Edexcel A Level Economics A Paper 1: Markets and business behaviour June 2017 question paper 9EC0/01

The table shows market data for e-cigarette kits. The original equilibrium price is £23.

As a result of a successful advertising campaign, demand increased by 3 000 e-cigarette kits at all prices. At the same time production costs fell leading to an increase in supply of 1 000 e-cigarette kits at all prices.

Calculate the new equilibrium price and quantity following the successful advertising campaign and the fall in production costs. Use the last two columns for your working.

Research conducted in New Zealand in 2014 estimated the cross elasticity of demand for e-cigarettes to be 0.16 in response to changes in the price of tobacco. This implies that a 5% increase in the price of tobacco will cause the percentage change in demand for e-cigarettes to be:

C 0.8

Between 2010 and 2015 the average price of tea in the UK increased from £7.20 per kilo to £8.48 per kilo. Over the same period the quantity of tea purchased fell from 97 million kilos to 76 million kilos.

(Source: http://www.theguardian.com/lifeandstyle/shortcuts/2015/aug/05/brew-do-you-think-you-are-why-tea-needs-to-copy-coffee-in-order-to-survive)

Assume that the change in the quantity of tea purchased was only caused by the change in the price of tea. Calculate the price elasticity of demand for tea in response to the rise in its price. You are advised to show your working.

Calculate the change in total sales revenue for UK tea retailers between 2010 and 2015. You are advised to show your working.

Estimates for the demand for black tea in the UK suggest that it is an inferior good. This implies it has a negative:

Calculate the total domestic cooking gas subsidy paid daily by the Indian government. You are advised to show your working.

Calculate the percentage share of the total subsidy received by:

consumers

producers

One effect of the subsidy is to increase:

In 2015 JCB, the construction equipment manufacturer, experienced a 6% fall in revenue. This resulted from a reduction in sales of construction equipment to emerging markets.

Draw a cost and revenue diagram to show the likely impact of a reduction in sales of construction equipment on JCB’s profits.

In India JCB has a strong brand image and a 50% share of the market for construction equipment. This means the construction equipment market in India is likely to have a low level of:

Figure 1 shows the distribution of the revenue received from the sale of a Starbucks cappuccino drink priced at £2.27 in 2015.

(Source: adapted from Allegra strategies research and analysis, reported in The Times, 27th January 2015)

Which one of the following is a fixed cost to Starbucks?

Explain the difference between fixed costs and variable costs.

With reference to Figure 1, calculate the profit (in pence) for a cappuccino drink. You are advised to show your working.

With reference to Figure 1 and Extract A, explain one likely reason for the change in the four-firm concentration ratio of the supermarket sector between 2010 and 2015.

With reference to Figure 2 and Extract A, discuss the possible impact of supermarket monopsony power on both food suppliers and consumers.

Examine measures the government might use to restrict the monopsony power of supermarkets.

Assess the extent to which ‘information gaps’ (Extract B, lines 5 and 6) and ‘irrational behaviour’ (Extract B, line 11) are the main causes of food waste in the UK.

Discuss the likely problems for Sainsbury’s and Morrisons if the suggested merger between them goes ahead. Refer to Figure 1, Extract C and your own knowledge in your answer.

In 2015 a report by Public Health England recommended the imposition of a 20% tax on the sale of soft drinks that contain high levels of sugar.

Evaluate the likely microeconomic effects of such a tax.

8 ‘Revenue maximisation is a more realistic business objective than profit maximisation for many businesses.’

To what extent do you agree with this statement? Refer to an industry of your choice in your answer.

Write your answer here: