Common errors for 9708/01
Chapter
1: Basic Economic Ideas
a. Unable
to distinguish between the outward shift of a PPC and movement of a point
inside the PPC towards boundary
b. Unable
to differentiate between a positive and a normative statement
c. Confuse
between functions and characteristics of money
Chapter
2: The Price System
a. Unable
to tell the difference between price elastic in demand/ high PED and price
inelastic in demand/ low PED
b. Always
forget the fact that goods/ services with PED = 1/ unitary PED will have the
same TR even after price changes
c. Mixing
up the positive (+) and negative sign (-) for XED
d. Inability
to identify the direction of shifts in both demand and supply curves
e. Forget
the fact that value of a subsidy or indirect tax is measured based on the
vertical distance of two supply curves
Chapter
3: Government Intervention in the Price System
a. Unable
to identify positive and negative externalities from a given case study
b. Unaware
that the market price for demerit goods is cheap because negative externalities
are not accounted for. Equally market price for merit goods is expensive
because positive externalities are not factored in
c. Forget
that maximum price policy will be futile if price is set above equilibrium.
Likewise, minimum price policy is useless if it set below equilibrium. In both
cases, price will eventually settle at original equilibrium level
Chapter
4: International Trade
a. Confuse
between the features of a free trade area, custom union and economic union
b. Weak
in questions involving terms of trade
c. Do not
know how to interpret the tariff diagram e.g. calculating tax revenue and
identifying the amount of new imports
d. Unaware
that entries into the financial account also have impact onto the current
account in the long run
Chapter 5: Theory and Measurement in the
Macroeconomy
a. Always misinterpret falling rate of
inflation as falling prices
Chapter 6: Macroeconomic Problems
a. Unable to identify factors that cause
demand-pull and cost-push inflation
b. Poor reasoning skills regarding the
demand and supply of a country’s currency
Chapter 7: Macroeconomic Policies
a. Lack of understanding of how
deflationary fiscal and monetary policies actually work to reduce BOP/ current
account deficit
b. Confuse between expenditure-dampening/
reducing and expenditure-switching policies
c. Always forget that high value of PED for
exports and imports is good for the BOP/ current account
