Pre-U Economics

First year

Progress Test 2

Section A – Definitions

1. Demand

2. Quantity demanded

3. Law of Demand

4. Normal Good

5. Inferior Good

6. Substitutes

7. Complements

8. Supply

9. quantity supplied

10. Law of Supply

11. Ceteris Paribus

12. Market Clearing Price

13. Consumer Surplus

 14. Producer Surplus

15. Equilibrium

16. Disequilibrium

17. excess demand

18. excess supply

19. Giffen goods

20. Veblen goods

21. Joint supply

22. Derived demand

(Ten will be chosen)

Section B – Multiple Choice

1.

2.

3.

4.
5.

6.
7.

8.

9.
 10.

11.

(Five will be chosen)

Section C – Diagrams

1. Draw a fully labelled diagram showing the change in price and quantity demanded of fish
when there is an increase in the income of consumers (n.b. consider whether fish is normal
or inferior) .

2. Draw a fully labelled diagram showing the change in price and quantity of beef and leather
following a rise in demand for beef.

3. Draw a fully labelled diagram showing the change in consumer surplus that occurs in the
market for petrol when there is a fall in the cost of oil extraction.

4. Draw a fully labelled diagram showing the change in producer surplus that occurs when
there is a fall in the demand for roses.

5. Draw a fully labelled diagram showing the following after the imposition of a specific tax on
tobacco:

a. price and quantity before and after tax

b. total tax paid
c. instance in producer and consumer

(5 marks; 2 marks for correct labels for axes and equilibria; 3marks for correct shifts of curve)

(One will be chosen)

Section D – Short Answers

1.
a. Using an example explain what is meant by the term
‘complement.’ 2 marks

b. Using a supply and demand curve diagram explain the effect of a failure of
the tea harvest in the equilibrium price and quantity for coffee. 3 marks

2.

a. Using an example explain what is meant by the term

‘derived demand.’ 2 marks

b. Using a supply and demand curve diagram explain the likely effect of
successful anti-smoking campaign on the wage rate for
tobacco workers. 3 marks

3.
a. Using an example explain what is meant by the term ‘subsidy’ 2 marks

b. Using a supply and demand curve diagram explain of the imposition of a

specific tax on alcohol. 3 marks
4.
a. Using an example explain what is meant by the term
‘indirect tax’ 2 marks

b. Using a supply and demand curve diagram explain of the imposition of a

subsidy on low emission cars 3 marks
5.
a. using an example explain what is meant by the term ‘speculative
demand’ 2 marks

b. Using a supply and demand curve diagram explain of a fall in interest rates on
the price of houses. 3 marks