Exam preparation

and technique
About the examination papers
From 2014, there will be two examination papers for the Cambridge International
Examinations IGCSE and O Level qualifications in Economics.

Paper Type Duration Weighting Structure

Paper 1 Multiple choice 45 minutes 30% 30 questions, each with four options
(A, B, C or D)
Paper 2 Structured 2 hours 15 70% Information and data interpretation and
questions minutes analysis

Paper 1
Paper 1 consists of multiple choice questions. You must:
l Write all 30 answers following the instructions provided.
l Write answers using a soft pencil (Type B or HB are the preferred options).
l Use a soft eraser for making any corrections.
Paper 1 multiple choice questions require you to select the correct answer from
four choices. This chapter provides seven example questions below, together with
accompanying advice on how to approach them.
General tips for answering multiple choice questions include:
l Read through the question and circle/underline the key terms.
l Try to think of the answer to the question before looking at the options.
l Choose the option you think is the answer and read through the other options to
make sure that they are incorrect.
l Read through the options and eliminate any obvious wrong answers.
l Study any tables/charts carefully to determine what information they contain.
l Work out any calculations first before looking at the options provided.
l If asked to determine what happens to the price of a good if a variable changes,
draw a demand and supply diagram of the market before and after the change to
determine what happens to price and quantity demanded/supplied.
l Go back and check your work!

Example 1
Which of the following is a disadvantage of division of labour?
A Workers become more skilled in a particular job
B Productivity of workers increases
C Quality of the product may increase
D Workers become bored because of the repetitive nature of the work

Tips for answering Example 1:

l Circle/underline the key term/phrase in the question in this case it is a
disadvantage of division of labour.
l Read the options and identify their relationship to the question.
l Options A, B and C are advantages of division of labour.
l Option D is the answer as it is a disadvantage of division of labour.

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 Exam preparation and technique

Example 2
What is the return on owning shares?
A Rent
B Interest
C Dividends
D Profit

Tips for answering Example 2:

l Recognise the topic being tested in this case the question is testing your
knowledge about the potential return that shareholders get on the shares they
own.
l Read through each option and decide what relationship it has to shareholders:
A Rent the return on land
B Interest the return on capital
C Dividends the share of profits given to shareholders
D Profit the return on enterprise
l A, B and D are returns on the factors of production.
l C is the correct answer.

Example 3
What is a possible effect of an increase in interest rates?
A Increase in government spending
B Increase in borrowing
C Increase in consumer spending
D Increase in savings

Tips for answering Example 3:

l Delete the obvious wrong answer, which in this case is answer A as there is no
direct relationship between government spending and interest rates.
l Go through each option and consider the impact of an increase in interest rates
on each one:
B Borrowing will fall if interest rates rise WRONG ANSWER
C Consumer spending will fall as interest rates rise WRONG ANSWER
D Savings will increase CORRECT ANSWER
Example 4
What are the effects of a successful anti-smoking campaign?
A Decrease in demand for cigarettes and a decrease in the price
B Increase in demand for cigarettes and a decrease in price
C Decrease in supply of cigarettes and an increase in the price
D Increase in supply of cigarettes and a decrease in the price

Tips for answering Example 4:

l Sketch a demand and supply diagram on your question paper (see next page).
l Decide which curve will be affected by a successful advertising campaign in this
case it is the demand curve.
l Decide whether the demand curve for cigarettes will shift to the left or right a
decrease in demand is shown by a leftward shift of the demand curve.
l Draw the new demand curve the demand curve will decrease (shift inwards)
from D1 to D2.
l Determine what happens to the price price falls from P1 to P2.

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 Exam preparation and technique

P1

Price ($)
P2

D2 D1
O Q2 Q1

Quantity traded

l Eliminate the obviously incorrect answers B and D as demand for cigarettes does
not increase and neither does the supply.
l C mentions an increase in price, which is also incorrect.
l Therefore A is the correct answer.

