Economics Demand and Supply Concepts Quiz
45 Questions
0 Views

Choose a study mode

Play Quiz
Study Flashcards
Spaced Repetition
Chat to lesson

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

Which of the following goods would likely exhibit inelastic demand?

  • Insulin (correct)
  • Luxury cars
  • Concert tickets
  • Designer handbags

    • What is the relationship between the value of PED and the elasticity of demand?

  • A PED value less than 1 indicates elastic demand.
  • A PED value of 1 indicates unit elastic demand. (correct)
  • A PED value of 0 indicates perfectly elastic demand.
  • A PED value greater than 1 indicates inelastic demand.

    • If a company raises the price of a good with elastic demand, what is the likely outcome?

  • The company will experience a slight increase in revenue.
  • The company will experience a significant increase in revenue.
  • The company will experience a significant decrease in revenue. (correct)
  • The company will experience no change in revenue.

    • What is the primary implication of inelastic demand for businesses?

    <p>Price changes have a minimal impact on revenue. (B)</p> Signup and view all the answers

    How does the concept of unit elastic demand impact a company's revenue?

    <p>A price change will have no impact on total revenue. (D)</p> Signup and view all the answers

    What is the primary market effect of elastic demand?

    <p>Price increases can lead to significant revenue loss. (D)</p> Signup and view all the answers

    What does it mean when the demand for a good is described as 'inelastic'?

    <p>Consumers are not very sensitive to price changes. (C)</p> Signup and view all the answers

    Which of the following is an example of a good with likely elastic demand?

    <p>Luxury watches (A)</p> Signup and view all the answers

    What are some potential drawbacks of carrying credit?

    <p>Identity theft risk (A), Debt accumulation (D)</p> Signup and view all the answers

    Which of the following are considered non-price determinants of supply?

    <p>Government intervention (C)</p> Signup and view all the answers

    In macroeconomics, what occurs when prices are set below the equilibrium price?

    <p>Shortage in the market (B)</p> Signup and view all the answers

    Which of the following is a consequence of not paying a credit card bill on time?

    <p>Increased interest rates (B)</p> Signup and view all the answers

    Which non-price determinant affects demand due to changes in consumer income?

    <p>Income (C)</p> Signup and view all the answers

    What do we call the intersection of the supply and demand curves?

    <p>Equilibrium (B)</p> Signup and view all the answers

    Which of the following best describes a shift in the entire supply curve?

    <p>A change in government policy (C)</p> Signup and view all the answers

    What characterizes unit elastic demand?

    <p>Price and quantity demanded change in such a way that total revenue remains constant. (A)</p> Signup and view all the answers

    Which one of these options is NOT a benefit of carrying credit?

    <p>Risk of identity theft (C)</p> Signup and view all the answers

    In markets with unit elastic demand, what happens when prices are adjusted?

    <p>Total revenue remains unchanged. (D)</p> Signup and view all the answers

    How does elastic demand typically affect businesses?

    <p>It usually results in lost revenue when prices are increased. (B)</p> Signup and view all the answers

    What is a key consequence of inelastic demand concerning taxation?

    <p>The tax burden tends to fall more heavily on consumers. (D)</p> Signup and view all the answers

    Which scenario exemplifies unit elastic demand?

    <p>A meal deal's price increases by 10% while quantity demanded decreases by 10%. (A)</p> Signup and view all the answers

    What type of unemployment occurs when workers are laid off due to a recession?

    <p>Cyclical Unemployment (C)</p> Signup and view all the answers

    Which type of unemployment is primarily caused by outdated skills due to technological advancements?

    <p>Structural Unemployment (D)</p> Signup and view all the answers

    What is the formula to calculate the unemployment rate?

    <p>Unemployed / Labour Force x 100 (D)</p> Signup and view all the answers

    What is the primary goal of expansionary fiscal policy during a recession?

    <p>Increase aggregate demand (A)</p> Signup and view all the answers

    What is the main effect of higher interest rates on consumer behavior?

