Cambridge IGCSE Economics (0455) — Past Papers, Revision Notes & Exam Prep

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The euro falls from $1.20 to $1.00.

A €10 export costs $10 abroad, down from $12.

A $30 import costs €30, up from €25.

A rise does the opposite.

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Fixed cost = total cost at zero output.

Total cost $42 at 0 units, $96 at 6: fixed $42, variable $54.

Divide by 6: average fixed $7, variable $9, total $16.

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Maximum price below equilibrium: shortage.

Minimum price above equilibrium: surplus (below it, no effect).

Minimum wage: jobs fall 500 to 400, but 600 want work.

Jobs lost 100; surplus 200.

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A falling but positive inflation or growth rate means a slower rise.

Inflation 5% then 3%: a $100 basket costs $105, then $108.15.

Prices fall only if inflation is negative.

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Inelastic: revenue moves with price.

Elastic: revenue moves the opposite way.

Unit elastic: no change.

Price $50 to $60, sales 10 to 9: revenue $500 to $540, so inelastic.

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Quantity goes on top: PED = % change in quantity demanded ÷ % change in price.

Price up 8%, quantity down 6%: PED = −6 ÷ 8 = −0.75 (inelastic).

The wrong way round gives −1.33 (elastic).

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Lower interest rates make loans cheaper: a bakery borrows for a new oven.

More spending: more jobs, but prices tend to rise.

Higher rates make loans dearer and discourage investment.

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Jobless workers: a point inside the PPC.

Hiring them moves the point to the curve, not past it.

Only more or better resources, e.g. new machines, shift the curve out.

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Link each step with 'so'.

Don't stop at 'economies of scale'.

A bigger paint maker gets tins cheaper in bulk, so average cost per litre falls, so prices can drop.

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Give each side its own reason.

Free school meals: well-fed pupils learn more.

But the opportunity cost is libraries not built.

It depends how many pupils currently go hungry.

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State the link: faster growth, lower unemployment.

Compare, don't copy: Country A grew fastest (6%), with the lowest unemployment (3%).

Reason: more output needs more workers.

Then explain any exception.

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Write the formula and keep 'bn' in every line.

Percentage change = change ÷ original × 100.

Exports $40bn to $50bn: $10bn ÷ $40bn × 100 = 25%, not 20%.

8% of $250bn = $20bn, not $20.

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Use other words and give every key part.

Inflation: a sustained rise in the general price level.

'A price rise' misses 'sustained' and 'general'.

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Label the vertical axis Price, the horizontal Quantity.

Demand slopes down, supply up.

Skateboards become fashionable: D1 shifts right to D2, price rises P1 to P2, quantity Q1 to Q2.

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Own price change: move along the curve.

Income, tastes, related goods' prices shift demand; costs, indirect taxes, subsidies shift supply.

A candle tax shifts supply left; buyers move along demand.

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Budget: government spending against tax revenue.

Spend $95bn, collect $80bn: deficit $15bn.

Current account: trade and income flows with other countries.

Exports $60bn, imports $72bn, net income $0: deficit $12bn.