OCR GCSE Economics: The labour market, wages, pay, money and interest rates (J205) – 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 topics 2.7 (the labour market) and 2.8 (the role of money and financial markets) of the OCR GCSE (9-1) Economics (J205) specification, Version 2.0 (June 2026), for first assessment in 2019. The specification has no tiers. All figures are invented.

Related pages: study guide, revision notes, the OCR GCSE Economics hub, the printable checklist and the free diagnostics.

Questions

1. Explain what is meant by a derived demand for labour, using an example. [3]

2. Explain how money, as a medium of exchange, makes trade easier than barter. [3]

3. The table shows the market for warehouse workers in Town B. All figures are illustrative.

Wage per hour	Workers wanted	Workers available
£9	70	20
£10	60	35
£11	50	50
£12	40	65
£13	30	80

(a) State the equilibrium wage and the number of workers employed. [2] (b) Describe the position in the market at a wage of £13. [3] (c) A new online retailer opens and wants 25 more workers at every wage. Find the new equilibrium wage and number employed. [3]

4. A worker in Country A has gross pay of £27,600 a year. Illustrative rules: income tax is 20% of gross pay above £12,000; national insurance is 8% of gross pay above £9,000; pension contributions are 3% of gross pay. Calculate the worker’s net pay for the year. [4]

5. A worker’s gross pay is £2,000 in a month. Income tax is £236, national insurance is £142 and net pay is £1,532.

(a) Calculate the pension contribution. [2] (b) Express it as a percentage of gross pay. [1]

6. Explain two factors that could increase the supply of labour to a particular occupation. [4]

7. Distinguish between the roles of a bank, a building society and an insurance company. [3]

8. A saver has £6,500. Interest rates are illustrative.

(a) Calculate the interest earned in one year at 2% and at 3.5%. [2] (b) Calculate the difference between the two. [1] (c) Interest is added to the account each year. Calculate the balance after 2 years at 2% and at 3.5%, and the difference between them. [3]

9. A household has an interest-only loan of £25,000.

(a) Calculate the annual interest at 5% and at 6.5%. [2] (b) Calculate the extra cost each month when the rate rises from 5% to 6.5%. [2] (c) Explain how this change could affect the household’s spending. [2]

10. A small firm can buy a machine for £60,000 that adds £3,900 a year to profit before any loan costs.

(a) Calculate the annual return on the machine as a percentage. [2] (b) Calculate the profit left each year after loan interest if the firm borrows the full £60,000 at 5.5%, and at 7.5%. [3] (c) Explain how a change in the interest rate affects investment. [2]

11. Evaluate the importance of the financial sector for consumers, producers and government. [8]

12. A baker works 35 hours a week. Illustrative rules: income tax is 20% of gross pay above £200 a week; national insurance is 8% above £150 a week; pension contributions are 5% of gross pay.

(a) Calculate weekly net pay at a wage of £11 an hour and at £12 an hour. [5] (b) Find the rise in net pay as a percentage of the rise in gross pay. [2] (c) Explain why net pay rises by less than gross pay. [2]

Answers

1. A derived demand is a demand that comes from demand for something else [1]. Firms hire workers only to make goods or services that customers want. For example, a bakery hires bakers because customers want bread [1]. If demand for bread falls, the bakery needs fewer bakers, so demand for labour falls [1]. [3] Examiner insight: A definition tied to an example and a consequence is stronger than a definition alone.

2. Money is generally accepted in payment [1]. In barter, each trader needs a partner who holds the wanted item and also wants the trader’s own goods (a double coincidence of wants), which is slow [1]. With money a seller can sell to anyone and spend the money on anything, so trade is quicker and people can specialise [1]. [3] Examiner insight: Show the problem money removes. Saying only that money is used to buy things does not explain why it beats barter.

3. (a) Workers wanted equal workers available at £11, where both are 50 [1]. Equilibrium wage £11 with 50 workers employed [1]. [2] (b) At £13, 30 workers are wanted but 80 are available [1]. There is a surplus (excess supply) of 50 workers [1]. Unemployment among them puts downward pressure on the wage until it falls towards £11 [1]. [3] (c) New demand is 95, 85, 75, 65 and 55 at £9 to £13 [1]. At £12 it is 65 and supply is 65 [1]. New equilibrium wage £12 with 65 workers employed [1]. [3] Examiner insight: Quote figures from the table, and add the extra demand to every row before looking for the new equilibrium.

4. Income tax = (27,600 - 12,000) × 0.20 = £3,120 [1]. National insurance = (27,600 - 9,000) × 0.08 = £1,488 [1]. Pension = 27,600 × 0.03 = £828 [1]. Deductions = 3,120 + 1,488 + 828 = £5,436, so net pay = 27,600 - 5,436 = £22,164 [1]. [4] Examiner insight: Show each deduction on its own line. Where a rate applies only above an allowance, answers that apply it to all gross pay give a different figure from the one asked for.

5. (a) Pension = gross - tax - NI - net [1] = 2,000 - 236 - 142 - 1,532 = £90 [1]. [2] (b) 90 / 2,000 × 100 = 4.5% [1]. [1] Examiner insight: Working backwards uses the same relationship, so write net pay = gross - deductions first and rearrange it.

