consumption 500, investment 120, government spending 150, exports 200 and imports 170, all in hundred million dollars.	Answer: 800 hundred million dollars, from 500 plus 120 plus 150 plus 200 minus 170
23	An economy computes its consumer price index from a basket that costs 600 dollars in the base year and 660 dollars this year. Calculate the index and the inflation rate.	Answer: the price index is 110 and the inflation rate is 10 percent
24	Explain the difference between nominal GDP and real GDP.	Answer: nominal GDP uses current prices and does not remove price changes, while real GDP uses constant prices and removes them
25	An economy has a labour force of 3 million and 150 thousand unemployed. Calculate the unemployment rate.	Answer: 5 percent, which is 15 divided by 300

Find a tutor — free Tutor Registration →

A TutorZone practice paper; original questions and passages, not publisher material.