OxfordAQA International GCSE Economics: Supply-side policies and externalities (9214) – 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 3.2.3.3 (Supply-side policies) and 3.2.3.4 (Policies to correct positive and negative externalities) of the OxfordAQA International GCSE Economics (9214) specification, first teaching September 2023, first examined May/June 2025. The course is not tiered. All countries, firms and figures are invented. Learn the content first from the study guide and revision notes. See also the course hub, the checklist and the free diagnostics.

Questions

1. What is meant by a supply-side policy? [2]

2. In Country A a worker earns 2,500 a month before tax. The income tax rate falls from 28% to 24%. Calculate the percentage increase in the worker’s take-home pay. Give your answer to 1 decimal place. [3]

3. Explain how a cut in taxes on business profits could lead to higher economic growth. [4]

4. Country B pays for 150 workers to be trained, at 2,000 each. Output per worker rises from 40 to 46 units a day.

(a) Calculate the total cost of the training. [1] (b) By what percentage has output per worker risen? [2] (c) Each worker works 220 days a year. Calculate the extra output per trained worker each year. [2]

5. A government plans to privatise a state-owned rail company. Explain one advantage and one disadvantage of this policy. [4]

6. City C removes the limit on the number of taxi licences. Explain how this could lower fares, and suggest one problem it could cause. [6]

7. In a market for fertiliser, demand is Qd = 120 - 4P and supply is Qs = 4P - 40, with price P per tonne and quantity Q in tonnes. Each tonne causes 6 of external cost through river pollution. The government taxes producers 6 per tonne.

(a) Work out the price and quantity before any tax. [2] (b) Find the price and quantity once the tax is in place. [3] (c) Calculate the tax revenue. [1] (d) State how much more buyers pay and how much less sellers receive per tonne. [2]

8. Cycling to work reduces traffic and gives an external benefit of 4 per bicycle. Demand is Qd = 150 - 5P and supply is Qs = 5P - 50, with Q the number of bicycles bought each month. The government gives sellers a subsidy of 4 per bicycle.

(a) Find the market price and quantity with no subsidy. [2] (b) Find what buyers pay, and the quantity bought, once the subsidy is paid. [2] (c) Calculate the cost of the subsidy. [1] (d) Explain why the subsidy moves the market closer to the best level of output for society. [2]

9. Explain how a legal limit on factory emissions can correct a negative externality, and give one drawback. [4]

10. Country B has high unemployment because many workers lack the skills firms need. Evaluate whether investment in education and training or a cut in income tax would be the better supply-side policy. [9]

11. A government puts a tax on a good that causes pollution. Demand for the good is inelastic, with a price elasticity of demand of -0.4. The tax raises the price by 10%. Evaluate how effective the tax is likely to be in reducing the externality. [6]

Answers

1. A policy that aims to raise the economy’s productive capacity [1] by improving efficiency, skills, incentives or competition, shifting long-run supply to the right [1]. [2] Examiner insight: A definition earns credit for saying what the policy changes, which is capacity or costs, not just for naming an example.

2. Take-home before: 2,500 × 0.72 = 1,800 [1]. Take-home after: 2,500 × 0.76 = 1,900 [1]. Percentage rise: 100 / 1,800 × 100 = 5.6% [1]. [3] Examiner insight: Divide by the original take-home pay, not the new one, and show both figures so the examiner can see your method.

3. Firms keep more of each unit of profit [1]. This makes it worth spending on machinery or new premises [1]. More capital per worker raises productivity and capacity [1]. Higher potential output allows output, and so growth, to rise [1]. [4] Examiner insight: Spell out every step. “Firms invest more so growth rises” jumps over two of them.

4. (a) 150 × 2,000 = 300,000 [1]. (b) (46 - 40) / 40 × 100 [1] = 15% [1]. (c) Extra units per day = 6 [1]. 6 × 220 = 1,320 units [1]. [5] Examiner insight: Percentage change is on the starting value, 40. Giving the answer with its unit helps in part (c).