6. Any two developed factors, each worth 2. For example: More people qualify or train for the job, for instance a new training course opens [1], so more workers are able to offer their labour at each wage and the supply curve shifts right [1]. Pay in similar jobs falls [1], so some workers move to this occupation, which increases its supply [1]. [4] Examiner insight: Finish each factor with the direction the supply curve moves.

7. A bank takes deposits, makes loans and provides payment services [1]. A building society is owned by its members and mainly offers savings accounts and mortgages for buying property [1]. An insurance company collects premiums from many customers and pays out to those who suffer a loss, so risk is shared [1]. [3] Examiner insight: Say what each institution does; names alone do not distinguish them.

8. (a) At 2%: 6,500 × 0.02 = £130 [1]. At 3.5%: 6,500 × 0.035 = £227.50 [1]. [2] (b) 227.50 - 130 = £97.50 [1]. [1] (c) At 2%: 6,500 × 1.02² = £6,762.60 [1]. At 3.5%: 6,500 × 1.035² = £6,962.96 [1]. Difference = £200.36 [1]. [3] Examiner insight: Label which rate each figure belongs to, and check that the balance is above the amount saved plus one year’s interest.

9. (a) At 5%: 25,000 × 0.05 = £1,250 [1]. At 6.5%: 25,000 × 0.065 = £1,625 [1]. [2] (b) Extra per year = 1,625 - 1,250 = £375 [1]. Extra per month = 375 / 12 = £31.25 [1]. [2] (c) The household pays £31.25 more each month, leaving less income to spend on other goods [1]. Its spending on other items is likely to fall, and it may borrow less in future because borrowing costs more [1]. [2] Examiner insight: Convert to a monthly figure only after finding the annual one, and state the unit. An effect on spending needs a link from the extra cost to what the household can afford.

10. (a) Return = 3,900 / 60,000 × 100 [1] = 6.5% [1]. [2] (b) Interest at 5.5% = 60,000 × 0.055 = £3,300, so profit left = 3,900 - 3,300 = £600 [1]. Interest at 7.5% = 60,000 × 0.075 = £4,500 [1], so profit left = 3,900 - 4,500 = a loss of £600 [1]. [3] (c) When the rate goes up, loans cost more, so fewer projects earn a return above the cost of the loan [1]. Investment falls when rates rise and rises when they fall [1]. [2] Examiner insight: Keep the sign when a result is negative and describe it as a loss. Compare the return with the interest rate to reach a decision.

11. For consumers: the sector gives a safe place to save, loans and mortgages for large purchases, and insurance against loss [1]. A limit is that borrowing has to be repaid with interest, and poor decisions lead to unmanageable debt [1]. For producers: loans pay for machines and premises, and payment services let firms trade [1]. A limit is that loans must be repaid even if sales fall, and some firms are refused credit [1]. For government: the sector lets it borrow and works as a route for interest rate policy and for tax and benefit payments [1]. A limit is that large borrowing leads to later repayments, and a failing institution can harm the whole economy [1]. Judgement: the sector is very important because households, firms and government all depend on it for payments, saving and borrowing, but the benefit depends on institutions being well run and on people borrowing within their means [2]. [8] Examiner insight: Give each group a benefit and a limit, then a judgement that says which matters most and why.

12. (a) At £11: gross = 35 × 11 = £385 [1]. Tax = (385 - 200) × 0.20 = £37.00, NI = (385 - 150) × 0.08 = £18.80, pension = 385 × 0.05 = £19.25, so net = 385 - 75.05 = £309.95 [1]. At £12: gross = 35 × 12 = £420 [1]. Tax = (420 - 200) × 0.20 = £44.00, NI = (420 - 150) × 0.08 = £21.60, pension = 420 × 0.05 = £21.00 [1], so net = 420 - 86.60 = £333.40 [1]. [5] (b) Rise in net = 333.40 - 309.95 = £23.45; rise in gross = 420 - 385 = £35 [1]. 23.45 / 35 × 100 = 67% [1]. [2] (c) Part of every extra pound of gross pay goes in extra income tax, national insurance and pension contributions [1]. Only what is left after these deductions is added to net pay [1]. [2] Examiner insight: Compare net with net and gross with gross, and set out the working for each wage on separate lines.

Where marks are usually lost

• Leaving out one of the three deductions, or subtracting a rate from gross pay when it should apply above an allowance.
• Mixing up gross and net pay in a comparison.
• Moving a whole curve when only the wage has changed.
• Quoting an equilibrium without both the wage and the number employed.
• Giving a factor that shifts supply without saying which way the curve moves.
• Forgetting to convert annual interest to a monthly amount.
• Saying a rate rise helps everyone; savers gain, borrowers lose.
• Describing the financial sector without a limit or a judgement when asked to evaluate.

Next steps

• Re-read the revision notes and the study guide.
• Go to the OCR GCSE Economics hub and tick off the checklist.
• Take the free 10-minute diagnostics.
• Book a free trial class.

Official syllabus

OCR, Cambridge OCR Level 1/Level 2 GCSE (9-1) in Economics (J205), Version 2.0 (June 2026), first assessment 2019: topics 2.7 and 2.8.