Cambridge University Press
978-1-107-61233-4 – Cambridge IGCSE Economics
Susan Grant
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Cambridge IGCSE
Cambridge IGCSE
® ®
Economics
Economics
Susan Grant
Susan Grant
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Susan Grant
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Cambridge University Press
978-1-107-61233-4 – Cambridge IGCSE Economics
Susan Grant
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To the memory of my mother, Pat Grant,
who was a woman of great cheerfulness and courage.
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Susan Grant
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978-1-107-61233-4 – Cambridge IGCSE Economics
Susan Grant
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Contents
Introduction ix
Preparing for Examination xi
Acknowledgement xii
SECTION I The Basic Economic Problem 1
Unit 1 Scarcity 3
Unit 2 Factors of Production 7
Unit 3 Opportunity Cost 16
Answer Key 22
Examination Practice 25
SECTION II Allocation of Resources 27
Unit 4 Market and Mixed Economies 29
Unit 5 Equilibrium Price 39
Unit 6 Changes in Demand 50
Unit 7 Changes in Supply 59
Unit 8 Price Elasticity of Demand 68
Unit 9 Price Elasticity of Supply 78
Unit 10 Merits of the Market System 85
Unit 11 Market Failure 94
Unit 12 Use of Resources 105
Unit 13 Public Expenditure versus Private Expenditure 111
Answer Key 117
Examination Practice 134
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Susan Grant
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SECTION III The Individual as Producer,
Consumer and Borrower 137
Unit 14 Specialisation, Exchange and Money 139
Unit 15 Banks 147
Unit 16 Stock Exchanges 155
Unit 17 Choice of Occupation 162
Unit 18 Differences in Earnings 170
Unit 19 Changes in Earnings 178
Unit 20 Trade Unions 188
Unit 21 Motives for Spending, Saving and Borrowing 196
Unit 22 Differences in Expenditure Patterns 203
Answer Key 210
Examination Practice 220
SECTION IV The Private Firm as Producer and Employer 225
Unit 23 Types of Business Organisations 227
Unit 24 Demand for Factors of Production 240
Unit 25 Costs of Production 248
Unit 26 Principle of Profit Maximisation 256
Unit 27 Pricing and Output Strategies 265
Unit 28 Different Size of Firms and Integration 273
Unit 29 Economies of Scale 281
Answer Key 289
Examination Practice 298
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SECTION V Role of Government in an Economy 303
Unit 30 The Government as a Producer and an Employer 305
Unit 31 Aims of Government 310
Unit 32 The Government’s Influence on Private Producers 318
Unit 33 Conflicts between Government Aims 328
Unit 34 Types of Taxation 334
Unit 35 Incidence and Impact of Taxation 340
Answer Key 346
Examination Practice 353
SECTION VI Economic Indicators 357
Unit 36 Consumer Prices Index 359
Unit 37 Causes and Consequences of Inflation and Deflation 365
Unit 38 Employment 374
Unit 39 Causes and Consequences of Unemployment 381
Unit 40 Gross Domestic Product and Economic Growth 388
Unit 41 Living Standards 397
Answer Key 405
Examination Practice 411
SECTION VII Developed and Developing Countries 415
Unit 42 Different Stages of Development 417
Unit 43 Inequality and Poverty 423
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Susan Grant
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Unit 44 Population Growth 430
Unit 45 The Effects of Changes in Population 437
Unit 46 Problems of Development 444
Answer Key 451
Examination Practice 456
SECTION VIII International Aspects 459
Unit 47 The Structure of the Balance of Payments 461
Unit 48 Changing Patterns of Exports and Imports 467
Unit 49 International Trade 475
Unit 50 Exchange Rates 482
Unit 51 Changes in Exchange Rates 488
Unit 52 Free Trade and Protection 493
Answer Key 499
Examination Practice 505
Answers to Examination Practice Questions 509
Additional Structured Questions 551
Useful Resources 557
Index 561
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IntroduCtIon
This book is designed to introduce you to the study of economics and to help you
progress through your IGCSE Level course. The book follows the structure of the
IGCSE courses closely.
It covers all the topics of the course. In places, the book goes beyond the syllabus
to include concepts which will stretch your understanding and which will provide
you with additional possible ways to approach particular topics and strengthen the
depth of your answers. These are:
Allocative, productive and dynamic efficiency (pages 87–89)
Cost-benefit analysis (page 114)
Aggregate demand and aggregate supply analysis (page 312)
Velocity of circulation (page 367)
Flexible employment (page 376)
Purchasing power parity (page 399)
Lorenz curve (page 427)
The capital and financial accounts of the balance of payments (pages 463–464)
Absolute and comparative advantage (pages 476–478)
The terms of trade (page 479).
