Hkcee 2010 Econ Paper 2 Q2 New! May 2026

PS = area below price and above supply. [ PS_free = \frac12 \times (68 - 20) \times 16 = \frac12 \times 48 \times 16 = 384 ] Total surplus = ( 256 + 384 = 640 ).

Equilibrium price = $68 per tonne, quantity = 16 tonnes.

A price floor is effective (binding) only if set above the equilibrium price. Since equilibrium price is already $68, a minimum price at $68 is non-binding . The market will continue to clear at the equilibrium quantity of 16 tonnes. No surplus or shortage occurs. hkcee 2010 econ paper 2 q2

Careful – producers supply 20 units but only sell 10 at $80. The government may buy surplus, but here standard analysis assumes producers receive $80 for the 10 units sold. However, producer surplus also includes the area below price but above supply for all units supplied up to 20? No – PS is based on actual output sold unless government purchase is specified. Typical HKCEE approach: PS = revenues – variable cost for quantity sold.

Introduction: Why This Question Still Matters The HKCEE Economics examination, though replaced by the HKDSE, remains a goldmine of rigorous microeconomic problems. Among the most instructive is 2010 ECON Paper 2 Question 2 . This question is a classic case study of government market intervention —specifically a price floor (minimum price) in a hypothetical agricultural market. It tests students on demand and supply analysis, elasticity, consumer surplus, producer surplus, and deadweight loss. PS = area below price and above supply

( 450 - 384 = +66 ) (producers gain from price floor, but only if they sell the 10 units; if they produce 20, unsold stock reduces profit unless subsidized).

This extension is common in HKDSE Paper 2. | Item | Free Market | Price Floor at $80 | Change | |------|-------------|-------------------|--------| | Price | $68 | $80 | +$12 | | Quantity traded | 16 | 10 | -6 | | Consumer surplus | $256 | $100 | -$156 | | Producer surplus | $384 | $450 | +$66 | | Total surplus | $640 | $550 | -$90 (DWL) | Conclusion The hkcee 2010 econ paper 2 q2 is a masterpiece of microeconomic testing. It forces students to integrate algebra, geometry, and policy analysis. Mastery of this single question equips you to handle price controls, elasticity, and welfare economics in any exam. Practice drawing the graph step by step, label all surpluses, and always double-check which quantity determines actual market outcome. For HKDSE candidates, this question remains highly recommended revision material. Have questions or want to see a graphical illustration? Leave a comment below or email your economics tutor. Happy studying! A price floor is effective (binding) only if

DWL = loss in total surplus = (original total surplus 640) – (new CS+PS = 100+450=550) = 90.