PRESIDENTIAL SCHOOL IN FERGANA

0455 Cambridge IGCSE Economics

Grade: 9-Green Students full name: Abdusalom Muhammadjonov

Type of assessment: ___________________Term : 3 Date: 20.02.2024

Case Study Questions on Market Failure:

1. Explain the concept of disposable income and its significance in determining consumption patterns.

The amount of money one has left after subtracting income taxes. It's significant in determining consumption
patterns because it directly influences how much individuals can afford to spend on goods and services, and also
has impact on demands of consumers.

2. Discuss the relationship between wealth and consumption, and how wealth affects an individual's
spending behavior.

An individual's wealth, or the sum of all of their property and belongings, affects how much they spend by
providing security that may increase their trust to make purchases. Compared to people with lower income levels,
those with higher wealth tend to consume more, also luxury products and services.

3. How does the rate of interest influence investment decisions? Explain with examples.

The cost of borrowing and the return on investment are two factors that the interest rate affects when making
investment decisions. Low interest rates result in lower borrowing costs, which increases investment spending.
On the other hand, as borrowing becomes more expensive, high interest rates may affect borrowing and
investment.

4. Analyze the relationship between income and consumption, and discuss the factors that determine an
individual's average propensity to consume (APC). Calculate APC when given income and consumption data.

Positive relation between oncome and consumption; average propensity to consume (APC) will be different in
various situations; APC = Consumption / Income

5. Describe the pattern of expenditure among individuals, considering the allocation of income towards
different categories such as food and clothing, consumer durables, and leisure goods and services.

vary by income and wants of individuals; allocating income to necessities and luxuries; less spending on inferior
goods; high spending on luxuries.

6. Place the following groups of people in the most likely order of disposable income from richest to
poorest, considering their spending patterns: a) Retirees, b) High-income professionals, c) Low-skilled workers, d)
University students. Perform calculations based on given information.
 1. High-income professionals
2. Retirees
3. Low-skilled workers
4. University students

7. Explain the concept of savings and discuss the reasons why individuals choose to save rather than
consume.

Saving – saved, not spended part of income; maybe saved for future needs; meybe saved to take risk of future
economy.

8. Analyze the factors that influence saving behavior, including interest rates, income levels, and future
expectations.

interest rates: higher taxes offers better returns for savings

income levels: high income – high saving
future expectations: expecting risks causes for more savings or more spending on firm for not failing business

9. Calculate the saving ratio when given data on income and savings. Discuss the significance of the saving
ratio in an economy.

Saving ratio – savings divided by income; indicates saving habits; very significant; describes ration of saving in
income. Needed for future needs or risks.

10. Define the average propensity to save (APS) and explain how it relates to the average propensity to
consume (APC).

APS – proportion of income saved; indirectly related to APC, if APC increase APS decrease, or vise versa;
APS+APC=1

11. Discuss the concept of borrowing and explain the role of mortgages in facilitating home ownership.

Borrowing: obtaining, gaining funds by promising to return

mortgage: a loan for individuals to help buy a house, and they enable for home ownership
both of them help to large purchases like homes, transports

12. Evaluate the impact of borrowing on individuals and the economy, considering both the benefits and
risks.

Helps to invest money on servises, education or homes or business

can lead to debt growth;
financial loses for individuals;
more spending;

13. Explain the difference between wages and salaries, including their components and how they are
determined.

Wages are paid maybe for hourly or maybe for quality and quantity of labor; salaries are fixed amounts and they
are paid in specific time and order; determined by skill, labor;

14. Describe the concept of fringe benefits and discuss their importance in employee compensation
packages.
Extra benefits provided to workers; can be health insurance, or etc; attract workers; motivate to better work
quality; worker can compensate for other expenditures; help for worker.

15. Using demand and supply curves, illustrate the job market for a specific occupation and explain how
changes in demand and supply affect wages and employment levels.

Equilibrium is where demand and supply are equal and it is showing the current wage and employment in
graph(teacher, I am just assuming, because there is no graph, it is difficult to make graph to this document); if
demand increases, it will increase wages and employment; when supply decreases because of shortages, wages
increase but employment may decrease.

