Hkcee 2010 Econ Paper 2 Q2 Link

The HKCEE 2010 Economics Paper 2, Question 2 focuses on the core concept of opportunity cost in the context of investment choices. Answer Key

"With the increasing use of plastic bags, a government is considering introducing a tax on their use. Using examples, explain how a tax on plastic bags can help to internalize the external costs associated with their use." hkcee 2010 econ paper 2 q2

(c) Price ceiling below equilibrium

Definition:
A price ceiling is a maximum legal price set by government. The HKCEE 2010 Economics Paper 2, Question 2

Solution: Set ( Q_d = Q_s ). From demand: ( P = 100 - 2Q ). From supply: ( P = 20 + 3Q ). [ 100 - 2Q = 20 + 3Q ] [ 100 - 20 = 3Q + 2Q ] [ 80 = 5Q \implies Q_e = 16 \text tonnes ] Substitute into demand: ( P_e = 100 - 2(16) = 100 - 32 = 68 ). CS increases if demand is inelastic or elastic

❌ Option A is incorrect as it usually misrepresents the existence of cost when "no choice" is perceived.

• CS increases if demand is inelastic or elastic? For typical HKCEE answer: CS may increase or decrease? Actually, in standard analysis, with a binding price ceiling, CS usually increases (consumers pay lower price), but some consumers cannot buy (shortage). In this numeric example, CS rises compared to equilibrium if we assume rationing is efficient. However, HKCEE expected: CS could increase or decrease depending on rationing – but in the simple diagram, CS unambiguously rises if we assume no rationing cost.
• PS definitely decreases – fewer units sold + lower price.

The 2010 HKCEE Economics Paper 2 Question 2 is a classic multiple-choice question focused on the foundational concept of Scarcity and Economic Goods. In the final years of the HKCEE (1978–2011) , examiners frequently used these early questions to test whether students could distinguish between "economic goods" and "free goods" based on the presence of opportunity cost. Question Overview