Example 5
The table shows the demand for and supply of onions in a market in Dhaka,
Bangladesh.
Price per kg ($) Quantity demanded (kg) Quantity supplied (kg)
3 60 40
4 50 50
5 40 60
6 30 70

When the price rises from $4 to $5 per kilo, what is the price elasticity of supply
(PES)?
A 0.1
B 1.25
C 0.8
D 1.0

Tips for answering Example 5:

Do the calculations for PES on the question paper before looking at the options.
(60 50) 20%
PES = % change in quantity supplied = = = +0.8
50 25%
% change in price (5 4)
5
Answer = +0.8, i.e. Option C.
Example 6
In 2010 the USA imposed a tariff on car tyres imported from China. Which option
shows the likely impact the tariff had on US tyre producers, US consumers and
Chinese tyre producers?

US tyre producers US consumers Chinese tyre producers

A Increase in demand for tyres Increase in price of tyres Decrease in demand for tyres
B Decrease in demand for tyres Decrease in price of tyres Decrease in demand for tyres
C Increase in demand for tyres Decrease in price of tyres Increase in demand for tyres
D Decrease in demand for tyres Increase in price of tyres Increase in demand for tyres

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 Exam preparation and technique

Tips for answering Example 6:

Read the question and determine the impact of a tariff on each stakeholder
individually before reading the contents of the table.
l US tyre producers increase in demand for tyres as Chinese imports are more
expensive
l US consumers increase in price of tyres as Chinese imports are now taxed,
making tyres more expensive
l Chinese tyre producers Americans reduce their demand for tyres from China as
price has increased due to the tariff
Read through each option and tick the correct option.
The correct answer is A (increase, increase, decrease).
Example 7
The table below shows the inflation rate in Uganda from 2009 to 2012.
Year Inflation rate (%)
2009 2.0
2010 2.5
2011 2.0
2012 1.0

What happened to prices in Uganda between 2009 and 2012?

A Decreased
B Stayed the same
C Increased at a faster rate
D Increased but at a decreasing rate

Tips for answering Example 7:

l Study the table of figures and decide what the content means. In this case, the
data shows the inflation rate in Uganda between the years 2009 and 2012.
l Determine what has happened to prices during this time period the rate of
inflation has decreased from 2.5% in 2010 to 1% in 2012.
l Decide what this means for prices in this case, prices have increased but at a
reduced rate.
l Read through each option eliminating the incorrect answers.
Option A is incorrect because although the percentage rate of inflation has
decreased prices have still increased (the rate of inflation is positive).
Option B is incorrect because prices have increased rather than staying the
same.
Option C is incorrect as the rate of inflation has fallen.
D is the correct answer.

Paper 2
In Paper 2, you must:
l Write your answers in dark blue or black ink pen only, although pencils are
allowed for any economics diagrams.
l Answer the compulsory question in Section A, which is marked out of 30. This is
in the format of a data response question.
l Answer any three of six structured questions in Section B, each of which is
marked out of 20.

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 Exam preparation and technique

Hence, the total marks for Paper 2 are 90.

The grades for IGCSE Economics range from A* to G, whereas for O Level
Economics the grades range from A* to E. The grade boundaries, based on the
exam boards percentage uniform marks (PUM), are shown below:

IGCSE Economics O Level Economics

Grade % Grade %
A* 90 A* 90
A 80 A 80
B 70 B 70
C 60 C 60
D 50 D 50
E 40 E 40
F 30
G 20

