Economics and Business Department, Pathways World School, Aravali Holiday Assignment IGCSE Grade 9

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1 Economics and Business Department, Pathways World School, Aravali Holiday Assignment IGCSE Grade 9 [2014]

2 Demand and supply Assignment

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4 7. In which of the circumstances will consumer surplus be zero? A. Demand is perfectly inelastic B. Demand is perfectly elastic C. Elasticity of demand is 1 D. Supply is perfectly elastic 8. The price elasticity of demand for commodity is 0.5. The price of the commodity is initially $5 and the initial quantity sold is 100. By how much would the price have to reduce to increase sales by 20 units? A. $0.5 B. $1.00 C. $2.00 D. $ Which of the following traveler would be expected to have the highest price elasticity of demand for rail travel? A. Air travelers using a rail link from a city centre to an international airport B. business executives C. students returning home for the weekend D. commuter working in central business districts of major cities. 10. The price elasticity of demand for a good is unity. What will increase as result of reduction in the price? A. expenditure on the good B. expenditure on the substitute. C. quantity demanded D. marginal revenue. 11. under which condition will an indirect tax fall entirely on the consumer? A. Demand is unitary elasticity. B. Demand is perfectly inelastic C. Supply is unitary elastic D. Supply is perfectly elastic What is most likely to make the demand for Good X inelastic? A Good X is a luxury good. B Good X is habit-forming. C The proportion of income spent on Good X is very high. D There are a large number of substitutes for Good X. 14. The market for tractors is supplied by two firms, X and Y, each initially having 50 % of the market. A 10 % increase in the price of tractors leads to an increase in output from firm X of 10 % and from firm Y of 20 %.What is the price elasticity of supply of tractors in this market? A. 1 B. 1.5 C. 2 D. 3

5 15. The diagram shows the demand curve and supply curve for a good on which the government imposes a specific tax. What will be the result of this tax? A Most of the incidence of the tax will fall on the producer. B The new demand curve will be parallel to DD. C The price will rise by the full amount of the tax. D The quantity bought will fall proportionately to the tax rate. 16. Which government policy might limit the rationing function of the price mechanism? A the imposition of tariffs on imported consumer goods B the levy of indirect taxes at varying rates on different goods C the payment of subsidies to food producers D the setting of maximum prices for rented housing 17. Which of the following is a normative statement? A If firms spend more on advertising, sales volume may not rise. B If firms raise prices, profits will rise. C The government should reduce taxes on spending so that economic welfare will rise. D Export volumes will rise if the government lowers the exchange rate. 18. A country s production possibility curve moves from XX to YY as shown in the diagram. What could have caused this movement? A a rise in the retirement age B an increase in investment C an increase in net emigration D a rise in technological progress 19. Planned economies had a history of failing to produce enough consumer goods. Which method of allocating these goods in short supply involved a market system approach? A equal rationing to people according to their family size B official sale to people according to their ability to queue C selective distribution to people according to their occupation D unofficial sale to people according to their willingness to pay 20. What is necessarily a function of enterprise rather than management? A accepting the risks involved in production B deciding how much labour should be employed C organising the other factors of production D promoting the sale of the product

6 Demand and supply Assignment

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8 MCQ Assignment 3 1. Rising demand for oil from China and other countries is leading to concerns that there may be a world shortage of oil. How should a change in the price of oil prevent such a shortage developing? A Price should fall to reduce demand and encourage a search for more oil. B Price should fall to reduce supply and encourage a reduction in fuel use. C Price should rise to reduce demand and encourage a search for alternative fuels. D Price should rise to reduce supply and encourage a switch to alternative fuels. 2. Domino Pizza, the largest US pizza chain, said that its profits had been reduced by price inflation on ingredients and by a reduction in consumers disposable income. How would these changes affect the demand and supply curve for its products? 1. The diagram shows the demand curve for a product. Which statement is correct? A Demand is less elastic at higher prices than at lower prices. B Consumer expenditure on the product always rises when price falls. C Price elasticity of demand is different at every price. D Price elasticity of demand equals one at every price. 3. What might shift an individual s demand curve for petrol to the left? A a fall in the price of parking B a fall in the price of petrol C a rise in the price of cars D a rise in the price of public transport 4. Worldwide, the film industry has increased its expenditure to over $1 billion each year on successful antipiracy measures which it finances by charges on DVD products. How would this be shown in a demand and supply diagram of the market for legally produced DVDs?

9 Assignment 4 Demand and Supply And Government Intervention Tyre problems for the mining industry In 2005, large-scale economic growth in China had increased the demand for minerals to record levels. As a result, 2005 was a boom year for mining worldwide, and output expanded rapidly. The huge earthmoving trucks used in mining need massive off-the-road (OTR) tyres. These tyres cost $ each and take a day to manufacture. By 2006, a major tyre producer, Bridgestone, estimated that mining companies required 50% more OTR tyres than in the previous year, but the tyre producers struggled to meet this demand from the mining companies. Tyre producers stocks of tyres were very low, while fixed production capacity meant that output had remained steady since It was not technically possible to switch from car tyre production to making OTR tyres. Total planned production for all of 2006 had already been sold and no new factories were due to start producing before the end of Another tyre producer, Michelin, intended to spend $85m on its factory in the US, and Bridgestone intended to raise its factory capacity in Japan in Rio Tinto, one of the world s largest mining companies, usually spent $100m on 5000 tyres each year, but instead faced the prospect of having to stop trucks working while they had expensive tyre checks and tyre repairs. The company predicted that this would limit future exploration for new sources of minerals and cause a rise in mineral prices. (a) Why can the demand for OTR tyres be described as a derived demand? [2] (b) Explain why the supply of OTR tyres was highly inelastic in [4] (c) Analyse, with a demand and supply diagram, the change in the market for OTR tyres during [5] (d) Discuss whether the shortage of OTR tyres required government intervention. [6]