Form 5 Economics Practice Paper: Demand, Supply, Elasticity, Macro Indicators And Trade

Form 5 Economics Practice Paper: Demand, Supply, Elasticity, Macro Indicators and Trade

2026-11-05

Form 5 Economics – 12 questions – 100 marks – 75 minutes

Form 5 Economics paper: 12 questions, 100 marks in 75 minutes on demand, supply, elasticity, tax, price ceilings, GDP, inflation, money creation, unemployment and trade, with answers.

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Paper details　Form 5 Economics practice paper: 12 questions, 100 marks in 75 minutes on demand, supply, elasticity, GDP, inflation, money creation, trade and opportunity cost.

Section A: Demand, Supply and Elasticity

Answer all parts and show your working in calculations.

#	Question	Answer and marking notes
1	In a market the demand function is Qd = 300 − 2P and the supply function is Qs = P + 60, where Q is in thousand units and P is in dollars. (a) Find the equilibrium price and quantity. (b) If the government sets a price ceiling of $60, find the size of the shortage. (c) Give one form of non-price competition that may appear under a price ceiling.	(a) Set 300 − 2P = P + 60, so 3P = 240 and P = $80; Q = 80 + 60 = 140 thousand units (4 marks). (b) At P = $60, Qd = 180 and Qs = 120 thousand units, so the shortage is 60 thousand units (3 marks). (c) Queuing, rationing, seller preference for regular customers or black-market trading (any one, 1 mark).
2	The price of a good falls from $10 to $8 and the quantity demanded rises from 100 to 140 units. (a) Calculate the price elasticity of demand using the original-value method. (b) State whether demand is elastic, unit elastic or inelastic. (c) Calculate total revenue before and after the price cut and explain the link between elasticity and total revenue.	(a) Ed = (40/100) ÷ (2/10) = 0.4 ÷ 0.2 = 2.0 (3 marks). (b) Ed > 1, so demand is elastic (2 marks). (c) Total revenue is $10 × 100 = $1,000 before the cut and $8 × 140 = $1,120 after, a rise of $120; when demand is elastic, price and total revenue move in opposite directions, so a price cut raises revenue (3 marks).
3	The government imposes a specific tax of $6 per unit on producers. Before the tax the equilibrium price is $30 and the quantity 200 units; after the tax the price is $34 and the quantity 180 units. (a) How much tax per unit is borne by consumers and by producers? (b) Calculate the government tax revenue. (c) If demand were perfectly inelastic, how would the tax burden be shared?	(a) Consumers bear $34 − $30 = $4 per unit and producers bear $6 − $4 = $2 per unit (4 marks). (b) $6 × 180 = $1,080 (3 marks). (c) With perfectly inelastic demand the quantity does not change, so consumers bear the whole $6 tax (2 marks).
4	(a) Distinguish between a change in quantity demanded and a change in demand, giving one cause of each. (b) How does a sharp fall in the price of used cars affect the demand curve for new cars? (c) If the government gives producers a subsidy of $5 per unit, how do the equilibrium price and quantity change?	(a) A change in quantity demanded is caused by a change in the good’s own price and is a movement along the same demand curve; a change in demand is caused by non-price factors such as income, tastes or related prices and shifts the whole curve (4 marks). (b) Used and new cars are substitutes, so cheaper used cars reduce the demand for new cars and shift the demand curve left (2 marks). (c) A subsidy raises supply and shifts the supply curve right, so the equilibrium price falls and the equilibrium quantity rises (2 marks).

Section B: Macroeconomic Indicators

Answer all parts and support your answers with figures.

