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S5 Economics | Price Control and Quota Practice Paper 4 (Error Drill)
S5 Economics | Price Control and Quota Practice Paper 4 (Error Drill)
One market across ten items: equilibrium, a ceiling shortage, a floor surplus, quota prices, deadweight loss and who collects the rent, with the usual confusions corrected.
Attempt first, mark afterwards Allow about thirty-five minutes; write the Qd and Qs figures, decide shortage or surplus, then work out the areas.
01 Paper details (check answers afterwards)
| Item | Detail |
|---|---|
| Questions | 10 items |
| Suggested time | About 35 minutes |
| Difficulty mix | Foundation 4 · Intermediate 3 · Challenge 2 · Error redo 1 |
| Chapter | Chapter: S5 Economics | Price Control and Quota |
| Level | S5 (Secondary 5) Economics |
02 Questions (10 items)
- FoundationIn a market with Qd = 100 − 2P and Qs = 3P, what are the equilibrium price and quantity?
- FoundationWith a price ceiling of 14 in the same market, how large is the shortage in units?
- FoundationWith a price floor of 32 instead, how large is the surplus in units?
- FoundationWith a quota of 48 units in the same market, what do consumers pay and producers receive?
- IntermediateWhat is the deadweight loss under the 14 ceiling?
- IntermediateUnder the 32 floor the government promises to buy all unsold output. How much does it spend?
- IntermediateWhat is the total quota rent for a quota of 48 units?
- ChallengeThe 14 ceiling and the 42-unit quota trade the same quantity. Where does the 15 gap go in each case?
- ChallengeFree-market total surplus is 3000. What percentage of it does the 14 ceiling destroy as deadweight loss?
- Error redoError drill: a student says quota rent always belongs to the government. What is correct?
03 Answers and one-line notes
| # | Answer | One-line note |
|---|---|---|
| 1 | Equilibrium price 20 and quantity 60 units | 100 − 2P = 3P gives P = 20, and either equation then gives 60. |
| 2 | A shortage of 30 units | Qd is 72 against Qs of 42, a gap of 30. |
| 3 | A surplus of 60 units | The floor sits above equilibrium, so Qs of 96 exceeds Qd of 36 by 60. |
| 4 | Consumers pay 26 and producers receive 16 | A quota fixes quantity only: read the consumer price off demand and the producer price off supply at that quantity. |
| 5 | 135 | Trade is 42, the last unit is valued at 29 against the 14 ceiling, so 0.5 × 18 × 15 = 135. |
| 6 | 1920, that is 60 units of surplus times 32 | The buying price is the floor itself, so spending is the surplus multiplied by that floor. |
| 7 | 480, being a 10 gap times 48 units | Rent is the consumer price minus the producer price, multiplied by the quota, and is not tax revenue. |
| 8 | Under the ceiling buyers still pay 14, so 15 × 42 = 630 evaporates in queues and black markets; under the quota buyers pay 29 and that same 630 becomes quota rent | Both carry the same 135 deadweight loss, and only the question of who can collect the gap differs. |
| 9 | About 4.5%, since 135 over 3000 | Divide deadweight loss by the free-market total surplus, not by the quantity traded. |
| 10 | Whoever the licences are given to: free or first-come licences leave the rent with holders, and only auctions or fees capture it; either way the deadweight loss stays 135 | Rent is the gain from the price gap, and the government only collects it by auctioning or charging, which differs from a tax. |
04 What to do after marking
- After marking, redo only the wrong items and write down which step went wrong (formula, unit, or misread number).
- Repeat the same item two days later; move to the next paper only when both attempts are correct.
- Parents only need the answer and note columns; there is no need to explain every item.
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