Revision planning
Here are some suggestions for revision. Use the ones that work best for you:
l Download a copy of the Cambridge International Examinations IGCSE or O Level
Economics syllabus from the Cambridge International Examinations website.
The IGCSE syllabus is here: www.cie.org.uk/qualifications/academic/middlesec/
igcse/subject?assdef_id=851 and the O Level syllabus is here: www.cie.org.uk/
qualifications/academic/middlesec/olevel/subject?assdef_id=906. Use this to
guide you during revision what topics to study and the learning outcomes for
each of these topics.
l Download the exam timetable from the Cambridge International Examinations
website: www.cie.org.uk/examsofficers and plan your revision accordingly.
l Draw diagrams to help you remember. For example, try drawing diagrams to
show the following:
opportunity cost (production possibility curves)
changes in equilibrium price caused by taxes and subsidies
price elastic demand
price inelastic demand
national minimum wage
economies of scale and diseconomies of scale
fixed, variable and average costs
business cycle
economic growth.
l Use mnemonics or acronyms to help remember concepts. The authors suggest
these as examples:
CELL = the four factors of production, i.e. capital, enterprise, land and labour
THIS = the determinants of price elasticity of demand, i.e. time, habits/tastes/
fashion, income and substitutes
MISC = non-price determinants of demand, i.e. marketing, income, substitutes
and complements
WITS = non-price determinants of supply, i.e. weather, ICT (technology), taxes
and subsidies
GETUP = the five main government objectives, i.e. growth (economic
growth positive and stable), environment (protection of), trade (balanced),
unemployment (low) and price (stability)
l Use mind maps as a visual aid for revising topics. You can use online software to
produce these, e.g. https://bubbl.us/.

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 Exam preparation and technique

l Produce summaries for each topic. By making succinct notes on each topic in the
syllabus you should be able to identify the most important points so that these
become easier to remember.
l Practise, practise, practise ask your teacher for past paper questions (or
download them from the CIE website). Practise answering the exam questions
under timed conditions to improve your performance for the actual exams.

Guidance for examination

l Read the question (RTQ) carefully and answer the question only. For example,
if the question asks candidates to explain how unemployment is measured,
there is no need to discuss the causes and consequences of the different types
of unemployment. If such an approach is used, there is an opportunity cost (!) of
time remaining for other questions that must be answered.
l Mark allocations in Paper 2, do pay attention to the number of marks
allocated to each question. For example, a question that asks candidates to define
inflation (2 marks) requires less time than one that asks candidates to explain two
factors that cause inflation (4 marks).
l Diagrams pay attention to detail when constructing your diagrams. Economics
diagrams can help to make your explanations more meaningful. Make sure these
are accurately labelled and refer specifically to the question asked. For example, if
the question requires candidates to Demonstrate, with the use of a diagram, how
a rise in indirect taxes affects the market for beef, then Figure 27.1, although it
shows the same effects, is not as complete a response as Figure 27.2.

S2 S1
P

D
O Q
Figure 27.1 Impact of an indirect tax on market for beef

S2 S1
Price of beef
($)
P2
Tax per unit
P1

D
Quantity of beef (kg)
O Q2 Q1

Figure 27.2 Impact of an indirect tax on the market for beef

l Examples explanations and descriptions are often clarified with the use of
relevant economic examples. For instance, if the question asks candidates to
distinguish between labour-intensive and capital-intensive production, then it is
best to include examples of these (e.g. teaching and car manufacturing).

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Common errors/confused words

