Cambridge IGCSE Economics: Scarcity, free and economic goods, and the factors of production (0455) – Practice Questions

These are original questions written for Marlbridge, for revision and practice on this content. They are not reproduced past-paper questions, and they do not replicate the exam’s exact structure, question count or mark tariffs – examination boards hold copyright in their own papers. Use these alongside the official past papers from your board or school.

This set tests sections 1.1 and 1.2 of the Cambridge IGCSE Economics 0455 syllabus for examination in 2026. All names and figures are invented. Teaching is in the study guide and the revision notes. Other links: the Cambridge IGCSE Economics hub, the printable checklist and the free diagnostics.

Questions

1. Define the economic problem. [2]

2. Explain how the economic problem affects a producer. [3]

3. The government of Country B (invented) expects tax revenue of 120 units. It wants to spend 70 on health, 55 on education and 25 on defence.

(a) Calculate the shortfall between planned spending and revenue. [2] (b) Explain why borrowing to cover the shortfall does not remove the economic problem. [2]

4. Explain the difference between a free good and an economic good. [3]

5. State whether each of the following is best described as a free good or an economic good, and give a reason.

(a) Air on an open hillside. [1] (b) Water piped to homes in a large city. [1] (c) Vaccinations given at no charge to patients at a clinic. [2]

6. For each of the following, give the factor of production it represents and the payment it earns: a field, a delivery van, a driver employed by a firm, and the person who set up the firm and bears its risk. [4]

7. A small tailor (invented) has yearly revenue of 90,000. It pays wages of 40,000 and rent of 12,000. It has a loan of 50,000 at an interest rate of 6%.

(a) Calculate the yearly interest paid. [2] (b) Calculate the profit. [2] (c) Calculate profit as a percentage of revenue, to one decimal place. [1]

8. Explain two influences on the geographical mobility of labour. [4]

9. A worker in Town X could earn 3,000 a year more in Town Y. Housing in Y costs 1,200 more a year. Moving costs 5,400 once.

(a) Calculate the worker’s net gain each year. [2] (b) Calculate the number of years needed to recover the cost of moving. [2] (c) Explain one reason why the worker may still choose not to move. [2]

10. A mill (invented) begins the year with 300 looms. Looms lose 10% of their number each year through wear. The mill buys 24 new looms.

(a) Calculate depreciation. [1] (b) Calculate net investment. [1] (c) Calculate the closing stock of looms. [1] (d) Explain how output could rise even though the stock of looms fell. [3]

11. Country B has a working-age population of 5.0 million and a labour force of 3.1 million. A year later, working-age population is 5.2 million and the labour force is 3.4 million.

(a) Calculate the participation rate (labour force as a percentage of working-age population) in each year, to one decimal place. [2] (b) Calculate the percentage growth of the labour force, to one decimal place. [1] (c) Explain two causes of an increase in the quantity of labour. [4] (d) Discuss whether a larger labour force will necessarily raise output. [5]

12. A region (invented) has 5,000 hectares of farmland producing 2.5 tonnes per hectare. Each year erosion removes 2% of the farmland. The region reclaims 60 hectares. Fertiliser then raises output to 3.0 tonnes per hectare.

(a) Calculate the farmland area after erosion and reclamation. [3] (b) Calculate total output before and after the changes. [2] (c) Discuss whether raising the quality of land is a more reliable way of raising farm output than raising the quantity of land. [5]

Answers

1. Resources are finite [1] and wants are unlimited, so choices have to be made [1]. [2] Examiner insight: Both halves of the definition are needed; saying only “there is not enough” does not show the contrast between resources and wants.

2. A producer has limited inputs such as finance, workers and machinery [1]. It wants to raise output and profit without limit [1]. It must choose what to produce and which inputs to use, giving up other uses of the same inputs [1]. [3] Examiner insight: A producer-specific answer links the idea to firms’ resources. A generic definition of scarcity does not answer “how does it affect a producer”.

3. (a) Planned spending = 70 + 55 + 25 = 150 [1]. Shortfall = 150 − 120 = 30 units [1]. [2] (b) Borrowing has to be repaid, using resources in the future [1]. Total resources are still limited, and wants stay unlimited, so choices remain [1]. [2] Examiner insight: Show the addition before the subtraction so the shortfall can be traced. For the explanation, say what happens in the future, not just that borrowing is “limited”.

4. A free good is not scarce, so no resources are given up to obtain it [1] and there is no price [1]. An economic good is scarce, uses resources to supply and has an opportunity cost [1]. [3] Examiner insight: A question on the difference between two things needs both sides. Writing only one definition is incomplete, however well written.

5. (a) Free good: it is available in unlimited quantity and uses no resources to supply [1]. (b) Economic good: pipes, plants and workers are used to supply it [1]. (c) Economic good [1] because doctors, equipment and vaccines use resources even though the patient pays nothing [1]. [4] Examiner insight: A zero price to the user is not enough to call something free. The reason must refer to resources used or not used.