The Book is divided into 52 units. Each of these units explores a key economic topic
and provides activities and multiple choice questions to assess your understanding
of the same. At the end of each unit a teacher’s tip is given. This may remind you of a
key point, warn you about a common confusion, give you advice on how to approach
a question or recommend an activity which will enhance your understanding. There
is also a summary of the main points covered in the unit.
The units have been arranged into eight sections. At the end of each section, there
are answers to the activities and multiple choice questions. Do not look at them
until you have worked through the questions. Besides ‘Answer Key’, a section on
‘Examination Practice’ also contains ten multiple choice questions covering the whole
Introduction ix
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978-1-107-61233-4 – Cambridge IGCSE Economics
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section and some structured questions from past examination papers. Answers to
these multiple choice questions and structured questions can be found at the end of
the book. You must remember that the answers, included for structured questions,
are only suggested answers. There can be different approaches, particularly in the
case of the higher marked questions, which are equally valid.
Economics
Economics is an important, well-respected and exciting subject. Economists play a
key role in the world. They give advice to firms and governments to improve their
performance and also comment on their success or failure. The work of economists
can make a significant difference to people’s lives. For instance, the policies they
recommend to governments may reduce poverty and improve the quality of the
environment.
Whilst some of the people, who study economics, go on to become economists,
others enter a range of professions including accountancy, banking, education,
journalism and the law. Economists enjoy a lot of respect in universities and
professional organisations. They regard it as a rigorous subject, that develops logical
thinking and analytical and mathematical ability.
There are certain concepts – such as opportunity cost and price elasticity of demand,
and certain topics – including price determination, unemployment and inflation, that
are central to economics. The subject, however, is ever changing as new theories
develop, new institutions are created and new problems are encountered. This makes
it an interesting and challenging subject.
The Skills of an Economist
To be a good economist, you need to be informed of the developments in your
economy and other economies. You need to be able to think and write clearly
and apply relevant economic terms and concepts. You need to be confident in
handling figures. This involves being able to add, divide, subtract, multiply, calculate
percentage changes and understand index numbers. You also need to be able to
draw relevant, well-labelled and accurate diagrams. This book is designed to help
you develop these skills.
x CambridgeIGCSEEconomics
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PreParIng
IntroduCtIon
for examInatIon
Revision is a continuous process. After every lesson, check your work and if
necessary, add extra notes. As an examination approaches, you will need to do
intensive revision. Try to engage in active revision. This involves, not just reading
notes, but also using the information. There are a number of ways through which
this can be done. These include testing other members of the class and getting
them to test you, drawing spider diagrams and producing tables and revision
cards.
Examination Technique
It is not sufficient to have a sound knowledge and good skills in the subject. You
also have to demonstrate these under examination conditions. So, it is essential to
develop examination techniques.
Before an examination, check out the duration of the examination and the number
of questions you have to answer. Read the instructions on the examination paper
carefully. Do not rush into writing your answers.
In answering multiple choice papers, consider every option in a question carefully.
If you are uncertain of an answer to a particular question, proceed further and
return to it when you have answered the other questions. At the end, check that
you have answered all the questions. Never leave a question unanswered, even if
you have to guess.
In answering structured questions read the questions very carefully, paying
particular attention to the directive (instruction) words. A questions which asks
you to identify or state something will only require a brief answer, consisting of
a few words. In contrast, a question which asks you to explain, assess or discuss
something will require a longer answer, written in sentences and paragraphs.
Unless specifically asked for, do not produce a list. Such an approach is likely to
gain you a few marks.
The marks allocated to a question or part of a question should give you a clear
indication of the extent of detail required. It is often useful to include a diagram
(or diagrams) in your answers. These should be clear, accurate, well-labelled and
backed up by an explanation in the text.
PreparingforExamination xi
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Susan Grant
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aCknowledgement
Photo credits : Shutterstock
Section I: 24164749, 61753705, 117364918, 71048386, 59788057, 430205, 60779491, 54791671 Section II: 84084331,
77951401, 3844432, 109624334, 1380985, 50418028, 102745670, 101904619, 95330008, 54151870, 111999368,
86325814, 89663761, 61547215, 1748151, 65030281, 72653824, 29434846, 8864401, 4646644, 114104152, 33111940,
79657726, 115490365, 56239708, 89343070 Section III: 76590274, 91539893, 65714203, 12196441, 88516873,
109392416, 83133064, 80324677, 111946214, 101827642, 95521039, 115151443, 80227009, 116667094, 9203965,
114541927, 77192542 Section IV: 77042365, 64124296, 100158233, 107447666, 109515845, 88781662, 79172839,
111328973, 103588754, 110533598, 81974545, 56131003, 38412814, 56239708 Section V: 63608758, 85259425,
72852049, 114871843, 66673771, 114440692, 99014546 Section VI: 94986733, 106095458, 81155452, 86416297,
93928222, 32739469, 54279004, 68716657, 57367663, 80334658 Section VII: 80548063, 98264402, 77179411,
59788057, 86843710, 68148946 Section VIII: 48918724, 104212088, 38104051, 11430322
The questions taken from past examination papers are reproduced by permission of Cambridge
International Examinations.