Below is a list of words that are commonly confused in the examination. Use the
Glossary on this CD-ROM to check your understanding of the differences.
l capital and money
l company (limited) and business
l income and wages (or salaries)
l income and wealth
l inflation and price stability
l investments and savings
l managers and owners
l price and costs (of production)
l production and productivity
l profit and revenue
l public company and public sector
l shareholders and stakeholders
l specialisation and division of labour
l strike action and industrial action
Other common mistakes made in the exam (which you should try to avoid) include:
l reversing the labels for demand and supply curves
l indirect taxes shifting the demand curve (rather than the supply curve) to the left
l reversing the formula when calculating price elasticity of demand
l stating a product is elastic rather than price elastic
l stating that price elastic means as price falls, demand rises (this is true even if
demand is price inelastic)
l using absolute changes rather than percentage changes when calculating price
elasticity of demand
l confusing the (four) factors of production with the (three) sectors of industry, or
the stages of production
l using social costs interchangeably with negative externalities
l defining public goods as those produced by the public sector
l using the terms mergers and takeovers interchangeably
l stating that diseconomies of scale can be caused by a recession (when output
declines)
l stating that (all) people who work in the tertiary sector earn more than those who
work in the primary and secondary sectors
l stating that monopolists can do whatever they want
l confusing real income with disposable income
l interpreting falling rates of inflation as a fall in prices
l stating that progressive taxes mean people pay more tax as they earn more (this is
true even with proportional taxes)
l confusing a budget deficit with a balance of payment deficit
l stating that monetary policy targets the supply-side of the economy
l stating that businesses can make money only the central monetary authority
can do this
l stating that businesses can lose money they spend money during the
production process, rather than misplacing it.

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Command terms or words

Command term Meaning Example
Analyse Carry out a detailed examination of Analyse how a firm can use the concept
an issue, concept or theory of price elasticity of demand when
setting prices.
Define Show precise understanding of an Define the term market failure.
economic term or concept
Demonstrate Show or point out something by Demonstrate how the use of production
reasoning possibility curves can illustrate the
concept of choice and resource
allocation.
Describe Give an account of a concept or an Describe what is meant by population
idea growth.
Discuss Explore an argument in depth, Discuss whether protectionist measures
considering alternative views are in the best interest of a country.
Distinguish Show an understanding of the Distinguish between cost-push and
differences between two or more demand-pull inflation.
terms or concepts
Explain Make a concept or issue clear, Explain two consequences of a current
usually with the use of an example or account deficit.
diagram
Evaluate Make an appraisal by weighing up Evaluate the use of fiscal policy in
the strengths and limitations of an reducing the rate of inflation.
argument or issue
Identify Recognise, pinpoint or state key facts Identify two features of a mixed
or features economic system.

Useful websites
Past exam papers, mark schemes and examiners reports for IGCSE and O Level
Economics can be downloaded from the Cambridge International Examinations
website.
IGCSE: www.cie.org.uk/qualifications/academic/middlesec/igcse/subject?assdef_
id=851
O Level: www.cie.org.uk/qualifications/academic/middlesec/olevel/subject?assdef_
id=906
Further revision and study tips can be downloaded as a PDF file from Cambridge
International Examinations Learner Guide for IGCSE and O Level Economics:
www.cambridgestudents.org.uk/subjectpages/folder.2008-06-12.9320437292/
folder.2008-06-13.0822994812/Learner%20Guide%20for%20IGCSE%20and%20O%20
Level%20Economics.pdf
Excellent economics notes and regularly updated blogs written by teachers and
examiners from tutor2u: www.tutor2u.net or http://goo.gl/E1U6L
An excellent website from Dinesh Bakshi, with lots of notes, exam tips, worksheets
and interactive quizzes for CIE IGCSE Economics: http://goo.gl/X9IWY
Lots of free teaching materials (e.g. exam tips, revision games and topic notes) are
available from i-study.co.uk: http://goo.gl/1s6Ld
Another great website for IGCSE Economics, with lots of notes, quizzes and exam
advice from Open Gecko: http://goo.gl/zAk7W
NationMaster has a huge bank of data, allowing you to compare economic data for
any two countries of your choice: www.nationmaster.com
Free economics online videos on YouTube from Paj Holden: http://goo.gl/mkktD
Lots of economic data and information can be found at the following websites:

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 Exam preparation and technique

l World Bank: www.worldbank.org/

l World Trade Organization: www.wto.org/
l United Nations: www.un.org/en/
l Trading Economics: www.tradingeconomics.com/
l CIA World FactBook: www.cia.gov/library/publications/the-world-factbook/
index.html
Very best wishes for your final examinations!

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