Question 1a. Draw a production possibilities curve for a hypothetical economy producing capital goods andconsumer goods Illustrate economic growth and use (A) to represent an inefficientb. Explain the law of increasing opportunity cost.c. Explain why scarcity forces individuals and society to incur opportunity costs. Give three (3)specific examples.Question 2Market researchers have studied the market for orange juice, and their estimates for the supplyand the demand for orange juice per month are as follows:Quantity demandedPrice per gallon ($)250Quantity Supplied200600120030040050040015010050030050600200a. Using the above data, graph the demand for and the supply of orange juice. Identify theequilibrium point as E, and use dotted lines to connect E to the equilibrium price on the priceaxis and equilibrium quantity on the quantity axis.b. Assume that the government decided to set a price ceiling of $100 per gallon.i) Define price ceilingii) Explain three effects una inis legal maximum price will have on the supply of orange juice inthe market. (Draw a new hypothetical diagram to illustrate)Question 3a. Calculate the cross-price elasticity of demand for porridge oats and milk sold in a supermarketif at the end of last period, the price of the porridge oats rose from $150 to $210 and the demandfor milk sold, moved from 200 units sold to 180 units. State whether you think these two goodsare complements or substitutes.b. Consider the case where the manager of KFC finds that the number of two-piece mealsconsumed per week fell from 1200 to 1000 boxes when the price of its meals was increased from$400 to $520.i) Calculate the price elasticity of demand. Show your calculations.ii) If the KFC manager wishes to raise revenue, what is the appropriate action to take? (4 marks)c. Given that the demand function for banana chips may be written Qd-200-3p, where p is theprice for banana chips, and the supply may be written as Qs=30+2p. Determine the equilibriumprice and quantityQuestion 4a. Describe five (5) factors that influence the market demand for a product such as personalcomputers.b. Explain three (3) characteristics of the planned economy. Give one example for each.21175

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Question 1 a. Draw a production possibilities curve for a hypothetical economy producing capital goods and consumer goods Illustrate economic growth and use (A) to represent an inefficient

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Chapter1: Making Economics Decisions

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Question 1
a. Draw a production possibilities curve for a hypothetical economy producing capital goods and
consumer goods Illustrate economic growth and use (A) to represent an inefficient
b. Explain the law of increasing opportunity cost.
c. Explain why scarcity forces individuals and society to incur opportunity costs. Give three (3)
specific examples.
Question 2
Market researchers have studied the market for orange juice, and their estimates for the supply
and the demand for orange juice per month are as follows:
Quantity demanded
Price per gallon ($)
250
Quantity Supplied
200
600
1
200
300
400
500
400
150
100
500
300
50
600
200
a. Using the above data, graph the demand for and the supply of orange juice. Identify the
equilibrium point as E, and use dotted lines to connect E to the equilibrium price on the price
axis and equilibrium quantity on the quantity axis.
b. Assume that the government decided to set a price ceiling of $100 per gallon.
i) Define price ceiling
ii) Explain three effects una inis legal maximum price will have on the supply of orange juice in
the market. (Draw a new hypothetical diagram to illustrate)
Question 3
a. Calculate the cross-price elasticity of demand for porridge oats and milk sold in a supermarket
if at the end of last period, the price of the porridge oats rose from $150 to $210 and the demand
for milk sold, moved from 200 units sold to 180 units. State whether you think these two goods
are complements or substitutes.
b. Consider the case where the manager of KFC finds that the number of two-piece meals
consumed per week fell from 1200 to 1000 boxes when the price of its meals was increased from
$400 to $520.
i) Calculate the price elasticity of demand. Show your calculations.
ii) If the KFC manager wishes to raise revenue, what is the appropriate action to take? (4 marks)
c. Given that the demand function for banana chips may be written Qd-200-3p, where p is the
price for banana chips, and the supply may be written as Qs=30+2p. Determine the equilibrium
price and quantity
Question 4
a. Describe five (5) factors that influence the market demand for a product such as personal
computers.
b. Explain three (3) characteristics of the planned economy. Give one example for each.
21175

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3. Economic growth The following graph shows the production possibilities curve (PPC) of an economy that produces food and computers. Suppose that a series of natural calamities and climate changes significantly reduce the economy's endowment of natural resources and damages its productivity capacity. Adjust the PPC to show the economy's new production possibilities after the decrease in natural endowment. QUANTITY OF FOOD (Millions of pounds) 32 24 16 0 0 5 PPC 10 15 QUANTITY OF COMPUTERS (Millions of computers) 20 PPC Consider the direction in which you shifted the PPC on the graph. This type of shift of the PPC generally means that GDP that the population in this economy does not change. In such a case, GDP per capita of this economy experiences economic growth. Assume . This means the economy
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Question 1 a. Draw a production possibilities curve for a hypothetical economy producing capital goods and consumer goods Tlhustrate economic growth and 1use (A) to represent an inefficient b. Explain the law of increasing opportunity cost. c. Explain why scarcity forces individuals and society to incur opportunity costs. Give three (3) specific examples.