Angel International School - Manipay 2 nd Term Examination April Economics. Duration: 2.30 Hours. Part I

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1 Grade 09 Angel International School - Manipay 2 nd Term Examination April Economics Duration: 2.30 Hours Index No:- Part I 1) What is meant by opportunity cost? a. The best alternative forgone b. The cost of the item selected c. The cost of exploring business opportunities d. The labour used in producing the product 2) How are resources allocated in a market economy? a. By directives b. By the price mechanism c. By directives or the price mechanism d. By directives and the price mechanism 3) What is an advantage of a market economy? a. An absence of poverty b. Consumer sovereignty c. Firms having considerable market power d. Full employment 4) What happens to people s willingness and ability to buy a product when its price falls? Willingness ability a. Increases increases b. Increases decreases c. decreases decreases d. decreases Increases 5) An increase in demand is represented by? a. A movement down the demand curve b. A movement up the demand curve c. A shift to the left of the demand curve d. A shift to the right of the demand curve 1

2 6) The diagram shows a change in the market for coffee What could explain this change? a. A rise in the price of coffee b. A rise in the price of tea c. A successful advertising campaign for tea d. A health report indicating that drinking coffee can cause headaches 7) The price of a product rises. What will happen to the demand for its complement? a. It will contract c. It will decrease b. It will extend d. It will increase 8) What effect would a decrease in supply of a product have an it s price and demand? Price demand a. Decrease contracts b. Decrease extends c. Increase contracts d. Increase extends 9) What is the formula for PES? a. Change in quantity supplied change in price Change in price b. Percentage change in quantity supplied Percentage change in price c. Change in quantity supplied Change in quantity demanded d. Percentage change in quantity supplied Percentage change in quantity demanded 10) What does a PES of 0.8 indicate? a. Supply is elastic b. Supply is perfectly elastic c. Supply is perfectly inelastic d. Supply is inelastic 2

3 11) Which figure illustrates elastic supply? a. b. c. d. 12) In a market system what encourages firms to their costs low? a. Competition c. Subsidies b. Government regulations d. Taxation 13) In the diagram below which movement show an increase in productive efficiency? a. A to B b. B to C c. C to D d. A to D 14) Which of the following is true for any inelastic demand curve? a. A price cut causes a fall in expenditure 3

4 b. A price rise has no effect on demand c. A price rise has no effect on total profit d. The percentage change in demand is greater than the percentage change in price 15) The demand for a product is known to be price elastic. Which fall in quantity demanded could follow a 10% price rise? a. 0% c. 10% b. 5% d. 15% 16) Which type of factor of production can be described as a nature resource? a. Capital c. Labour b. Entrepreneur d. Land 17) Why will scarcity continue to be a problem in the future? a. Price will rise b. The quantity of resources will decline c. Wants will continue to increase d. World population will fall 18) The diagram shows the demand for chocolate What could cause the movement from point to point y? a. A change in tastes b. A fall in the price of chocolate c. An increase in income d. A successful advertising campaign for chocolate 19) What could cause an increase in the supply of milk? a. An increase in the price of cattle foods b. An increase in wages paid to farm workers c. The introduction of a subsidy to cattle farmers d. The outbreak of a disease affecting cows 20) Demand for a product is inelastic. What effect will a fall in price have? a. Demand will not change b. Demand will change by a greater percentage c. Total revenue will fall 4

5 d. Total revenue will rise 21) The price of a product rises from $60 t0 $90. This cause demand to contract from 300 to 600. What type of price elasticity of demand does this product have over this price range? a. Perfectly inelastic c. Unity b. Inelastic d. Elastic 22) What is price elasticity of demand? a. A measure of the extent to which price changes when the quantity demanded changes. b. A measure of the extent to which the quantity demanded changes when price changes. c. A measure of the extent to which total revenue changes when price changes d. A measure of the extent to which price changes when total revenue changes. 23) In what circumstance would supply of a product be elastic? a. It is costly to produce b. It takes time to produce c. It can be stored d. It was resources which are in short supply 24) Why will scarcity continue to be a problem in the future? a. Prise will rise b. The quantity of resources will decline c. Wants will continue to increase d. World population will fall 25) A country produces 4000 new capital goods in a week. 800 of these replace worn out capital goods. What is the net investment made? a c. 800 b d ) Which factor of production is the most mobile? a. Capital b. Enterprise 27) Which of the following is a economic good? a. Water in a river b. Sunshine c. Labour d. Land c. Education d. air 28) A presently works as a builder. His previous jobs included working as a form labourer and a street trader. His next best-paid job Is that of a carpenter but he would rather choose choose to work gardener if not a builder what will be the opportunity cost of him working as a builder? a. A carpenter b. A gardener 29) Equilibrium price is the price of which c. A farm labourer d. street trader 5

6 a. Everything that is production is sold b. The amount consumers demand is equal to the sellers supply c. Supply exceeds demand d. The number of buyers equal the number of sellers 30) Which of the following diagrams illustrates the effect of an increase in income of the market for and inferior good? a. b. (30 1= 30) c. d. Answer the question Part II Section A 01) 02) a) Describe a possible opportunity cost of a going to university? b) What is meant by an industry being capital intensive? c) Explain how resources are allocated differently in market and mixed economic systems? d) Sometimes the government does not act as a producer of goods and services but still influence private producer. Explain how it might do this? Section B Answer any 03 questions a) Explain the term scarcity? b) What are the factors of production? c) Do producers have opportunity cost? Explain d) Differentiate economic goods and free goods and give examples? 03) 6

7 04) 05) 06) a) Give 03 disadvantages of a market economy? b) What is meant by privatisation? c) Differentiate individual and market supply? d) Explain the terms a. An extension in demand b. A contraction in demand a) State 04 factors that cause of changes in demand? b) Differentiate normal goods and inferior goods? c) Decide whether each of the following is a substitute or a complement to a coffee? I. Tea II. Sugar III. Milo powder d) Use a demand and supply diagram to illustrate the effect of the following events on the market for coffee. a. A successful advertising campaign for coffee b. A rise in the price of tea a) What are the causes of a change in supply for a product? b) What is meant by subsidy? c) In the last 55years the world production of rice has increases considerably from 215m tonnes in 1961 to more than 600m tonnes in This has largely been the result of breakthroughs in seed generation and cultivation techniques. a. Draw diagram showing the change in supply of rice since 1961 b. Identify two factors that can cause the supply curve for rice to move in the opposite direction a) What do you mean by price elasticity of demand and state the formula used to calculate it? b) In each case calculate the PED. I. A fall in price from $4 to $3 cause the demand extend from 60 to 105 II. Demand falls from 200 to 180 when price rises from $10 $12. c) Decide in each case whether demand is likely to be elastic or inelastic a. Cut flowers b. Gold jewellery c. Coffee d. Train travel by commuters e. food ***************************************** 7