QUESTION 1
Answer both (a) and (b)
(a) Suppose for health reasons a tax is placed on cigarette consumption with the sole objective of
reducing the demand for cigarettes.
The tobacco industry objects to the tax and argues that, since the price elasticity of demand for
cigarettes is very low, the only impact of the tax will be an increase in government revenue.
Using demand and supply diagrams, present the tobacco industry’s argument and suggest other
measures the government could use to achieve its objective.
(15 marks)
(b) Imagine you are the new owner of a bus company that is struggling to survive. You have access
to the following information about the elasticities of demand for bus travel:
Income elasticity = -0.4
Own-price elasticity = -1.2
Cross-price elasticity with respect to rail fares = +2.1
Briefly explain the meaning of each of these terms and discuss how this information could
influence your business decisions.
(10 marks)
Total (25 marks)
QUESTION 2
Answer both (a) and (b)
(a) Why is it necessary to have competition legislation?
(15 marks)
(b) Discuss the main factors which prevent market forces from eroding the market power of
monopolies and oligopolies.
(10 marks)
Total (25 marks)
QUESTION 3
What is meant by the term ‘The gig economy’?
Analyse the main advantages and disadvantages to firms and workers of the gig economy.
(25 marks)
QUESTION 4
Monetary and fiscal policies are often used by governments to achieve their objectives. Drawing on your
knowledge of these policies, evaluate their effectiveness in achieving economic growth.
(25 marks)
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QUESTION 5
Critically evaluate Ireland’s membership of the European Union under each of the following headings:
(a) Foreign direct investment
(b) International trade
(c) Growth and immigration