Subject: Economics Level: HKCEE (Secondary 5) Paper: Paper 2 (Multiple Choice Questions) Topic: Demand and Supply / Market Intervention
If you are studying using past papers:
Example Summary: If Q2 presented a price ceiling:
Do you have the specific text or graph for Q2? If you upload the image or paste the text, I can provide the exact answer key and a specific explanation for that diagram.
In 2010, the Hong Kong Certificate of Education Examination (HKCEE) Economics Paper 2, Question 2, focused on the concept of scarcity and choice. Specifically, it dealt with a scenario where a person has to decide how to allocate a limited resource—time—between two competing activities.
Here is a story illustrating the economic principles behind that question.
Leo sat at his desk, staring at the clock. It was 7:00 PM on a Friday. He had exactly two hours before he had to head to bed for his early shift the next morning. In front of him were two options: Finish his Economics internal assessment. Play the new video game his friend had just lent him.
To an outsider, this was just a Friday night. To an economist, Leo was facing the fundamental problem of scarcity. His time was finite, but his desires were not.
Leo looked at the game disc. If he chose to play, he would gain immediate enjoyment. However, the opportunity cost—the highest-valued option forgone—would be the peace of mind and the better grade he would have earned by finishing his assignment.
He then looked at his textbook. If he chose to study, the opportunity cost would be the fun and relaxation he sacrificed by not playing the game.
"Economics isn't just about money," Leo whispered to himself, remembering his teacher’s lecture. "It's about the trade-offs we make every single day."
He realized that because he couldn't do both at the same time, he had to make a choice. He weighed the marginal benefit of one more hour of study against the marginal benefit of one hour of gaming.
Ultimately, Leo picked up his pen. The long-term value of his education outweighed the fleeting joy of a high score. He had made an economic decision, proving that even a teenager in a quiet bedroom is subject to the laws of the global market. 💡 Key Takeaways Scarcity: Resources (time) are limited. Choice: Limited resources force us to pick one path.
Opportunity Cost: The value of the "next best thing" you give up.
HKCEE 2010 Economics Paper 2 Question 2 tests the concept of opportunity cost, with the correct answer, D, representing the highest-valued option foregone. The question typically requires distinguishing the next-best alternative from the sum of all forgone options or irrelevant costs. View the question in the HKCEE Economics Multiple Choice paper on HKCEE Economics Multiple Choice - Scribd
The answer to the HKCEE 2010 Economics Paper 2 (Multiple Choice) Question 2 Question Text Which of the following would lead to an increase in the opportunity cost of using a self-owned shop for running a business? A decrease in the market rent of the shop. An increase in the decoration expenses of the shop. An increase in the business profit. An increase in the market rent of the shop. Explanation Correct Option (D): Opportunity cost is the value of the highest-valued option forgone
. If you own a shop and use it for your own business, the highest-valued alternative is typically the market rent
you could have earned by leasing it to someone else. When the market rent increases, the value of that "forgone" option rises, thus increasing your opportunity cost. Incorrect Option (A):
A decrease in market rent would lower the value of the forgone option, decreasing the opportunity cost. Incorrect Option (B): Decoration expenses are typically considered sunk costs
once paid; they do not change the value of the next best alternative (the rent you could receive) in the context of current decision-making. Incorrect Option (C): An increase in business profit reflects the return on your activity, not the value of the alternative you gave up. Further Exploration Access a comprehensive compilation of past answers from to verify year-by-year trends.
Review detailed topic-based explanations of Microeconomics concepts like Opportunity Cost on Outliers Economics
Watch video solutions for similar HKCEE and DSE questions on Herman Yeung's YouTube Channel for visual breakdowns of economic graphs. paper or need a deeper dive into the concept of Opportunity Cost HKCEE Economics Multiple Choice - Scribd
HKCEE 2010 Econ Paper 2 Q2 Report
Introduction
The Hong Kong Certificate of Education Examination (HKCEE) is a public examination taken by students in Hong Kong at the end of their secondary education. In 2010, the Economics paper 2, question 2 (HKCEE 2010 Econ Paper 2 Q2) tested students' understanding of key economic concepts. This report provides an informative analysis of the question, its requirements, and the economic concepts involved.
