Topic:

 Information  Gaps  
 
 Q1  

Based  on  the  above,  calculate:  

The  global  population  

  7B
Global  GDP  

  71 T

Q2  

Before  the  ‘5  a  day’  idea  was  introduced,  many  people  were  unaware  of  the  benefits  of  eating  fruit  
and  vegetables.  Using  this  example,  explain  the  diagram.    

The MPB curve shifted to the right. This

resulted in greater quantity supplied
and demanded in the economy. The
quantity shifted from Q1 to Q2 and the
price went from P1 to P2

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Topic:  Information  Gaps  
 
Q3  

Refined  sugar  is  the  new  ‘evil’  according  to  many  in  the  medical  profession.    Write  a  brief  paragraph  
and  draw  a  diagram  (similar  to  the  one  above)  to  explain  why  the  medical  professions  are  keen  to  
eliminate  the  information  gap  on  this  ‘evil’.  

Medical professions are keen to

MSC eliminate the information gap as this
will shift the MPB downwards. This
will create a welfare lost (triangle X).
Removing the information gap will
result in less people willing to
X
consume the “evil” product at any
given price.

MPB
MPB

Q4  

Complete  the  box  below  to  evaluate  a  policy  to  help  the  UK  avoid  an  obesity  ‘epidemic’.    

Explain  the  policy    

Increase indirect taxes on unhealthy products. This will result in
  a rise of the final price of the product, so less people will be
  willing and able to buy the product at a new given price
 
 
 
Advantages     The government would be able to increase tax revenue which
 
allows them to increase spending in public goods like healthcare
 
 
 
 
Disadvantages     The indirect taxes may result in a lower revenue from the
  business, they might lower cost of production by firing staff;
  therefore, unemployment rates in the country will increase
 
 
It  would  be  better  if       It would be better if the PED of the product would be inelastic,
  government to increase tax revenue and at the same time not
the
  risk potential increases in the unemployment rate in the
  economy
 
 

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