6. Field: land, rent [1]. Delivery van: capital, interest [1]. Driver: labour, wages [1]. Person who set up the firm: enterprise, profit [1]. [4] Examiner insight: The factor and its reward are two separate points, so check that both are given and that they match.

7. (a) Interest = 50,000 × 0.06 [1] = 3,000 [1]. [2] (b) Profit = 90,000 − (40,000 + 12,000 + 3,000) [1] = 90,000 − 55,000 = 35,000 [1]. [2] (c) 35,000 ÷ 90,000 × 100 = 38.9% [1]. [1] Examiner insight: Show the subtraction of all three costs and write each step, so that your method is visible even if a figure slips.

8. Any two influences, each with an explanation, for example: Cost of moving and housing: moving is expensive and housing may be dearer in a new area [1], so a worker with a small wage gain does not move [1]. Family and community ties: workers with children in school or relatives nearby are reluctant to leave [1], so labour stays where it is even when jobs are better elsewhere [1]. [4] Examiner insight: “Explain” needs a reason and a consequence, so naming an influence alone is not enough. Keep to geographical mobility rather than occupational.

9. (a) Net gain = 3,000 − 1,200 [1] = 1,800 a year [1]. [2] (b) Years = 5,400 ÷ 1,800 [1] = 3 years [1]. [2] (c) Any one reason, developed: family ties or a partner’s job in Town X [1] outweigh a net gain that takes three years to repay [1]. [2] Examiner insight: A good answer to a part like (c) uses the figures. A reason tied to the three-year payback shows more than a general statement about “not wanting to move”.

10. (a) 300 × 0.10 = 30 [1]. (b) 24 − 30 = −6 [1]. (c) 300 + 24 − 30 = 294 looms [1]. (d) The new looms may be of a better design or newer technology [1], so each loom produces more [1], and quality gains can outweigh the fall in quantity, so total output rises [1]. [6] Examiner insight: In (d) the key idea is quality versus quantity. State both, then say which dominates.

11. (a) Year 1: 3.1 ÷ 5.0 × 100 = 62.0% [1]. Year 2: 3.4 ÷ 5.2 × 100 = 65.4% [1]. (b) (3.4 − 3.1) ÷ 3.1 × 100 = 9.7% [1]. (c) Any two, each explained: population growth or immigration adds people of working age [1], so more can join the labour force [1]. Higher participation, for example more people taking jobs because of flexible hours [1], means a bigger share of the working-age population is working or seeking work [1]. (d) Argument for: more workers can produce more, if they have tools and land [1]. Argument against: if capital and land do not rise, each worker has less to work with and output per worker may fall [1]. Skills matter: untrained workers may add little [1]. Depends on whether the jobs exist or workers stay unemployed [1]. Judgement: output rises only if the extra labour is matched by capital, skills and demand [1]. [12] Examiner insight: An evaluation needs a judgement that follows from the arguments. Listing points for and against, without saying what output depends on, stops short of that.

12. (a) Erosion = 5,000 × 0.02 = 100 hectares [1]. Net change = 60 − 100 = −40 [1]. New area = 4,960 hectares [1]. (b) Before: 5,000 × 2.5 = 12,500 tonnes [1]. After: 4,960 × 3.0 = 14,880 tonnes [1]. (c) Quality: a 20% rise in yield (2.5 to 3.0) more than offsets a 0.8% loss of area, so output rose by 19.0% [1]. Quality gains work with the land already owned, whereas new land is limited and reclaiming it is costly [1]. Against: fertiliser can harm soil in the long run and raises costs [1], and erosion continues unless it is stopped [1]. Judgement: raising quality is more reliable provided it is sustainable, but the area must also be protected [1]. [10] Examiner insight: Use the figures from part (b) in the discussion. A conclusion that names a condition (“provided it is sustainable”) reads as a judgement rather than a repeat of earlier points.

Where marks are usually lost

• Stating one half of a definition when both parts are needed.
• Treating a zero price as proof of a free good.
• Giving the right factor but the wrong reward.
• Writing that money is capital.
• Forgetting that profit is what remains after all other payments.
• Listing influences on mobility without explaining the effect.
• Mixing up geographical and occupational mobility.
• Giving a quantity change when the question asks about quality, or the reverse.
• Reporting a calculation without the working or without units.
• Ending an evaluation without a conclusion that depends on stated conditions.

Next steps

• Re-read the study guide for any part that cost you marks.
• Revise from the revision notes.
• Check the Cambridge IGCSE Economics hub and tick off the printable checklist.
• Take the free 10-minute diagnostics.
• Book a free trial class.

Official syllabus

Cambridge IGCSE Economics 0455 syllabus for examination in 2026, version 2, published by Cambridge University Press & Assessment: sections 1.1 The nature of the economic problem and 1.2 The factors of production.