CIE A Level Economics · 9708

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Try a real questionAS · The price system and the microeconomy

The price of a good rises and total expenditure on the good increases. What can be concluded about the price elasticity of demand for the good?

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“A depreciation of the exchange rate makes exports cheaper in foreign markets and imports more expensive domestically. Assuming the Marshall-Lerner condition holds, the current account should improve. However, in the short run the J-curve effect means the deficit may initially worsen because demand for imports is price inelastic…”

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Examiner-style feedback
9 / 12
StrengthAccurate use of the Marshall-Lerner condition and the J-curve to analyse the effect of depreciation on the current account.
StrengthClear chain of analysis linking price changes to export and import demand.
To improveEvaluate the significance of your points — for example, how elasticities change over time, or the role of income effects abroad.
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Syllabus coverage

Every theme in CIE 9708

AS Level · Papers 1 & 26 themes
Basic economic ideas and resource allocationScarcity, choice, opportunity cost, PPCsThe price system and the microeconomyDemand, supply, elasticities, marketsGovernment microeconomic interventionTaxes, subsidies, price controlsThe macroeconomyAD/AS, inflation, unemploymentGovernment macroeconomic interventionFiscal, monetary and supply-side policyInternational economic issuesTrade, exchange rates, balance of payments
A2 Level · Papers 3 & 45 themes
The price system and the microeconomyUtility, market structures, labour marketsGovernment microeconomic interventionMarket failure, equity, policyThe macroeconomyGrowth, development, employmentGovernment macroeconomic interventionPolicy objectives and conflictsInternational economic issuesGlobalisation, trade policy, exchange rates