Syllabus Name & Code Paper & Question Number Month/Year Section/Page in book
Cambridge IGCSE Economics 0455 Paper 2 Q5 Nov 1997 Section I Page 26
Cambridge IGCSE Economics 0455 Paper 4 Q3a May/June 2006 Section I Page 26
Cambridge IGCSE Economics 0455 Paper 2 Q2a and b May/June 2002 Section II Page 136
Cambridge IGCSE Economics 0455 Paper 2 Q2 Oct/Nov 2007 Section II Page 136
Cambridge IGCSE Economics 0455 Paper 2 Q3 Oct/Nov 2003 Section II Page 136
Cambridge IGCSE Economics 0455 Paper 2 Q4 May/June 2005 Section III Page 222
Cambridge IGCSE Economics 0455 Paper 4 Q7 Oct/Nov 2005 Section III Page 222
Cambridge IGCSE Economics 0455 Paper 4 Q6 May/June 2004 Section III Page 223
Cambridge IGCSE Economics 0455 Paper 4 Q2 May/June 2006 Section IV Page 301
Cambridge IGCSE Economics 0455 Paper 6 Q1 May/June 2006 Section IV Page 302
Cambridge IGCSE Economics 0455 Paper 4 Q3 May/June 2005 Section IV Page 302
Cambridge IGCSE Economics 0455 Paper 4 Q4 Oct/Nov 2002 Section V Page 355
Cambridge IGCSE Economics 0455 Paper 6 Q2 May/June 2002 Section V Page 355
Cambridge IGCSE Economics 0455 Paper 2 Q6 Oct/Nov 2006 Section V Page 355
Cambridge IGCSE Economics 0455 Paper 6 Q2 May/June 2003 Section VI Page 413
Cambridge IGCSE Economics 0455 Paper 4 Q4 May/June 2006 Section VI Page 413
Cambridge IGCSE Economics 0455 Paper 6 Q2 May/June 2004 Section VI Page 414
Cambridge IGCSE Economics 0455 Paper 4 Q7 May/June 2006 Section VII Page 457
Cambridge IGCSE Economics 0455 Paper 4 Q7 May/June 2005 Section VII Page 458
Cambridge IGCSE Economics 0455 Paper 4 Q7 May/June 2004 Section VII Page 458
Cambridge IGCSE Economics 0455 Paper 4 Q5 May/June 2005 Section VIII Page 507
Cambridge IGCSE Economics 0455 Paper 4 Q5 Oct/Nov 2005 Section VIII Page 507
Cambridge IGCSE Economics 0455 Paper Q6 Oct/Nov 2004 Section VIII Page 508
Cambridge IGCSE Economics 0455 Paper 2 Q2 May/June 2004 Section I Page 551
Cambridge IGCSE Economics 0455 Paper 22 Q2 Oct/Nov 2011 Section I Page 551
Cambridge IGCSE Economics 0455 Paper 2 Q2 May/June 2004 Section II Page 551
Cambridge IGCSE Economics 0455 Paper 4 Q7 May/June 2002 Section II Page 552
Cambridge IGCSE Economics 0455 Paper 2 Q3 Oct/Nov 2006 Section III Page 552
Cambridge IGCSE Economics 0455 Paper 4 Q2 May/June 2002 Section III Page 552
Cambridge IGCSE Economics 0455 Paper 2 Q7 Oct/Nov 2006 Section IV Page 553
Cambridge IGCSE Economics 0455 Paper 4 Q7 Oct/Nov 2003 Section IV Page 553
Cambridge IGCSE Economics 0455 Paper 4 Q6 May/June 2005 Section V Page 553
Cambridge IGCSE Economics 0455 Paper 4 Q3 Oct/Nov 2004 Section V Page 553
Cambridge IGCSE Economics 0455 Paper 2 Q4 Oct/Nov 2006 Section VI Page 554
Cambridge IGCSE Economics 0455 Paper 4 Q7 Oct/Nov 2002 Section VI Page 554
Cambridge IGCSE Economics 0455 Paper 4 Q6 Oct/Nov 2005 Section VII Page 554
Cambridge IGCSE Economics 0455 Paper 4 Q5 Oct/Nov 2002 Section VII Page 555
Cambridge IGCSE Economics 0455 Paper 4 Q6 May/June 2006 Section VIII Page 555
Cambridge IGCSE Economics 0455 Paper 4 Q5 May/June 2004 Section VIII Page 555
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