Section A 1. Not free goods because the resources used to produce them have alterna the quantity available is insufficient to satisfy all our wants for them / any appropriate explanation Unit Price = supply curve shifts to the left + demand curve shifts to the left Quantity tive uses / there is @ cost to society of producing them / = correct indication of the inerease in equilibrium price with the leftward shift of the supply curve > the leftward shift of the demand curve Verbal explanation = decrease in the supply of gasolins gasoline is an oil product) = gasoline and automobiles are complementary goods = ©, decrease in the demand for gasoline the change in supply is greater than the change in demand 3 100.000 00% 500 144 000 120x800 Firm B + different education / training + different capital = different technology = different management + different working conditions + any other relevant point [Mark the FIRST TWO points only.) units of output per man-hour = 1.5 units of output per man-hour 4, The liability of an owner of a firm is confiried to the amount of his investment in the firm, 2002-CE-ECON 1-8 RRS FOR TEACHERS’ USE ONLY | Marks 1@, maxMarks + many sellers / many buyers + differentiated products + easy entry /exit = imperfect information 1@, max: 3 + price competition = non-price competition + any other relevant point [Mark the FIRST THREE points only.) 6. M1 increased 1 by $90 000. 1 “© the legal tender notes and coins held by the public increased. 1 M3 decreased 1 bby $60 000. 1 ~* this amount was no longer included in the cash in public circulation in HK or in the deposits with ‘the monetary sector of HK. 1 [Remark: Mere mentioning of the definition of MI and/or M3 — NO marks} 7. = to issue currency + to act as the banker of the government + toact as an advisor to the government ~ to supervise / monitor the monetary sector, e.g, private banks + toactas the lender of last resort + to administer the clearing house 1@, max:2 + to carry out the monetary policy ~ tomanage the country’s foreign exchange reserve + any other relevant point [Mark the FIRST TWO points only.) 8. (Equality -) The tax payments should be in proportion to the taxpayers’ income. (Cenainty -) The tax obligation (e.., the time of payment, the manner of payment and the tax amount) of the taxpayers should be stated with certainty and not be arbitrarily interpreted or changed by the government. 2@, max:4 (Convenience -) The time and methods ofthe tax payment should be convenient to the taxpayers. (Economy -) The administrative costs of tax collection should be as small as possible relative to its yield [Mark the FIRST TWO points only.) 9.(a) We cannot because 1 the amount of resources of both countries are not given 2 (b)_ Yes, we can because 1 In Country A, the cost of 1 unit of toys is 5/15 = 1/3 units of computers. 1 In Country B, the cost of 1 unit of toys is 5/10 = 1/2 units of computers 1 ': Country A has a lower cost in producing toys 1 Effective communication for Section A max :2 Total 40 2002-CE-ECON 1-9 RRAMEH FOR TEACHERS’ USE ONLYSection B Marks 10. (a) (i) The required reserve ratio = (20/100) = 1/5 or mulkiplier = 5 1 max. amount of deposits created = $10 mx 5 = $50 m 1 max. amount of money supply created = max. amount of deposits created - decrease in cash in public circulation (850m - $10m) = $40 m (i) there is cash leakage + the banks decide to hold excess reserves 2@, max: 4 ~ insufficient demand for loans [Mark the FIRST TWO points only.] - Unit Pric mitre t Quantity 2 + demand curve shifts to the right ' = price t and quantity transacted { i + change in total expenditure = ‘Verbal explanation = increase in demand (°." iower cost) 1 = price t and quantity transacted + total expenditure increases (©) The cost of depositing money with one bank is the deposit interest that can be eamed from other banks. 2 to deposit money into those large (small) banks has a higher (lower) cost 1 <1. there will bea flow of deposits from those large banks to those small banks. 1 [Remark : Mere mentioning of the definition of cost without other elaboration - NO marks} (@) Included in HK's GDP 1 Bank A is a resident producing unit of HK. Excluded from HK"s GNP *.” ‘Tom is not a resident of HK / Tom's salary is an income to abroad Effective communication max :2 Total :25 2002-CE-ECON I-10 ARASH FOR TEACHERS’ USE ONLY