    <p>Decreases borrowing and increases saving (B)</p> Signup and view all the answers

    Which of the following describes tight money policy?

    <p>Decreases money supply and raises interest rates (D)</p> Signup and view all the answers

    Which of the following best defines the labour force?

    <p>All individuals aged 15 and over who are either employed or actively seeking employment (D)</p> Signup and view all the answers

    What type of unemployment is exemplified by a ski instructor losing work in the summer?

    <p>Seasonal Unemployment (B)</p> Signup and view all the answers

    What action is typically associated with contractionary fiscal policy?

    <p>Increasing taxes (B)</p> Signup and view all the answers

    During which economic period would a government most likely implement easy money policy?

    <p>During recessionary periods (C)</p> Signup and view all the answers

    What is measured by the Consumer Price Index (CPI)?

    <p>The average price level of a basket of goods and services consumed by households (B)</p> Signup and view all the answers

    Which of the following formulas properly calculates the inflation rate?

    <p>(CPI year 2 - CPI year 1) x 100 / CPI year 1 (A)</p> Signup and view all the answers

    What is one potential consequence of government subsidies?

    <p>Distortion of market prices (B)</p> Signup and view all the answers

    How does contractionary monetary policy typically affect interest rates?

    <p>Increases them (A)</p> Signup and view all the answers

    Which of the following is a characteristic of an expansionary fiscal policy?

    <p>Lowering taxes (D)</p> Signup and view all the answers

    Which scenario best fits the application of contractionary fiscal policy?

    <p>During a period of rising inflation (D)</p> Signup and view all the answers

    What is one potential negative consequence of providing large subsidies for electric vehicles?

    <p>Greater reliance on government support (C)</p> Signup and view all the answers

    How do taxes generally impact overall welfare in a market?

    <p>They decrease overall welfare (B)</p> Signup and view all the answers

    Which category of price elasticity indicates that consumers are not significantly affected by price changes?

    <p>Inelastic demand (C)</p> Signup and view all the answers

    What can occur as a result of price controls in a market?

    <p>Shortages or surpluses (A)</p> Signup and view all the answers

    What is the primary role of price elasticity of demand (PED) in the context of taxation?

    <p>It indicates how much price changes will affect quantity demanded (B)</p> Signup and view all the answers

    Why might a government intervention, such as subsidies, lead to overproduction?

    <p>It distorts the true cost of production (C)</p> Signup and view all the answers

    In what scenario might the demand for a product be classified as elastic?

    <p>When luxury items see a significant drop in demand due to a slight price increase (A)</p> Signup and view all the answers

    What is a deadweight loss in the context of government interventions?

    <p>A reduction in total welfare due to market distortion (A)</p> Signup and view all the answers

