Economics
Economic principles — Paper 1
- 1.
A country's consumer price index rises from 125 to 130. Which is the approximate inflation rate? A 4.0% B 5.0% C 25.0% D 30.0%
[1 mark] - 2.
Which change is most likely to increase the supply of locally produced solar panels? A higher wage costs; B a subsidy to producers; C a rise in the product's price causing movement along supply; D a tax on imported components.
[1 mark] · no calculator - 3.
A student can spend an evening either revising for an exam or working a part-time shift that pays $40. If she chooses to revise, what is her opportunity cost? A The time spent revising B The $40 she could have earned C Her exam grade D Nothing, revising has no cost
[1 mark] · no calculator - 4.
A farmer combines soil, a tractor, hired labourers and his own organisational skill to grow wheat. Which factor of production does 'hired labourers' represent? A Land B Labour C Capital D Enterprise
[1 mark] · no calculator - 5.
A country's production possibility curve shows combinations of food and machinery it can produce. A point inside the curve indicates: A full and efficient use of resources B unemployed or underused resources C an impossible combination D economic growth
[1 mark] · no calculator - 6.
Explain one benefit and one drawback to a worker of a high degree of specialisation in a single task.
[2 marks] · no calculator - 7.
In a planned (command) economy, who primarily decides what goods and services are produced? A Private firms responding to consumer demand B The government C Individual consumers directly D Foreign investors
[1 mark] · no calculator - 8.
The price of a good rises from $10 to $12, and the quantity demanded falls from 200 to 180 units. Calculate the price elasticity of demand (ignoring the sign) and state whether demand is price elastic or inelastic.
[4 marks] - 9.
An economic system in which both the government and private individuals make production decisions is called: A A market economy B A planned economy C A mixed economy D A subsistence economy
[1 mark] · no calculator - 10.
A sudden increase in consumer income shifts the demand curve for a normal good to the right, with supply unchanged. Explain the effect on the equilibrium price and quantity.
[3 marks] · no calculator - 11.
Distinguish between a positive economic statement and a normative economic statement, using an example of each.
[2 marks] · no calculator - 12.
Explain what is meant by economic growth, and how it is usually measured.
[2 marks] · no calculator - 13.
Distinguish between demand-pull inflation and cost-push inflation, using one possible cause of each.
[2 marks] · no calculator - 14.
Explain what is meant by cyclical unemployment, and when it is most likely to occur.
[2 marks] · no calculator - 15.
Explain one function that money performs in an economy.
[2 marks] · no calculator - 16.
Explain the difference between a free good and an economic good.
[2 marks] · no calculator - 17.
Coffee and sugar are often bought and used together. Explain, using this example, what is meant by complementary goods.
[2 marks] · no calculator - 18.
Tea and coffee are often seen as alternatives to each other. Explain, using this example, what is meant by substitute goods.
[2 marks] · no calculator - 19.
Explain what is meant by derived demand, using the demand for steel as an example.
[2 marks] · no calculator - 20.
Explain how the division of labour, where workers specialise in small, repeated tasks on a production line, can increase a factory's total output.
[2 marks] · no calculator - 21.
A farmer keeps adding workers to a fixed amount of land. Explain what the law of diminishing returns predicts will eventually happen to the extra output produced by each additional worker.
[2 marks] · no calculator - 22.
When the price of a good rises by 10%, the quantity supplied rises by 25%. Calculate the price elasticity of supply, and state whether supply is elastic or inelastic.
[3 marks] - 23.
When consumer income rises by 10%, demand for a particular good rises by 15%. Calculate the income elasticity of demand, and state what this tells us about the type of good.
[3 marks] - 24.
Explain what cross elasticity of demand measures, using the relationship between butter and margarine as an example.
[2 marks] · no calculator