OCR GCSE Economics: The Role of Markets and Money — Practice Questions

These are original questions written for Marlbridge, in the style and at the standard of the examination. They are not reproduced past-paper questions — examination boards hold copyright in their own papers. Use these alongside the official past papers available free from your board.

Related: The Role of Markets and Money study guide | The Role of Markets and Money revision notes

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Section A

1. Define equilibrium price and quantity. [2]

2. State whether each of the following causes a movement along the demand curve or a shift of the demand curve: (a) a fall in the product’s own price (b) a rise in consumer incomes. [2]

Section B

3. A new report links a snack food to poor health, and demand for it falls at every price level. Explain the effect on the demand curve, and distinguish this from the effect of the product’s price rising instead. [5]

4. Explain the difference between price elasticity of demand and price elasticity of supply. [4]

5. Explain how competition between producers in a market affects the price consumers pay, and explain why a monopoly can behave differently. [6]

6. A firm’s total cost of producing 200 units is £8,000, and its total revenue from selling all 200 units is £11,000.

(a) Calculate the firm’s average cost, average revenue and profit. [4] (b) Explain one way the firm could benefit from economies of scale if it increased output. [3]

7. An employee earns £2,100 gross per month. Income tax deducted is £220, national insurance is £160, and pension contributions are £105.

(a) Calculate the employee’s net pay. [2] (b) Explain the difference between gross pay and net pay. [2]

8. Evaluate the importance of the financial sector for consumers and producers in the economy. [9]

Answers

1. Equilibrium price and quantity is the price and quantity at which the demand and supply curves intersect [1], where the quantity demanded exactly equals the quantity supplied, so the market clears [1].

2. (a) A movement along the demand curve [1]. (b) A shift of the demand curve [1].

3. The health report changes consumer tastes and preferences, which is a non-price factor, so the entire demand curve shifts left (inward) — less is demanded at every price level, not just at the original price [2]. This is distinct from the product’s price rising, which would instead cause a movement along the original demand curve to a point with a higher price and lower quantity, with the curve itself staying in the same position [2]. Naming the specific non-price cause — here, a change in consumer tastes — rather than simply stating “demand fell” is what distinguishes a full answer [1].

4. Price elasticity of demand measures how responsive the quantity demanded of a good is to a change in its own price [1]; price elasticity of supply measures how responsive the quantity a producer is willing to supply is to a change in price [1]. Both describe responsiveness rather than the overall level of demand or supply — a good can have high demand but still be price inelastic if quantity demanded barely changes when price changes [1], and the same distinction applies on the supply side, where elasticity depends on how quickly a producer can adjust output [1].

5. In a competitive market with many producers, no single firm can influence the market price [1], so firms must set prices close to their rivals’ or lose customers to a competitor selling the same product more cheaply [1], which tends to keep prices lower and closer to the cost of production [1]. A monopoly, by contrast, faces little or no competition [1], giving it significant market power to set a higher price than a competitive market would allow [1], while also potentially restricting output and reducing consumer choice compared with a market with many competing suppliers [1].

6. (a) Average cost = £8,000 ÷ 200 = £40 [1]; average revenue = £11,000 ÷ 200 = £55 [1]; profit = £11,000 − £8,000 = £3,000 [2]. (b) If the firm increased output, it could spread its fixed costs over a larger number of units, lowering average cost per unit [2], which — provided average revenue does not fall by the same proportion — would allow profit per unit to rise even without changing the selling price [1].

7. (a) Net pay = £2,100 − (£220 + £160 + £105) = £2,100 − £485 = £1,615 [2]. (b) Gross pay is the total pay an employee earns before any deductions are taken [1]; net pay is what the employee actually receives after income tax, national insurance and pension contributions have been subtracted [1].

8. For its importance: the financial sector enables consumers to save safely and earn interest on money not spent immediately, and to borrow through loans, mortgages and credit to make purchases they could not otherwise afford upfront [1] [1]; it also enables producers to borrow to invest in new equipment, premises or expansion, which they could not fund from revenue alone [1]; and it transmits interest rate changes through the economy, directly affecting how much it costs consumers to borrow and how much they earn from saving, which in turn influences overall spending levels [1]. Against — limits to its importance: not every consumer or producer needs to use financial-sector products directly, since some purchases and investments are funded entirely from existing income or retained profit without any borrowing or saving involved [1]; and the financial sector can also be a source of instability — for example, if banks lend too freely or interest rate changes are mistimed, this can create economic problems rather than solve them [1]. Judgement: despite these limits, the financial sector’s role is best described as foundational rather than optional, since even transactions that do not directly involve borrowing or saving still rely on money and payment systems the financial sector provides [1], and the way it channels savings toward borrowers is what allows both consumer spending and business investment to happen at a scale well beyond what either could achieve using only their own existing funds [1].

A note on shift-versus-movement questions

Question 3 is built around the single most heavily tested distinction in this topic, and the key to a full-mark answer is naming the specific non-price cause responsible for a shift, rather than simply stating that demand “increased” or “decreased.” A price change always produces a movement along the existing curve; any other cause — income, tastes, the price of substitutes or complements, advertising, the number of buyers — shifts the curve itself to an entirely new position. Explicitly stating which of these applies, and in which direction, is what separates a diagram correctly drawn from a diagram correctly explained.

Where marks are usually lost

• Explaining a shift in a curve without naming the specific non-price cause responsible.
• Describing price elasticity as simply “high demand” or “low demand” rather than as a measure of responsiveness to a price change.
• Explaining monopoly and competitive markets as differing only in the number of firms, without addressing the effect on price, output or consumer choice.
• Confusing gross and net pay, or omitting one of the three standard deductions (income tax, national insurance, pension) when calculating net pay.
• Answering an “evaluate” question, such as question 8, at only an “explain” level, without reaching and justifying a final judgement.

Approaching markets and money questions

Before attempting any question involving a demand or supply curve, decide explicitly whether the cause described is a change in the good’s own price (a movement along the curve) or a change in anything else (a shift of the whole curve), since this single judgement underpins nearly every question in this topic. For calculation questions involving cost, revenue, profit or net pay, write out the relevant formula before substituting the numbers given, since method marks are available even where an arithmetic slip affects the final figure. For “evaluate” questions specifically, structure the answer with a clear case for, a clear case against, and a final judgement that explicitly weighs the two rather than simply presenting both sides and stopping — OCR mark schemes reward this evaluative structure directly, and its absence is one of the most common reasons a strong explain-level answer fails to reach the highest mark band.