Structured questions (econs textbook)

1. A. It’s about the issue of scarcity of the allocation of resources.

B. In market economies, the allocation of resources are determined by the individuals in a
private market. In mixed economies, the allocation of resources are determined by the
market and also the government that gives us police forces and fire services.
C.
As the diagram shows, the allocation of
resources is: capital goods and consumer goods.
In order to satisfy the economy’s needs and
wants so they need to have an opportunity cost
to sacrifice something in order to gain
something. So they have to choose between the
two to determine which resource to be allocated
gives the better benefits.

D. It would benefit from health care because there will be lesser sickly people so more of
those people will be able to be employed in jobs that require man-power, thus
improving the country’s economy by getting more people to get more cash money.
However, they might be also be wasting money on healthcare instead on other things
that benefits the economy more, such as the allocation of food to feed homeless people.
But, it will ultimately benefit the economy.

2. A. Equilibrium price means when the quantity demanded is equal to the quantity supplied.
B. When other products become less profitable
An increase in resources, for example from new sources of new materials.
C. The profit of farm owners will increase when food prices drop, because farm owners are
the producers of organic food, so when they sell it off to the companies that sell their
food, they get money from it too. So when food prices fall, more demand happens
because of the rise in consumers buying cheaper food. So that’s why the profit of farm
owners will increase.
D. It is likely to increase in the future because of the rise in populations size, each year it
increase by millions, so it is likely the whole world will have a large population so the
demand rise. Another reason is that the incomes of the future generation will increase
since a lot of people have a better education to seek better jobs, resulting in higher
demand. The land in the future might decrease because of the increase in buildings and
lesser organic land so it reduces in food supplies, so the price for food will increase.

3. A. Demand is when consumers have the will to purchase goods and services and
willingness to pay a price for those good or services.
B. Consumers might want to exercise more so they start to buy more bicycles.
So that they won’t destroy the environment with the air pollution from cars and buses.
C. In some countries, some of the products used are more price elastic than other because
there is only a certain point in time that they are being used more for consumers for the
profits to rise. For example, a country who is cold all day will need gloves to fend off the
 cold everyday than a country that is only cold during winter. So the price elasticity varies
between the two countries.

D. Increasing tax will lead to a fall in demand, although this may only be a small effect
because demand is price inelastic. People are addicted and there are no close
substitutes. Cigarettes are a demerit good, therefore, consumers may underestimate the
costs of smoking. Also, smoking has many negative externalities

4. A. Price elasticity of supply measures the responsiveness of quantity supplied to a change

in price
B. They might have high production costs/ The price might rise because the demand
increases, but then people will buy less because of how expensive it is, so suppliers will
supply less
C.
D.