16. Discuss the national minimum wage policy of Uzbekistan, including its objectives and potential impacts on
the labor market.

Amount is 1,050,000 UZS/month. Objective: to improve lving standards of population; can impact to employment
levels. If paid amount by employer is less than this for full-time job, worker can complaint to the couurt.

17. Analyze the factors that affect the elasticity of demand and supply for occupations in the job market.

Skills of workers, conditions in market such as unemployment, technological changes.

18. Define wage differentials and explain the reasons for wage differentials between occupations.

Occurs because of different skills, labor force; happens when demand and supply are different in every worker;
have effect on income inequality.

19. Discuss the concept of labor supply and demand and explain how elasticity influences wage levels.

Supply is affected by population, skills, education; demand is affected by technology in production, type of
production; equilibrium is when demand and supply ae equal. Wage’s elasticity is affected by them.

20. Explain the concept of elasticity of demand for labor and elasticity of supply for labor. Discuss the factors
that determine the elasticity of labor demand and supply.

Elasticity is determined by considering resonsiveness of employers and their labor to wage changes; determined
by several factors like labor mobility, and also substitutes; and it has impacts on wage levels.

21. Define division of labor and specialization and explain their role in increasing productivity and efficiency.

Division of labor and specialization is division of works and tasks between workers; it increases efficiecy;
specialization focuses on specific tasks to increase productivity; both have effects on productivity.

22. Differentiate between craft unions, general unions, industrial unions, and white-collar unions. Discuss
their goals and characteristics.

Craft unions: focus on specific trades;

General unions: represent workers for various trades;

Industrial unions: combine workers to whole industries;

White-collar unions: represent professionals and office workers.

23. Explain the concept of collective bargaining and discuss its significance in labor relations.
It happens between employers and trade unions or labor unions; collective bargaining will make agreement on
wages, working conditions; agreement between workers and employer.

24. Define real income and explain how changes in prices affect real income.
Real income - nominal income adjusted for inflation; income’s actual value; can be money or other thing which
has good liquidity; affected by changes in price and inflation also.

25. Discuss the different forms of industrial action, such as strikes and lockouts, and their impact on workers,
employers, and the economy.

Strike is when workers are not working and making difficulties to business and employers. Lockout is when
employer don’t let workers to work. Lockout is drawback for workers, strike is drawback for employers. But
actually both of them are drawback for business to develop and grow.

QMultiple Choice Questions:

1. The average propensity to consume (APC) is 5.In terms of disposable income, place the following
calculated as: groups of people in order from richest to poorest:

a) Consumption / Income a) High-income professionals, retirees, low-skilled

workers, university students
b) Income / Consumption
b) University students, high-income professionals,
c) Savings / Income
retirees, low-skilled workers
d) Income / Savings
c) Retirees, high-income professionals, low-skilled
2. The pattern of expenditure refers to: workers, university students

a) The distribution of income among different d) Low-skilled workers, university students, high-
individuals income professionals, retirees

b) The allocation of income towards different goods 6. The saving ratio is calculated as:
and services
a) Savings / Income
c) The relationship between income and
b) Income / Savings
consumption
c) Consumption / Income
d) The level of savings in an economy
d) Income / Consumption
3. Calculate the APC when the consumption is $600
and the income is $800. 7. The average propensity to save (APS) is calculated
as:
a) 0.25
a) Savings / Income
b) 0.5
b) Income / Savings
c) 0.75
c) Consumption / Income
d) 1
d) Income / Consumption
4. When income increases, and consumption
increases proportionately, the APC is: 8. The main reason individuals save is to:

a) 0 a) Increase their consumption levels

b) 0.5 b) Reduce their disposable income

c) 1 c) Prepare for future needs and emergencies

d) Infinite d) Stimulate economic growth

Q# Answer Q# Answer
1 A 11
2 B 12
3 B 13
4 C 14
5 A 15
6 A 16
7 A 17
8 C 18
9 19
10 20