Pearson Edexcel International GCSE Economics: The labour market and government intervention in business (4EC1) – 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.

These questions cover sections 1.2.5 (the labour market) and 1.2.6 (government intervention) of the Pearson Edexcel International GCSE Economics (4EC1) specification, Issue 3. The course is single tier. Calculators may be used and workings should be shown. Every country, firm and figure is invented. Read the study guide if a topic is new and use the revision notes for recall. Course pages: hub, checklist and free diagnostics.

Questions

1. (a) Define derived demand. [2] (b) State two factors, other than the wage, that affect the demand for labour. [2]

2. A workshop has 40 workers who make 480 units a day. Each worker is paid 84 a day. After training, output per worker rises by 25% and the wage is unchanged. (a) Calculate output per worker and labour cost per unit before training. [2] (b) Calculate the labour cost per unit after training and the percentage fall. [3]

3. Explain how a rise in the retirement age affects the supply of labour. [3]

4. The table shows a market for farm workers in Country K (illustrative). Wage is per hour.

Wage	Demanded	Supplied
10	580	380
11	540	440
12	500	500
13	460	560
14	420	620

(a) State the equilibrium wage and employment. [2] (b) Supply rises by 100 workers at every wage because of immigration. State the new wage and employment. [2] (c) Draw a diagram to show the effect of a fall in the demand for labour. [3]

5. Using the table in question 4, the government sets a minimum wage of 14. (a) Calculate the surplus of labour. [2] (b) Calculate the percentage change in employment. [2] (c) Work out how the total wage bill changes. [2] (d) Explain one way workers gain and one way they lose. [3]

6. Analyse how a trade union may help and harm its members. [6]

7. A firm spends 2,400 training each worker. Each trained worker adds output worth 800 a year. (a) Calculate the time taken to repay the cost. [1] (b) Explain how training improves the quality of labour for the firm. [3]

8. Paint market (illustrative): demand P = 140 − 2Q and private supply P = 20 + Q. Each unit causes 15 of external cost. (a) Calculate market equilibrium output and price. [2] (b) The government taxes 15 a unit. Calculate the new output and the price paid by buyers. [3] (c) Calculate tax revenue and the part paid by buyers. [3] (d) Calculate the fall in total external cost. [2]

9. A paint firm saves 9,000 by releasing waste. The chance of being caught is 20%. (a) Calculate the expected cost of a fine of 30,000, and of 60,000. [3] (b) Explain which fine deters the firm. [2] (c) Firm P can cut pollution at 30 per tonne and Firm R at 12 per tonne. Permits trade at 20. P must cut 10 tonnes. Calculate P’s saving from buying permits. [3]

10. In a market, four bakeries have shares of 40%, 30%, 20% and 10%. The two largest plan to merge. Price is 5 and would rise to 6; sales are 80,000 units. (a) Calculate the merged share and the percentage rise in price. [2] (b) Calculate the extra spending by consumers. [1] (c) Explain why a government may regulate this merger. [3]

11. A small shop employs 8 workers for 30 hours a week, 52 weeks a year. A minimum wage increase takes pay from 8.00 to 9.20 an hour. (a) Calculate the extra annual cost. [3] (b) Evaluate whether the rise is good for the shop and its workers. [9]

12. Evaluate whether taxation is the best way to reduce pollution from factories. [9]

Answers

1. (a) Demand for labour comes from [1] demand for the product it helps to make [1]. [2] (b) Any two of: demand for the final product [1]; availability of substitutes such as machines [1]; productivity of workers. [2] Examiner insight: A good definition links the factor to the product it helps make, so give both ideas. “Wage” is excluded by the question, so do not give it.

2. (a) 480 ÷ 40 = 12 units [1]; 84 ÷ 12 = 7.00 per unit [1]. [2] (b) 12 × 1.25 = 15 units [1]; 84 ÷ 15 = 5.60 [1]; (7 − 5.6) ÷ 7 × 100 = 20% [1]. [3] Examiner insight: Show each stage, since the working lets a marker follow the logic. Take the percentage fall on the original cost per unit.

3. People stay in the labour force for longer [1], so more workers are available at each wage [1] and the supply curve shifts to the right [1]. [3] Examiner insight: “Explain” wants a fact with two expansions, so state the change, say what happens to the number of workers, and name the shift.

4. (a) Wage 12 [1], employment 500 [1]. [2] (b) Supplied becomes 480, 540, 600… so supply equals demand at 11 [1]: wage 11, employment 540 [1]. [2] (c) Axes labelled wage and quantity of labour [1]; D shifts left to D1, with S unchanged [1]; the new equilibrium sits at a lower wage and lower employment [1]. [3] Examiner insight: A diagram is credited for labelled axes, the correct shift and the new equilibrium, so a sketch without labels loses the points. State the new figures, not just the direction, in part (b).