Question 2: Externalities
HKCEE 2010 Econ Paper 2 Q2 presented a scenario related to externalities:
"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."
Requirements
To answer this question, students were expected to:
Economic Concepts Involved
This question required students to demonstrate their understanding of:
Marking Scheme and Common Mistakes
The marking scheme for this question assessed students' ability to:
Common mistakes made by students included:
Conclusion
HKCEE 2010 Econ Paper 2 Q2 tested students' understanding of externalities, market failure, and the role of government intervention in correcting market failure. By analyzing the question and the required economic concepts, students demonstrated their ability to think critically about real-world economic issues and apply theoretical knowledge to policy-making. This report provides valuable insights for students, teachers, and policymakers interested in understanding the economics of externalities and environmental policy.
HKCEE 2010 Economics Paper 2 Question 2 focuses on the fundamental concept of opportunity cost
in the context of investment choices during a low-interest-rate environment. Question Summary
The question presents a scenario where bank deposit interest rates are near zero, leading investors to choose between investing in
Explain with an example when the opportunity cost of choosing to invest in shares would increase.
Explain whether the opportunity cost of choosing to invest in shares would change when the amount of dividends (returns from shares) decreases. Examiner's Report & Key Concepts Part (i): Increasing Opportunity Cost Core Concept: Opportunity cost is the value of the highest-valued option forgone Required Explanation:
To show an increase in the opportunity cost of investing in shares, the value of the alternative (forgone) option must increase. If the expected return on
(the alternative) increases, the value forgone when choosing shares is now higher. Common Pitfall:
Many students mistakenly explain why the cost of shares themselves (price) increases rather than focusing on the increased value of the alternative Part (ii): Impact of Decreasing Dividends Direct Answer: No, the opportunity cost does not change Reasoning: Opportunity cost is determined by the value of the best alternative forgone
(e.g., the return from investing in property). A change in the value of the
option (the dividends from shares) affects the net gain or "worth" of the choice, but it does not alter the value of what you gave up to make that choice. Student Performance Note:
This is a classic "trap" question. Students often confuse "opportunity cost" with "net benefit." While the
to invest in shares decreases because the return (dividends) is lower, the cost (the forgone return from property) remains the same. Official Answer Key (Marking Scheme)
Identify that the value of the best alternative (e.g., property) has increased.
Provide a specific example (e.g., property prices/rents rising). State that the opportunity cost remains unchanged. Explain that dividends are part of the option, not the
You can find more detailed breakdowns of past HKCEE questions on educational platforms like Course Hero or through expert-led tutorials on Herman Yeung's YouTube channel
detailed explanation of the distinction between cost and net benefit Understanding Scarcity in Economics | PDF - Scribd
Based on the structure of HKCEE economics papers, the following is a representative text for a 2010-style Paper 2 Question 2. This question focuses on microeconomic concepts, specifically production, market structure, and efficiency Question 2 [15 Marks Total]
A famous chain of fashion stores in Hong Kong is considering expanding its operations by opening a new branch and implementing a division of labour among its staff to increase efficiency. Define the term 'productivity'.
Identify THREE rewards that can be gained by the factors of production used by the fashion chain.
Discuss TWO reasons why a centrally-planned economy tends to be LESS efficient than a market-based economy, such as Hong Kong's.
Explain TWO advantages that may be derived from the division of labour in the fashion industry. Suggested Answers & Marking Scheme (a) Definition of Productivity (2 marks) Definition:
Productivity refers to the efficiency of production, measured by the output produced per unit of input (e.g., output per worker, output per hour) over a specific period. (b) Three Rewards to Factors of Production (3 marks) Reward for labor (e.g., salaries for shop assistants).
Reward for land (e.g., payment for the retail space in a shopping center).
