1. Plan I : Increase the tunnel toll of the CHT 1
1. During rush hour, there is traffic congestion in the Cross Harbour Tunnel (CHT). The government proposes the following plans to reduce this problem. 2
Plan I : Increase the tunnel toll of the CHT
Plan II: Build a new tunnel which links North Point with Kowloon City 3
Use separate diagrams to show how each plan could help reduce the traffic congestion in the CHT and how each of them would affect the total sales revenue of the CHT.
(8 marks)

2. Plan I : Increase the tunnel toll of the CHT 1
1. During rush hour, there is traffic congestion in the Cross Harbour Tunnel (CHT). The government proposes the following plans to reduce this problem. 2
Plan I : Increase the tunnel toll of the CHT
Plan II: Build a new tunnel which links North Point with Kowloon City
What does “traffic congestion” mean? 1 3
Use separate diagrams to show how each plan could help reduce the traffic congestion in the CHT and how each of them would affect the total sales revenue of the CHT (8 marks)

3. Plan I : Increase the tunnel toll of the CHT 1
1. During rush hour, there is traffic congestion in the Cross Harbour Tunnel (CHT). The government proposes the following plans to reduce this problem. 2
Plan I : Increase the tunnel toll of the CHT
Plan II: Build a new tunnel which links North Point with Kowloon City
What will happen to the quantity demanded of CHT service? 2 3
Use separate diagrams to show how each plan could help reduce the traffic congestion in the CHT and how each of them would affect the total sales revenue of the CHT (8 marks)

4. Plan I : Increase the tunnel toll of the CHT 1
1. During rush hour, there is traffic congestion in the Cross Harbour Tunnel (CHT). The government proposes the following plans to reduce this problem. 2
Plan I : Increase the tunnel toll of the CHT
Plan II: Build a new tunnel which links North Point with Kowloon City
What will happen to the demand for CHT service? 3 3
Use separate diagrams to show how each plan could help reduce the traffic congestion in the CHT and how each of them would affect the total sales revenue of the CHT (8 marks)

5. The congestion of CHT can be described as an e_________d_________ at the given toll set b_________ the equilibrium price (1 mark) 1 Qs P Q S D

6. What does “traffic congestion” mean?
The congestion of CHT can be described as an e_________d_________ at the given toll set b_________ the equilibrium price (1 mark) 1
What does “traffic congestion” mean? Qs P Q S D 1

7. The congestion of CHT can be described as an e_________d_________ at the given toll set b_________ the equilibrium price (1 mark) 1
xcess
emand
elow Qs P Q S D P1
excess
demand Qd

8. Plan I: Increase the tunnel toll in the CHT2
The increase in the toll (from P1 to P2) will r___________ the excess demand (lower quantity demanded from Q1 to Q2). Q1
excess demand
at P1 P Q D S Q0 P1

9. Plan I: Increase the tunnel toll in the CHT2
The increase in the toll (from P1 to P2) will r___________ the excess demand (lower quantity demanded from Q1 to Q2). Q1
excess demand
at P1 P Q D S Q0 P1
What will happen to the quantity demanded of CHT service? 2

10. Plan I: Increase the tunnel toll in the CHT2
The increase in the toll (from P1 to P2) will r___________ the excess demand (lower quantity demanded from Q1 to Q2).
educe Q1
excess demand
at P1 P Q D S Q0 P1
excess demand
at P2 P2 Q2

11. Plan I: Increase the tunnel toll in the CHT2
Yet it does not affect the quantity transacted (Q0) and, hence, the total sales revenue will i_________ as shown by the shaded area (1 mark) P2 Q2
excess demand
at P2 Q1
at P1 P Q D S Q0 P1

12. Plan I: Increase the tunnel toll in the CHT2
Yet it does not affect the quantity transacted (Q0) and, hence, the total sales revenue will i_________ as shown by the shaded area (1 mark) P2 Q2
excess demand
at P2 Q1
at P1 P Q D S Q0 P1
What will happen to the quantity demanded of CHT service? 2

13. Plan I: Increase the tunnel toll in the CHT2
Yet it does not affect the quantity transacted (Q0) and, hence, the total sales revenue will i_________ as shown by the shaded area (1 mark)
ncrease P2 Q2
excess demand
at P2 Q1
at P1 P Q D S Q0 P1
Gain in revenue Q2

14. Plan II: Build a new tunnel which links North Point with Kowloon City3
As a new s____________ is available, the demand for the CHT will d_________. Excess demand will thus decrease. Q1
excess
demand given D1 P Q D1 S Q0 P1

15. Plan II: Build a new tunnel which links North Point with Kowloon City3
As a new s____________ is available, the demand for the CHT will d_________. Excess demand will thus decrease.
What will happen to the demand for CHT service? 3 Q1
excess
demand given D1 P Q D1 S Q0 P1