5. Advantage: private owners seek profit, so they cut waste and costs [1], which may lead to lower prices or better service [1]. Disadvantage: the firm may become a private monopoly [1] and raise fares, or cut unprofitable lines and jobs [1]. [4] Examiner insight: Each side needs a developed point. A bare “efficiency” or “job losses” with no explanation earns little.

6. Without the limit more taxi firms and drivers can enter [1]. They compete for passengers [1], so fares fall [1]. Problem: more taxis can cause congestion or lower driver incomes [1], and with fewer rules, safety or vehicle standards may slip [1], so some passengers may be worse off [1]. [6] Examiner insight: Use the context. Answers that discuss taxis, fares and licences earn more than a general account of deregulation.

7. (a) 120 - 4P = 4P - 40 gives 8P = 160 [1]. P = 20, Q = 40 [1]. (b) The tax makes supply Qs = 4(P - 6) - 40 = 4P - 64 [1]. 120 - 4P = 4P - 64 gives 8P = 184 [1]. P = 23, Q = 28 [1]. (c) 6 × 28 = 168 [1]. (d) Buyers pay 23 - 20 = 3 more [1]. Sellers receive 23 - 6 = 17, which is 3 less than 20 [1]. [8] Examiner insight: Sellers receive the new price minus the tax. A common slip is to say sellers receive 23.

8. (a) 150 - 5P = 5P - 50 gives 10P = 200 [1]. P = 20, Q = 50 [1]. (b) With the subsidy, supply is 5(P + 4) - 50 = 5P - 30 [1]. 150 - 5P = 5P - 30 gives P = 18, Q = 60 [1]. (c) 4 × 60 = 240 [1]. (d) The good has an external benefit, so the market makes too few bicycles [1]. The subsidy lowers cost, so more are bought and output rises towards the level that counts the benefit to others [1]. [7] Examiner insight: A subsidy shifts supply, not demand. Say “the supply curve shifts right” with the reason.

9. A limit stops firms emitting above a set level [1], so output or pollution falls towards the socially best level [1]. Drawback: inspectors are needed to check and punish breaches [1], and compliance may raise costs, which can mean job losses or higher prices [1]. [4] Examiner insight: A drawback must be developed. “It is expensive” is stronger as “monitoring needs inspectors, which costs the government”.

10. Training matches the cause: unemployment is due to a skills gap [1]. Better skills raise productivity and make workers employable [1], which cuts structural unemployment and raises output [1]. An income tax cut raises take-home pay, which may bring more people into work [1], but it does little for people who lack the skills firms need [1]. Training is costly and slow [1], and a tax cut loses government revenue [1]. A tax cut tends to help high earners more, which may widen inequality [1]. Judgement: training is better for this problem because it tackles the cause, though it takes years, so a tax cut or other measure might be needed alongside [1]. [9] Examiner insight: A strong answer ties the choice to the context, here a skills gap, and ends with a clear judgement and a reason.

11. The tax raises the price by 10%, so quantity falls by -0.4 × 10 = -4% [1]. That is a small fall, so the pollution falls by little [1]. Demand is inelastic, so buyers keep buying and tax revenue is high [1], which could fund clean-up [1]. At an elasticity of -1.5 the same rise would cut quantity by 1.5 × 10 = 15% [1]. Judgement: the tax raises money but does little to cut pollution, so a limit may be needed alongside [1]. [6] Examiner insight: Use the figure given. Calculating the 4% fall shows why the tax may be weak.

Where marks are usually lost

• Using the new figure, not the starting one, as the divisor in a percentage change.
• Saying sellers receive the price buyers pay after a tax.
• Shifting demand instead of supply when showing a tax or subsidy.
• Naming a policy without a chain to the objective.
• Giving only one side in an “evaluate” question.
• Ignoring the time lag of training and education.
• Not using the context in the question.
• Calling any harm an externality when it falls on the buyer or seller.

Next steps

• Review the revision notes and the study guide.
• Open the course hub and checklist.
• Try all free 10-minute diagnostics.
• Book a free trial class.

Official syllabus

OxfordAQA International GCSE Economics (9214), published by OxfordAQA, first teaching September 2023, first examined May/June 2025. Sections 3.2.3.3 and 3.2.3.4.