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ECONOMICS
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READ THESE INSTRUCTIONS FIRST
There are fifteen questions in this document. Answer all questions.
Part A comprises of 8 structured questions which require analytical reasoning and diagrammatic analysis. Draw
neat and well labeled diagrams wherever required.
Part B comprises of 6 short questions. For the multiple choice questions tick the appropriate answer. Incase two
options are correct then tick both the correct options. For questions which require one word answers write the
answer next to the questions.
Part C comprises of 1 case study which helps students to prepare for critical evaluation.
You may submit this in a neat project file with your name and group neatly written on it.

Section A
1. Explain the meaning of (a) Joint demand (b) Competitive demand with appropriate examples.

2. (a) The price of butter is affected by the prices of certain other goods such as margarine, milk and bread.
How will a rise in the price of each good affect the demand for butter?

(b) Use 3 separate demand and supply curves for butter to illustrate your answer to part a

c) Use demand and supply diagrams to show the effect on the price and quantity sold of butter if a major
health report comes out suggesting that butter can cause heart disease, while at the same time price of milk
purchased by butter producers rises.
3. Sketch a demand and supply curve to show what happens in the market for Turbo chocolate if there is a
successful advertising campaign for a different substitute brand of chocolate?
4. Calculate the price elasticity of demand when the price of sweets rises from 10p to 11p
in the data given below: -
Price of sweets Quantity demanded
Per 4 oz bag (pence) (4 oz bags per day)
10 100
11 80

5. What could cause demand for a product to become more price elastic?
6. Calculate price elasticity of demand when price of a commodity increases from $ 10 to $15 and results in a
fall in its demand from 4000 units to 3000 units?
7. A local bus company lowered its bus fares. Although the number of passengers increased there was a fall in
the weekly receipts from bus fares. Was the demand for bus services elastic or inelastic? Explain your answer.

8. Use a demand and supply diagram to illustrate the effect of the following events on the market for economics
books in India:
(a) A successful advertising campaign runs in the country by publishers of economic books.
(b) A decrease in the number of students studying economics.

Section B
9. For which of two of the following goods demand is likely to be elastic?
(a) Electricity used for lighting (b) A particular brand of butter (c) One of the cheaper makes of ball-point pens
(d) Bread.
10. In which of the two cases is supply perfectly inelastic
(a) Seats in a London theatre (b) Cars produced by jaguar (c) Paintings by Rembrandt
11. The price of a product rises. What will happen to the demand for its complement?
(a) It will contract.
(b) It will extend
(c) It will decrease
(d) It will increase

12. A person decides to go to the university for three years, to study economics. If he had not gone, he could
have taken up a job which would have paid him $ 15,000 a year. After he graduates he expects to find a job
paying him $ 40, 000 a year. What is the opportunity cost of going to the university for him?
a) $15,000
b) $ 40,000
c) $45,000
d) $120,000
13. Decide in each case, whether the following would cause an extension in demand, a contraction in demand,
an increase in demand or a decrease in demand for fish in a country :
(a) a rise in the price of fish
(b) a report that eating fish reduces heart diseases
(c) net emigration
(d) a fall in the price of chicken
14. The price of a product rises from $ 60 to $90. This causes demand to contract from 800 to 600. What type
of price elasticity of demand does this product have over this price range?
(a) Perfectly inelastic
(b) Inelastic
(c) Unity
(d) Elastic
Section C
15. Food production in a number of countries has fallen greatly recently as a result of very low rainfall. At the
same time, unemployment has risen in rural areas. The United Nations and other international organizations
have sent gifts of food to those countries to help prevent starvation.
(a) Draw a demand and supply diagram to show what might happen to the price and quantity of food in
those countries.
(i) As a result of low rainfall.
(ii) As a result of the gifts of food provided.

(b) Why does low rainfall have greater effects on the standard of living in a developing country than in a
developed country?

Contraction
Increase
Decrease
Extend