16. Plan II: Build a new tunnel which links North Point with Kowloon City3
As a new s____________ is available, the demand for the CHT will d_________. Excess demand will thus decrease.
ubstitute
ecrease Q1
excess
demand given D1 P Q D1 S Q0 P1
excess
demand
given D2 D2 Q2

17. Plan II: Build a new tunnel which links North Point with Kowloon City3
Since the quantity transacted remains unchanged, the total sales revenue of the CHT will be u____________. (1 mark) Q1
excess
demand given D1 P Q D1 S Q0 P1 D2
demand
given D2 Q2

18. Plan II: Build a new tunnel which links North Point with Kowloon City3
Since the quantity transacted remains unchanged, the total sales revenue of the CHT will be u____________. (1 mark)
What will happen to the demand for CHT service? 3 Q1
excess
demand given D1 P Q D1 S Q0 P1 D2
demand
given D2 Q2

19. Revenue remains unchanged
Plan II: Build a new tunnel which links North Point with Kowloon City 3
Since the quantity transacted remains unchanged, the total sales revenue of the CHT will be u____________. (1 mark)
nchanged Q1
excess
demand given D1 P Q D1 S Q0 P1 D2
demand
given D2 Q2
Revenue
remains
unchanged

20. 2. The economic recession in Hong Kong during the period of 1998 to 2000 caused a great decrease in the number of taxi passengers.
On the other hand, the taxi fare is fixed by the government. Empty taxis could be found quite often. 1
With the aid of a diagram, explain what will happen to the total sales revenue of taxi services if there is a significant economic recovery (7 marks) 2

21. 2. The economic recession in Hong Kong during the period of 1998 to 2000 caused a great decrease in the number of taxi passengers.
On the other hand, the taxi fare is fixed by the government. Empty taxis could be found quite often.
Identity the economic phenomenon behind this. 1 1
With the aid of a diagram, explain what will happen to the total sales revenue of taxi services if there is a significant economic recovery (7 marks) 2

22. What is the effect upon the demand for taxi services?
2. The economic recession in Hong Kong during the period of 1998 to 2000 caused a great decrease in the number of taxi passengers.
On the other hand, the taxi fare is fixed by the government. Empty taxis could be found quite often.
What is the effect upon the demand for taxi services? 2 1
With the aid of a diagram, explain what will happen to the total sales revenue of taxi services if there is a significant economic recovery (7 marks) 2

23. _______________________. (2 marks)
The presence of empty taxis everywhere implies an _________________ of taxi services. The excess supply is caused by _____________________________________
_______________________. (2 marks) 1 P S D1

24. _______________________. (2 marks)
The presence of empty taxis everywhere implies an _________________ of taxi services. The excess supply is caused by _____________________________________
_______________________. (2 marks) 1
Identity the economic phenomenon behind this. P S D1 1

25. _______________________. (2 marks) excess supply
The presence of empty taxis everywhere implies an _________________ of taxi services. The excess supply is caused by _____________________________________
_______________________. (2 marks) 1
excess supply
the fixed taxi fare (Pf) set above the
equilibrium price P S Pf D1 Q1

26. The original amount of services transacted is Q1
The original amount of services transacted is Q1. The total revenue is Q1 x Pf. The economic recovery would lead to an ___________ in demand from D1 to D2 and the amount of services transacted would also _______________to Q2. As a result, the total revenue rises from Pf x Q1 to Pf x Q2
(increases by the shaded area) (2 marks) 2 P S Pf D1 Q1

27. What is the effect upon the demand for taxi services?
The original amount of services transacted is Q1. The total revenue is Q1 x Pf. The economic recovery would lead to an ___________ in demand from D1 to D2 and the amount of services transacted would also _______________to Q2. As a result, the total revenue rises from Pf x Q1 to Pf x Q2
(increases by the shaded area) (2 marks) 2
What is the effect upon the demand for taxi services? P 2 S Pf D1 Q1

28. The original amount of services transacted is Q1
The original amount of services transacted is Q1. The total revenue is Q1 x Pf. The economic recovery would lead to an ___________ in demand from D1 to D2 and the amount of services transacted would also _______________to Q2. As a result, the total revenue rises from Pf x Q1 to Pf x Q2
(increases by the shaded area) (2 marks)
increase 2
increase from Q1 P S 3 D2 Pf + D1 Q1 Q2

29. The original amount of services transacted is Q1
The original amount of services transacted is Q1. The total revenue is Q1 x Pf. The economic recovery would lead to an ___________ in demand from D1 to D2 and the amount of services transacted would also _______________to Q2. As a result, the total revenue rises from Pf x Q1 to Pf x Q2
(increases by the shaded area) (2 marks)
increase 2
increase from Q1
The maximum capacity of taxi services is restricted by the number of taxi licences. P 3 S 3 D2 Pf + D1