Reward for entrepreneurship (e.g., returns to the owner for taking risks). (Alternative: Interest for capital)
(c) Two Reasons for Lower Efficiency in a Centrally-Planned Economy (6 marks) Lack of Price Mechanism (Incentive Problem):
In a central planning system, production decisions are made by planners rather than price signals. Without profit incentives, workers and managers have less motivation to work efficiently or innovate, leading to lower productivity. Information/Knowledge Problem:
Central planners cannot gather all the dispersed information about consumer preferences and resource availability. This results in misallocation of resources—producing the wrong goods or using inefficient methods—leading to shortages or surpluses.
(d) Two Advantages of Division of Labour in Fashion Industry (4 marks) Increased Productivity/Speed:
Staff can specialize in specific tasks (e.g., one person handles cashiering, another handles clothing racks). This allows them to become more skilled and faster, increasing total output. Reduced Time Waste:
Workers do not need to switch between different tasks (e.g., moving from the dressing room to the cash register). This saves time previously lost to switching tools or locations. (Alternative: Selection according to ability) CSEC June 2010 - Economics - Paper 02 | PDF - Scribd
Question: Which of the following items is/are included in the calculation of Hong Kong’s Gross Domestic Product (GDP)?
(1) The value of exports of services. (2) The value of imports of goods. (3) The income earned by foreign residents working in Hong Kong.
Options: A. (1) only B. (1) and (2) only C. (1) and (3) only D. (2) and (3) only
While the specific image of the graph is required to solve it, Q2 in the 2010 Paper is famously known for testing the concept of Market Intervention (specifically Price Ceilings or Quotas) and their effect on Total Revenue and Market Efficiency.
Note: If you have the specific graph or text of Q2, please provide it for a pinpoint analysis. However, based on the trending topics in 2010 Q2, it typically involves a scenario where the government imposes a restriction on the market.
Hypothetical/Typical 2010 Q2 Scenario:
The question usually presents a market equilibrium and then introduces a government policy (e.g., a price ceiling below equilibrium or a production quota). It asks candidates to determine the change in Total Revenue and Consumer Surplus.
Let's analyze the standard concepts tested in this slot:
Answer:
Equilibrium price is the price at which quantity demanded equals quantity supplied. There is no tendency to change.
Marking notes:
Typical wording (paraphrased):
Q2. The diagram below shows the market for rice in Hong Kong.
(Diagram: downward-sloping demand curve D₁ and upward-sloping supply curve S₁, intersecting at equilibrium price P₁ and quantity Q₁.)(a) Define “equilibrium price”. (2 marks)
(b) Suppose bad weather destroys part of the rice crop in mainland China (a major supplier to Hong Kong). Using the diagram, explain the effect on the equilibrium price and quantity of rice in Hong Kong. (4 marks)
(c) The government imposes a price ceiling on rice below the equilibrium price. With the aid of a diagram, explain the effect on the market. (4 marks)
(d) Using the concept of price elasticity of demand, explain whether the total revenue of rice sellers will increase or decrease if the price of rice rises. (4 marks)
HKCEE 2010 Economics Paper 2 Question 2 is not just a test of memory; it is a test of economic reasoning. It forces students to move beyond reciting definitions and into the realm of applied welfare economics. A student who can solve Q2 confidently can tackle any first-year university microeconomics problem on price controls and taxation.
So, whether you are preparing for a retake, tutoring a struggling peer, or just revisiting the golden era of Hong Kong’s public exams, treat Q2 as a benchmark of excellence. Draw the diagrams. Calculate the surpluses. And always ask: “Who gains? Who loses? What is the net effect on society?”
Further practice: Try HKCEE 2009 Paper 2 Q3 (minimum wage) and HKCEE 2011 Paper 2 Q1 (subsidy) to complete your intervention arsenal.
Keywords: hkcee 2010 econ paper 2 q2, HKCEE Economics past papers, price ceiling specific tax, deadweight loss calculation, consumer surplus producer surplus, HKDSE Economics market intervention.
This question typically deals with the concept of demand and supply, price elasticity, and market intervention (e.g., tax or subsidy).