5. (a) Demanded 420, supplied 620, so surplus = 620 − 420 = 200 [1][1]. [2] (b) (420 − 500) ÷ 500 × 100 [1] = −16% [1]. [2] (c) Before 12 × 500 = 6,000; after 14 × 420 = 5,880 [1]; change = −120 (−2%) [1]. [2] (d) Gain: workers who keep jobs earn 14 instead of 12 [1]. Lose: 80 jobs fewer than before [1], and more people compete for fewer jobs, so unemployment rises [1]. [3] Examiner insight: Use the quantity demanded as employment, not the quantity supplied. Name both a gain and a loss when asked for each.

6. Help: union bargains a higher wage or better conditions [1]; members who keep jobs gain income [1]; safer conditions and security improve welfare [1]. Harm: if the wage is above equilibrium, firms demand fewer workers [1]; some members or non-members lose jobs [1]; strikes lose pay and may raise firm costs and prices [1]. [6] Examiner insight: “Analyse” asks for a chain in context. Give at least one development for each side so the answer is not a list.

7. (a) 2,400 ÷ 800 = 3 years [1]. [1] (b) Training lifts skills [1], so each worker produces more or makes fewer errors [1], which lowers cost per unit and improves product quality [1]. [3] Examiner insight: Each step in the chain from skills to output to cost is a separate point.

8. (a) 140 − 2Q = 20 + Q gives Q = 40 [1], P = 140 − 80 = 60 [1]. [2] (b) Supply becomes P = 35 + Q [1]; 140 − 2Q = 35 + Q gives Q = 35 [1]; price = 140 − 70 = 70 [1]. [3] (c) Revenue = 15 × 35 = 525 [1]. Buyers pay 10 more, 70 − 60 = 10 [1]; share = 10 × 35 = 350 [1]. [3] (d) Before 15 × 40 = 600; after 15 × 35 = 525 [1]; fall = 75 [1]. [2] Examiner insight: Check your answer against the tax: the producer’s price is 70 − 15 = 55. Write the working for each part so an early slip does not affect later ones.

9. (a) Expected fine = probability × fine [1]; 0.2 × 30,000 = 6,000 [1]; 0.2 × 60,000 = 12,000 [1]. [3] (b) 60,000 gives 12,000, above the 9,000 saved, so the firm is deterred [1]; 6,000 is below 9,000, so it is not [1]. [2] (c) Own cut = 10 × 30 = 300 [1]; permits = 10 × 20 = 200 [1]; saving = 100 [1]. [3] Examiner insight: Compare the expected cost with the gain from breaking the rule. Mention that fines work only if the firm is likely to be caught.

10. (a) 40 + 30 = 70% [1]; (6 − 5) ÷ 5 × 100 = 20% [1]. [2] (b) 1 × 80,000 = 80,000 [1]. [1] (c) A 70% share gives the firm market power [1], so it can raise price without losing many customers [1]; consumers lose and choice falls, so the regulator may block or set conditions [1]. [3] Examiner insight: Refer to the figures given. A general statement about monopolies without the 70% scores less.

11. (a) Hours = 8 × 30 × 52 = 12,480 [1]; rise = 1.20 [1]; extra = 14,976 [1]. [3] (b) Workers: higher pay of 15% for those employed, more spending and motivation [1][1]. Shop: wage bill rises from 99,840 to 114,816 [1], costs may lead to higher prices, fewer hours or fewer staff [1]. A small firm may have little spare profit [1]. If the shop passes costs on, customers may leave [1]. Benefits could include lower staff turnover and better service [1]. Judgement, for example that it helps if staff productivity rises or the shop can raise price, but may harm if demand is price sensitive [1]. Conclusion supported by the points above [1]. [9] Examiner insight: Use the 15% and the cost figure as evidence, give both sides, and decide which factor matters most.

12. Tax: makes the polluter pay and raises revenue [1]; reduces output towards the social level [1]; flexible [1]. Limits: rate hard to set [1]; if demand is inelastic, pollution barely falls [1]; firms may pass the tax to consumers [1]. Alternatives: regulation is certain but costly to enforce [1]; permits fix a cap [1]. Conclusion: tax may work best when demand is elastic and the harm is spread, but regulation may be better for very dangerous pollution [1]. [9] Examiner insight: Compare tax with at least one other policy and state a condition for your conclusion.

Where marks are usually lost

• Moving along a curve when a factor shifts it, and the reverse.
• Reading employment from the supply side under a minimum wage.
• Taking a percentage change of the later value, not the starting value.
• Leaving out working in Calculate answers.
• Drawing a diagram without labelled axes or a new equilibrium.
• Listing pros and cons without a chain.
• Claiming a minimum wage always causes unemployment.
• Ignoring the numbers in the question when evaluating.
• Writing no conclusion on an Evaluate question.

Next steps

• Revise with the revision notes and the study guide.
• Go to the Edexcel IGCSE Economics hub and the printable checklist.
• Try the free 10-minute diagnostics.
• Book a free trial class.

Official syllabus

Pearson Edexcel International GCSE in Economics (4EC1) specification, Issue 3, February 2026, for first teaching September 2017, published by Pearson Education Limited: sections 1.2.5 The labour market and 1.2.6 Government intervention.