Week 1 Homework
IG Economics
Part A Multiple-choice questions and definitions (1 point for each
question)
1. Which one of the following diagrams shows the likely effect on the
market for cars after an increase in subsidies to car manufacturers?
2. Which one the following diagrams shows excess supply?
3. Which one of the following is a reason why consumers may not
maximise their benefit?
A. Consumers may not accurately calculate benefits
B. Consumers may find it easy to give up habits
C. Consumers never copy the behaviour of others
D. Rational decisions are always made by consumers
4. Which one the following is a reason why firms may not always
maximise their profit?
A. They may minimise total costs
B. They may be able to sell at high price
C. They may have low fixed costs
D. They may complete charitable work
5. Which one of the following is most likely to cause a shift to the left
of the demand curve?
A. Increasing advertising
B. Cost reductions
C. Increased indirect taxes
D. Decreased incomes
6. Which one of the following factors may cause a shift of the demand
curve?
A. Costs of production
B. Demographic change
C. Subsides
D. Changes in price
7. Which one of the following is most likely to cause a shift to the left in
the supply curve?
A. Increased indirect taxes
B. Cost reductions
C. Increased subsides
D. Decreased advertising
8. Which one of the following would occur when there are unsold goods
in a market?
A. Excess demand
B. Excess supply
C. Higher prices
D. Increased productivity
9. Which one of the following statements is correct?
A. The supply curve is always vertical
B. Supply and price are not related
C. Quantity supplied will fall when price falls
D. An increase in price will shift the supply curve
10. The figure below shows a change in demand for tickets to
sporting event.
Which one the following statements is true?
A. When the price falls, quantity demanded falls
B. The demand curve slopes upwards from left to right
C. An increase in demand is shown by a shift to the right
D. A decrease in demand is shown by a shift to the right
11. Define the term excess supply.
12. Define the term substitute.
13. Define the term wants.
Part B Diagram questions (3 points for each question)
14. Using the diagram below, draw the likely effect of an increase
in the population on the market for rice. Label the new curve, the
new equilibrium price and the new equilibrium quantity.
15. Using the diagram below, draw the likely effect on the market
for solar panels if the government removes an indirect tax on them.
Label the new curve, the new equilibrium price and the new
equilibrium quantity.
16. Using the diagram below, draw the likely effects on the market
for apples following a decrease in the price of bananas. Label the
new curve, the new equilibrium price and the new equilibrium
quantity.
17. In the box below, draw a production possibility curve (PPC) for
a firm that can produce table and/or chair. On your PPC, draw and
label what would happen if production of chairs decreased and
tables increased.
Part C Short open-respond questions
18. What is meant by the term normal goods? (2’)
19. What is meant by the term inferior goods? (2’)
20. Describe one reason why consumers do not always maximise
their benefit from the consumption of a product. (2’)
21. Describe one reason why infinite wants lead to scarcity. (2’)
22. Casper has decided to purchase a new television.
Explain one possible opportunity cost for Casper of this decision.
(3’)
23. Hanan is the owner of a shop and wants to maximise profits.
However, Mostafa is the manager of the shop and wants to offer
customer a 10% discount for making purchases in large quantities.
Explain one reason why Mostafa may want to offer this discount
rather than to maximise profit. (3’)
24. The figure below shows the supply of wheat in a region during
2019.
Explain one effect on the supply curve of wheat following a change
in the price of wheat. (3’)
Part D Extended open-respond questions (6’)
25. The figure below shows an outward shift in the production
possibility frontier (PPF) for Zambia in 2019. Agriculture,
construction and copper production are some of the main areas that
contribute to the economy of Zambia.
With the reference to the data above and your knowledge of
economics, analyse why the economy has moved from PPF 1 to PPF 2.