| Mistake | Consequence | Correction | |--------|------------|-------------| | Using Qs (20) instead of Qd (10) to calculate CS | Overstates CS | In a price floor, actual trade = quantity demanded | | Forgetting that PS should use quantity sold (10), not quantity supplied (20) | Overstates PS | Unless government buys surplus, unsold stock yields no revenue | | Miscalculating intercepts | Wrong surplus areas | Always derive demand/supply intercepts from equations | | Stating that total surplus increases | Wrong conclusion | Any binding price floor reduces total surplus (DWL>0) | | Ignoring the possibility of non-binding floor | Misses part (b) marks | Always compare floor price to equilibrium price first |
To clear up common exam traps, consider how changes in real-world scenarios affect opportunity cost: Scenario Event Impact on Chosen Option Impact on Forgone Option Net Change in Opportunity Cost Becomes more attractive Increases Value of forgone option decreases Becomes less attractive Decreases Value of chosen option increases Becomes more attractive Unchanged Value of chosen option decreases Becomes less attractive Unchanged
The opportunity cost of investing in shares increases only if the increases. It does not change if the return on shares (dividends) decreases, because the value of the forgone alternative remains the same.
Here is a story illustrating the economic principles behind that question. hkcee 2010 econ paper 2 q2
(c) Two Reasons for Lower Efficiency in a Centrally-Planned Economy (6 marks) Lack of Price Mechanism (Incentive Problem):
Central planners cannot gather all the dispersed information about consumer preferences and resource availability. This results in misallocation of resources—producing the wrong goods or using inefficient methods—leading to shortages or surpluses.
Mastering this specific question requires breaking down the core concepts of opportunity cost, exploring its practical applications, and examining common traps that catch students off-guard. Core Theoretical Framework: Opportunity Cost (c) Two Reasons for Lower Efficiency in a
Workers do not need to switch between different tasks (e.g., moving from the dressing room to the cash register). This saves time previously lost to switching tools or locations. (Alternative: Selection according to ability) CSEC June 2010 - Economics - Paper 02 | PDF - Scribd
The marking scheme for this question assessed students' ability to:
In the 2nd quarter of 2010, Hong Kong's economy experienced a period of strong economic growth, leading to a significant rise in consumers' disposable income. Core Theoretical Framework: Opportunity Cost Workers do not
The government imposes a minimum price (price floor) of $68 per tonne to support farmers’ income.
The question introduces an external event that alters the value of an unchosen alternative. For instance, if the wages for part-time work rise, the opportunity cost of choosing to study instead of working will increase automatically—even if the student's study habits remain unchanged. 3. Sunk Costs (The Past Expenditures Trap)