Week 9 Homework
IG Economics
Part A Multiple-choice Questions (1 point for each)
1. A trade union is an organisation that aims to improve
A profit margins
B tax revenue
C the environment
D working conditions
2. A trade union is an organisation that aims to protect
A consumer interests
B the environment
C employee rights
D the government
3. Which one of the following is a definition of opportunity cost?
A Rivalry that exists between firms
B Investment in capital goods
C The next best alternative given up
D Unused resources
4. Which one of the following may result in economic growth?
A Increasing unemployment
B Decreasing government spending
C Decreasing productivity
D Increasing technological advancements
5. A country is able to produce agricultural and non-agricultural goods
with a given amount of resources. Its production possibility curve (PPC)
is shown in the figure below.
Which one of the following options shows unobtainable production?
A W
B X
C Y
D Z
6. Which one of the following might be an aim of a firm in the private
sector?
A Maximise costs
B Reduced interest rates
C Maximise profits
D Reduced economies of scale
7. When a firm increased its prices, many consumers stopped buying its
product.
Which one of the following explains the behaviours of these
consumers?
A Consumers aim to maximise profit
B Consumers aim to maximise benefits
C Consumers have habits that are hard to give up
D Consumer cannot calculate their benefits
8. Which one of the following is a reason why consumers may not
maximise their benefits?
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
9. Which one of the following options describes a price elasticity of supply
(PES) of 0.7?
A Perfectly price elastic
B Perfectly price inelastic
C Price elastic
D Price inelastic
10. Which one of the following is most likely to cause a shift to the left
of the demand curve?
A Increased advertising
B Cost reductions
C Increased indirect taxes
D Decreased incomes
11. A product has an income elasticity of demand (YED) of -0.9. Which
one of the following best describes the product?
A A public good
B A normal good
C A luxury good
D An inferior good
12. Which one of the following values shows perfectly price inelastic
supply?
A 0
B 0.5
C 1
D 2
13. Which one of the following values shows perfect price inelasticity of
demand?
A -1.5
B -1
C 0
D 0.5
14. Which one of the following diagrams shows the likely effect on the
market for cars after an increase in subsides to car manufacturers?
15. Which one of the following diagrams shows the new equilibrium
price and quantity for lemon ice cream in Thailand following a price
reduction in chocolate ice cream?
16. Which one of the following diagrams shows excess supply?
Part B Basic-knowledge Questions
17. State one factor that would affect price elasticity of supply (PES).
(1’)
18. Define the term substitute good. (1’)
19. What is meant by the term luxury good? (2’)
20. What is meant by the term demand? (2’)
Part C Calculations (2 points for each)
21. The figure below shows the Production Possibility Curve (PPC) for an
economy making consumer goods and capital goods.
When the current level of output is 350 units of capital goods, calculate
the
opportunity cost of producing an additional 100 units of capital
goods. You are
advised to show your working.
22. Calculate, to two decimal places, the income elasticity of
demand (YED) for a good if income increases by 6.2% and quantity
demanded increases by 1.7%. You are advised to show your working.
23. A firm increases supply of 5.4% following a price increase of 7.8%.
Calculate, to two decimal places, the price elasticity of supply
(PES) for the firm. You are advised to show your working.
24. Calculate the price elasticity of demand (PED) for a product of
price falls by 10% and quantity demanded increased by 19%. You are
advised to show your working.
25. Tour guides are available to accompany tourists who visit the
Terracotta Army
collection of sculptures in Xi’an, China. The quantity of tour guides
demanded for the first three months of 2019 is shown below.
Calculate the excess supply of tour guides if the quantity supplied
during this three-month period was 6,000 (2,000 per month). You are
advised to show
your work.
Part D Diagrams (3 points for each)
26. 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.
27. Using the diagram below, draw the likely effect on the market for
cars following a rise in the costs of raw materials. Label the new curve,
the new equilibrium price and the new equilibrium quantity.
28. Using the diagram below, draw the effects on the equilibrium price
and quantity after the government removes an indirect tax on
sustainable fuel. Label the new curve, the new equilibrium price and
quantity.
29. Using the diagram below, draw the likely effects of an increase in
the birth rate on
the market for toys. Label the new curve, the new equilibrium price and
the new
equilibrium quantity.
30. Draw a demand curve on the diagram below that has price elastic
demand (PED). Label the impact of a price change from P1 to P2 and its
impact on quantity from Q1 to Q2.
Part E Open-answer Questions
31. A firm has decided to purchase a new computer system.
Explain one possible opportunity cost for the firm of this decision. (3’)
32. There are many health warnings about the dangers of eating too
much sugar, but some consumers continue to do so.
Explain one reason why consumers may still make this decision. (3’)
33. The figure below shows an outward shift in the production possibility
frontier (PPF) for an economy.
Analyse why the economy has moved from PPF 1 to PPF 2. (6’)
34. A powerful typhoon destroyed property on the island of Lamma in
Hong Kong.
Owners of restaurants that were damaged think it may take two or
three months
for them to fully reopen. This was due to flood damage and replacing
equipment
that was washed away. The repair costs for one restaurant owner was
an estimated HK$300 000 to HK$400 000.
With reference to the data above and your knowledge of economics,
analyse how
natural factors such as adverse weather may cause a shift in the
supply curve. (6’)
35. In April 2023, 2.5 million German transport workers and their
employers agreed to a deal that ended a dispute. The dispute had
caused major disruption on railways and at airports, due to strike
action.
Although Germany’s second largest trade union, Verdi, had been
arguing for a 10.5% increase in pay, each worker instead received a
5.5% increase.
With reference to the data above and your knowledge of economics,
assess the effectiveness of trade unions in increasing wages, such as
for the transport workers in Germany. (9’)
36. In 2021, Morrisons, a leading UK-based supermarket chain, became
the first in the
retail industry to pay workers at least £10 per hour. This increased its
hourly wage rate from £9.20 to at least £10 per hour for its 110,000
workers. This increase was a result of negotiations with the trade
union, Usdaw. The majority of Morrisons’ workers are trade union
members.
With reference to the data above and your knowledge of economics,
assess the
impact of trade union activity on Morrisons and its employees. (9’)
37. Amazon Prime Video is a multinational entertainment provider. It
streams films and television shows to subscribers through the internet.
In Japan, Amazon holds 11.5% of the market share. This is higher than
Netflix but less than dTV, U-NEXT and Hulu. Subscribers currently pay 3
900 yen ($36.75) for annual membership to stream from Amazon,
which is cheaper than its competitors.
With reference to the data above and your knowledge of economics,
evaluate
the importance of income elasticity of demand (YED) for Amazon Prime
Video as
incomes in Japan increase. (12’)