Sem1 2017

ANSWER ALL QUESTIONS

1. Select and then mark your answer to each question.

(a) Which of the following factors is NOT likely to affect demand for cars?

(i) Income

(ii) Price of petrol

(iii) Advertising

(iv) Cost of car components

(2 Marks)

(b) Which of the following values show that a good has inelastic demand?

(i) -1.5

(ii) 1.1

(iii) -0.7

(iv) -2.8

(2 Marks)

Department of commerce Economics Grade 8

1
Sem1 2017

(c) A mixed economy has :

(i) An agricultural and an industrial sector

(ii) Consumer goods and capital goods

(iii) A financial sector and an industrial sector

(iv) A private sector and public sector

(2 Marks)

(d) Fill in the blanks :

(i) Some goods are purchased together because they are consumed
together. They are called …………………………….. goods.

(ii) Goods that are bought as an alternative to another but perform the same
function are called ………………….. goods.

(2 Marks)

(e)Most supply curves slope up from left to right. However, for products with fixed
supply the curve is ……………………. If a tax is imposed on a good, the supply
curve would shift to the ………………… .

(2 Marks)

(Total 10 Marks)

Department of commerce Economics Grade 8

2
Sem1 2017

2.
(a) What is meant by effective demand?

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(2 Marks)
(b) Do the following factors influence supply or demand?
List each factor under supply or demand.

Production costs Subsidies

Price of substitutes Fashion
Indirect tax Advertising
Change in technology Income
Natural factors Price of complementary goods

Supply Demand

(0.5X10 = 5 Marks)
(Total 7 Marks)

Department of commerce Economics Grade 8

3
Sem1 2017

3.
Figure 3.1 shows the market for wheat in a country.

Figure 3.1 The market for wheat in a country

(a) What is meant by ‘equilibrium price’?
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(2 Marks)

(b) If the price was P2, there would be excess demand in the market. Explain what
this means.
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(4 Marks)

Department of commerce Economics Grade 8

4
Sem1 2017

(c) To what extent can producers increase supply in this market. Give reasons for
your answer.

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(6 Marks)

(Total 12 Marks)

Department of commerce Economics Grade 8

5
Sem1 2017

4.
Figure 4.1shows a table listing the values of price elasticity of demand (PED) for
three products X, Y, and Z.

Product PED
X -2.7
Y -1.2
Z -0.7

Figure 4.1 Values of the price elasticity of demand for three different products

(a)
(i) Which one of the products in Figure 4.1 has inelastic demand?
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(1 Marks)

(ii) What is meant by price inelastic demand?

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(2 Marks)

QUESTION CONTINUED ON NEXT PAGE

Department of commerce Economics Grade 8

6
Sem1 2017

(b) Explain what is likely to happen to total revenue if the price of product X is
increased.
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(4 Marks)

(c) State three factors that might affect price elasticity of demand.
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(3 Marks)
(d) Define income elasticity of demand.
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(2 Marks)

QUESTION CONTINUED ON NEXT PAGE

Department of commerce Economics Grade 8

7
Sem1 2017

(e)With reference to the income elasticity of demand, explain the difference between
a normal good and an inferior good.

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(4 Marks)

(Total 16 Marks)

Department of commerce Economics Grade 8

8
Sem1 2017

5. Brazil and France are both mixed economies. However, the degree of mix is quite
different. The differences are shown by the pie charts in Figure 5.1.

Figure 5.1 The proportions of private sector spending and public sector spending
in France and Brazil
(a) Which of the two countries is more reliant on the government for the
provision of goods and services in the economy? Explain your answer.
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(2 Marks)

QUESTION CONTINUED ON NEXT PAGE

Department of commerce Economics Grade 8

9
Sem1 2017

(b) Explain how goods and services are distributed in a mixed economy.

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(4 Marks)

QUESTION CONTINUED ON NEXT PAGE

Department of commerce Economics Grade 8

10
Sem1 2017

(c) Although markets have a reputation for allocating resources efficiently,

resources are sometimes wasted due to market failure. An example of market
failure is a lack of competition.

Do you think consumers might be affected by a lack of competition in

market? Give reasons for your answer.

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(6 Marks)

(Total 12 Marks)

Department of commerce Economics Grade 8

11
Sem1 2017

6.

The production possibility curve in Figure 6.1 shows the different combinations
of capital goods and consumer goods that an economy can produce.

Figure 6.1 A production possibility curve for a country

(a) A nation’s resources are said to be scarce. What does this mean?

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(2 Marks)

Department of commerce Economics Grade 8

12
Sem1 2017

(b) Explain what is meant by the basic economic problem.

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(4 Marks)

(c)

(i) Look at Figure 6.1. What is the opportunity cost of increasing production
of capital goods from 10 million to 15 million units?

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(2 Marks)

(ii) Identify two factors that might cause the production possibility curve for
this country to shift outwards.
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(2 Mark)

(Total 10 Marks)

Department of commerce Economics Grade 8

13
Sem1 2017

7. Xicon produces a range of textiles products in Bangkok. Demand and supply

for one of its garments is shown in figure 7.1.

Figure 7.1. Demand and supply for a garment produced by Xicon

(a) Calculate the change in total revenue when the price reduced from £8 to
£5?

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(4 Marks)

(b) Explain whether demand for the garment is price elastic or price inelastic.

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(4 Marks)
Department of commerce Economics Grade 8

14
Sem1 2017

(c) To what extent might income elasticity of demand be helpful to firms like
Xicon? Give reasons for your answer.

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(6 Marks)

(Total 14 Marks)

Department of commerce Economics Grade 8

15
Sem1 2017

8.

In 2012, a warm month of April in Italy was followed by a short cold spell in
May. This caused a failure in the apple crop. The apple harvest was about 20% of
the normal yield.

(a) Draw a diagram to show the effect on the supply of apples of the adverse growing
conditions.

(4 Marks)

QUESTION CONTINUED ON NEXT PAGE

Department of commerce Economics Grade 8

16
Sem1 2017

(b)Explain the likely effect of the poor harvest on the price of apples in Italy.

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(4 Marks)

(c)Explain the effect of a subsidy to apple growers on the supply of apples in Italy?

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(4 Marks)

(Total 12 Marks)

Department of commerce Economics Grade 8

17
Sem1 2017

9.

(a) Explain the difference between a market economy and a command economy?

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(4 Marks)

(b) Since resources are scarce, economies should ensure that production is efficient.

What is meant by the term ‘efficiency’?

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(3 Marks)

(Total 7 Marks)

(Total for paper =100 Marks)

Department of commerce Economics Grade 8

18