INTERNAL EXAMINATIONS

Cambridge Ordinary Level

1st Sessional Examination Oct 2021 (O- II )

Candidate
Name

Centre Candidate
Number Number

Branch: ___________________________ Date: ______________________

Economics 2281
Time: 1 hour
Candidates answer on the question paper. Total marks: 30

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Write your Centre number, candidate number and name on Max. Marks
all the work you hand in. Questions
Marks Obtained
Write in dark blue or black pen. Question
10
1
Do not use staples, paper clips, highlighters and glue or Question
20
correction fluid. 2
Answer all questions.
Total 30
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Percentage
together.
The number of marks are given in brackets [ ] at the end of Grade
each question or part question.

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Choose the best answer

1: What is most likely to influence the price elasticity of demand for a food?
A a change in consumer tastes
B the number of close substitutes
C the rate of inflation
D whether the food can be stored easily

2: There are a fixed number of seats at a concert. Most of the audience would continue to
attend even if the seat prices were increased. Which demand and supply diagram represents
this situation?

3: When the price of shirts rises from $8 to $10, the demand for shirts falls from 1000 to 500.
What is the price elasticity of demand for shirts?
A greater than 1
B unitary
C less than 1
D zero

4: What is included in macroeconomics?

A the causes of a change in the price of one product
B the causes of a market failure
C the causes of determinants of price elasticities of supply
D the causes of economic growth

5: In response to an increase in price from $5 per kilo to $6 per kilo, a farmer increased supply
from 400 kilos to 500 kilos per week. What is the price elasticity of supply?
A 0.8 B 0.9 C 1.2 D 1.25

6: A recent study has found that the price elasticity of demand for cigarettes in the USA is –
0.7. What can be concluded from this information?
A A fall in the price of cigarettes would lead to a fall in the revenue of cigarette producers.
B A rise in the price of cigarettes would lead to a fall in consumer expenditure on cigarettes.
C A 7% increase in the price of cigarettes would reduce the quantity demanded by 10%.
D A 10% increase in the cost of producing cigarettes would lead to a 7% fall in the quantity
demanded.
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7: Which change would make the supply of a product more price elastic?
A an increase in the number of close substitutes for the product
B an increase in the proportion of firms working at full capacity
C a reduction in the time taken to make the product
D a reduction in the time that the product can be stored

8: Many people are life-long, devoted fans of the Los Angeles Lakers basketball team in the
United States. The team’s stadium can seat 19 000 spectators and tickets are always sold out.
What does this suggest about the price elasticity of demand and the price elasticity of supply
of tickets to watch the Lakers play?

9: A national trade union wishes to increase the wages of its members without reducing the
numbers employed. Which factor would help the union to do this?
A The demand for the industry’s product is high.
B The industry consists of a small number of well-organized employers.
C The union workers have low-level skills.
D The workers’ wages are the largest cost of the industry.

10: When will a trade union be less likely to be able to achieve a rise in wages for its
members?
A during a recession
B in an economic boom
C when productivity is rising
D where there is a limited supply of labor

Answer the following questions

(a) Explain the difference between inelastic supply and elastic supply. [4]

(b) Explain the functions of trade union [4]

(c) Analyze the factors that affect the price elasticity demand of a product. [6]

(d) Explain the factors that strengthen the bargaining power of trade union. [6]

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