Homework 2

Economics Grade: IX

1. In February 2017, Europe experienced a shortage of fresh vegetables due to bad

weather. For a period of time, the markets for a number of vegetables, including
broccoli and lettuces, were not in equilibrium. The price of food tends to fluctuate
more than the price of manufactured goods and services /21/M/J/19
(a) When is a market in equilibrium? [2]
(b) Analyse, using a demand and supply diagram, how bad weather is likely to
affect the market for broccoli. [6]

2. Both the private sector and the public sector are involved in building houses. In
one country a private firm has built an extra 100 000 houses but, at the same time,
its government has increased income tax significantly.

(a) Explain, using a demand and supply diagram, how these two actions would have
affected the equilibrium price and the equilibrium quantity of houses. [6]
(b) Explain what determines the demand for houses. [6]

3. Many governments seek to discourage people from smoking cigarettes, whilst

encouraging them to eat more fruit, including bananas and apples.
(a) Explain three reasons why the supply of bananas may decrease. [6]
(b) Analyse what effect a rise in the price of apples, which are a substitute for
bananas, will have on the market for bananas. [4]

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