    Study Notes

    CIE3M Exam Review Topics

    • Format:
      • Section 1: Multiple choice (30 marks, 40 mins)
      • Section 2: Short answer, graph drawing, and calculations (25 marks, 40 mins)
      • Section 3: Essay (20 marks, 40 mins, choose 1 of 2 essay questions - micro/macro)
    • Topics and Terminology:
      • Economic Problem - Scarcity: The basic economic problem; resources are limited while human wants are unlimited, forcing choices in resource allocation.
      • Scarcity: The state of being scarce or in short supply.
      • Limited Resources: Resources like land, labor, and capital are limited, unable to satisfy all desires.
      • Unlimited Wants: Human wants are infinite (e.g., food, clothing, shelter, entertainment).
      • Choice and Trade-offs: Scarcity forces choices, often requiring trade-offs (choosing one option means giving up another).
      • Resource Allocation: Scarcity necessitates decisions about how resources are efficiently allocated, often emphasizing pricing, supply, and demand, and economic policies.
      • Factors of Production:
        • Land: Natural resources (e.g., minerals, forests).
        • Labor: Human effort, both physical and mental.
        • Capital: Man-made resources used for production (e.g., machinery, buildings).
        • Entrepreneurship: The ability to organize resources and take risks to create goods and services.
        • Technology: Knowledge and tools that enhance production efficiency.
      • Economic Questions: What to produce, how to produce, and for whom to produce?
      • Production Possibilities Curve (PPC): A graphical representation of the maximum combinations of two goods that can be produced with available resources, illustrating concepts like efficiency and trade-offs.
      • PPC Growth/Decline: Movement of the PPC curve to the right or left is caused by changes in technology and/or resource quantity and quality. Reasons for growth include accumulation of capital, technological advances, population increases, and available land. Reasons for decline include population decrease, catastrophes, loss of land, aging population, less healthy populations, and decreased productivity.
      • Opportunity Cost: The value of the next best alternative that must be given up when making a choice.
      • Positive vs. Normative Statements:
        • Positive: Factual statements that can be tested (e.g., "Raising taxes increases revenue").
        • Normative: Opinion-based statements that cannot be directly tested (e.g., "Taxes should be higher to reduce inequality").
      • Financial Investments:
        • RRSPs (Registered Retirement Savings Plans)
        • TFSAs (Tax-Free Savings Accounts)
        • Stocks
        • Bonds
        • Mutual Funds
        • GICs (Guaranteed Investment Certificates)
      • Spending Methods:
        • Loans
        • Leases
        • Debit Cards
        • Cash
      • Credit: Most common form of credit today = Credit Cards. Key features like interest, costs and benefits.
      • Microeconomics:
        • Change in supply and demand vs. change in quantity supplied and quantity demanded
        • Determinants of supply and demand
        • Equilibrium
        • Consumer surplus, producer surplus and community surplus
      • Elasticity of Demand:
        • Elastic: Consumers are very responsive to change in price (Value > 1) - e.g., luxury goods.
        • Unit Elastic: Consumers are proportionally responsive to change in price (Value = 1) - e.g., a meal deal.
        • Inelastic: Consumers are not very responsive to change in price (Value < 1) - e.g., basic goods like food.
      • Total Revenue, Inelastic demand, Elastic Demand, Unitary Demand: The implications of these on prices.
      • Government Intervention (Taxes, Subsidies, Price Controls):
        • Taxes (specific excise vs. ad valorem)
        • Subsidies (payments to reduce production costs)
        • Price Controls (price floor vs. price ceiling)
        • Implications on consumer and producer surplus.
      • Macroeconomics:
        • GDP (definition and formula) - Expenditure approach: GDP = C + I + G + (X-M)
        • Real GDP, aggregate demand (AD)
        • Determinants of AD (Consumption, Investment, Government Spending, Net Exports).
        • Aggregate Supply (AS)
        • Leakages and Injections
        • Unemployment (Types: Frictional, Seasonal, Cyclical, Structural, Replacement, Technological)
        • Unemployment rate formula
        • Inflation rate formula + definition - CPI
        • Measuring Inflation
        • Interest rates
        • Fiscal policy (expansionary vs. contractionary)
        • Monetary policy (easy money vs. tight money)
      • Costs: Fixed costs, variable costs, total costs, marginal costs, short run costs, long run costs
      • Profit: Economic profit - total revenue - total costs
      • Market Structure: Perfect competition, monopolistic competition, oligopoly, and monopoly (characteristics)
      • Law of increasing returns to scale: When all inputs increase proportionally, but output increases by a larger proportion
      • Law of diminishing marginal returns: When one input increases while others remain constant, there comes a point where each additional unit of that input produces a smaller increase in output.

    Studying That Suits You

    Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

    Quiz Team

    Related Documents

    Economics Grade 11 Exam Review PDF

    Description

    Test your understanding of key concepts related to elasticity of demand and supply determinants. This quiz explores the implications of inelastic and elastic demand for businesses, the relationship between price and demand, and other factors affecting market behavior. Perfect for economics students and enthusiasts looking to solidify their knowledge.

    More Like This

    Use Quizgecko on...
    Browser
    Open
    Browser
    Browser