OCR AS Level Economics Past Papers

Elasticity calculations require precise use of the percentage change formula. Price elasticity of demand (PED) = % change in quantity demanded ÷ % change in price. If PED lies between 0 and −1 (ignoring the negative sign, PED < 1), demand is price inelastic — a price rise increases revenue because the proportional demand fall is smaller than the proportional price rise. If PED > 1, demand is price elastic — a price rise reduces revenue. Tax incidence questions use elasticity: when demand is inelastic relative to supply, consumers bear a larger proportion of an indirect tax (because they cannot reduce their quantity demanded significantly in response to the price rise). Diagram accuracy is worth significant marks at AS Level and is frequently neglected. Every supply-and-demand, externality, or AD-AS diagram must include: fully labelled axes (Price on the y-axis, Quantity on the x-axis, or Price Level and Real GDP for macro diagrams), labelled curves (D, S, AD, AS, LRAS), correctly plotted equilibrium points with associated price and quantity, and clearly drawn shift arrows with new labels (D₁, S₁). For negative externality diagrams, the social marginal cost (SMC) curve should lie above the private marginal cost (PMC) curve, reflecting the external cost added to private cost, with the deadweight welfare loss clearly shaded as a triangle between the market equilibrium quantity and the socially optimal quantity. For policy evaluation questions, structure your response around: the mechanism (how the policy achieves its aim), the evidence of effectiveness (empirical examples where available), the limitations (time lags, unintended consequences, political constraints), and an overall judgement. Avoid one-sided responses — examiners reward candidates who acknowledge trade-offs. For example, interest rate rises to combat inflation may slow growth and increase unemployment; this conflict between macroeconomic objectives must be acknowledged in any evaluation of monetary policy.