#	Question	Answer and marking notes
5	In an economy nominal GDP is $50 billion in 2024 and $55 billion in 2025, the price index rises from 100 to 105, and population is 5 million. (a) Calculate the growth rate of nominal GDP. (b) Using 2024 as the base year, calculate real GDP in 2025 and its growth rate. (c) Calculate real GDP per capita in 2025.	(a) (550 − 500)/500 × 100% = 10% (2 marks). (b) Real GDP = 550/1.05 ≈ $52.38 billion, so real growth ≈ (523.8 − 500)/500 × 100% ≈ 4.8% (4 marks). (c) $52.38 billion ÷ 5 million ≈ $10,476 (2 marks).
6	The consumer price index rises from 110 to 115.5. (a) Calculate the inflation rate. (b) A person’s nominal income rises from $22,000 to $23,100; find the change in real income. (c) Give two reasons why the CPI may overstate inflation.	(a) (115.5 − 110)/110 × 100% = 5.0% (3 marks). (b) Real income = 23,100/1.05 = $22,000, so real income is unchanged (3 marks). (c) It ignores quality improvements, suffers substitution bias and misses new products (any two, 2 marks).
7	In a banking system the required reserve ratio is 20%, the public holds no cash and banks hold no excess reserves. A customer deposits $10,000. (a) Find the deposit multiplier. (b) Find the final total deposits of the banking system. (c) Find the total new loans created. (d) What would total deposits be if the required reserve ratio rose to 25%?	(a) 1/0.20 = 5 (2 marks). (b) $10,000 × 5 = $50,000 (3 marks). (c) $50,000 − $10,000 = $40,000 (2 marks). (d) $10,000 × (1/0.25) = $40,000 (2 marks).
8	In an economy the population aged 15 and over is 5 million, the labour force is 4 million, unemployment is 200,000 and underemployment is 80,000. (a) Calculate the unemployment rate. (b) Calculate the labour force participation rate. (c) Calculate the underemployment rate. (d) Explain why the unemployment rate may not fully reflect labour market conditions.	(a) 200,000/4,000,000 × 100% = 5.0% (2 marks). (b) 4/5 × 100% = 80% (2 marks). (c) 80,000/4,000,000 × 100% = 2.0% (2 marks). (d) It excludes discouraged workers and the underemployed and does not reflect shorter hours or lower pay (any two, 2 marks).

Section C: Trade, Opportunity Cost and Market Intervention

Answer all questions and support your explanations with economic concepts or examples.

#	Question	Answer and marking notes
9	Country A needs 2 hours to produce 1 unit of wheat and 4 hours for 1 unit of cloth; Country B needs 3 hours and 9 hours respectively. (a) Calculate the opportunity cost of 1 unit of cloth in each country in terms of wheat. (b) Which country has an absolute advantage in both goods, and which has a comparative advantage in cloth? (c) State the range of wheat that 1 unit of cloth may be exchanged for.	(a) Country A: 4/2 = 2 units of wheat; Country B: 9/3 = 3 units of wheat (3 marks). (b) Country A has an absolute advantage in both goods; the opportunity cost of cloth is 2 units of wheat in A and 3 units in B, so A has a comparative advantage in cloth and B in wheat (3 marks). (c) 1 unit of cloth exchanges for 2 to 3 units of wheat (2 marks).
10	An economy has goods exports of $480 billion, goods imports of $520 billion, services exports of $90 billion and services imports of $70 billion. (a) Calculate the goods trade balance. (b) Calculate the overall goods and services trade balance. (c) Suggest two policies that could improve the trade balance.	(a) 4,800 − 5,200 = −$40 billion, a goods trade deficit of $40 billion (3 marks). (b) (4,800 + 900) − (5,200 + 700) = 5,700 − 5,900 = −$20 billion, a deficit of $20 billion (3 marks). (c) Raise export competitiveness, open new markets, encourage import substitution or develop service exports (any two, 2 marks).
11	A farmer’s plot yields 400 kg of rice if used entirely for rice and 800 kg of vegetables if used entirely for vegetables, and the production possibility curve is a straight line. (a) Find the opportunity cost of 1 kg of rice. (b) If the farmer grows 250 kg of rice, what is the maximum quantity of vegetables? (c) Explain how increasing opportunity cost differs from this case.	(a) 400 kg of rice equals 800 kg of vegetables, so the opportunity cost of 1 kg of rice is 2 kg of vegetables (3 marks). (b) Growing 250 kg of rice gives up 500 kg of vegetables, so the maximum is 800 − 500 = 300 kg (3 marks). (c) A straight production possibility curve means constant opportunity cost, while increasing opportunity cost gives a curve bowed outward from the origin (2 marks).
12	Rents in an economy keep rising and the government imposes a maximum rent (a price ceiling). Discuss: (a) the short-run and long-run effects on the supply of rental flats; (b) the effects on existing tenants and on new tenants; (c) two alternative policies that may work better than rent control.	(a) In the short run the supply of rental flats is fixed, so the ceiling mainly lowers rents (3 marks); in the long run landlords let fewer flats, sell them or stop maintaining them, so supply falls (2 marks). (b) Existing tenants gain in the short run but face poorer maintenance and fewer flats later, while new tenants face shortages and non-price competition such as queuing and side payments (3 marks). (c) Increase land and public housing supply, provide rent allowances or cap rent increases in tenancy renewals (any two, 2 marks).

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