IGCSE Economics Paper 1: Microeconomics and Business Economics

Front

Which one of the following is a factor of production? Taxation, Gym workout, Enterprise, Restaurant meal

Back

Enterprise

Answer explanation

Enterprise is a factor of production as it involves the organization and management of resources to create goods and services. The other options do not represent factors of production.

Front

What is the basic economic problem?

Back

Scarcity of resources

Answer explanation

The basic economic problem is the scarcity of resources, which means that there are limited resources to meet unlimited wants and needs. This fundamental issue drives the study of economics.

Front

Which of the following is an example of capital? Coal, A delivery van, A cleaner, A mortgage

Back

A delivery van

Answer explanation

A delivery van is an example of capital because it is a physical asset used in business operations. Coal is a raw material, a cleaner is a service, and a mortgage is a financial obligation, not capital.

Front

Opportunity cost

Back

The benefit lost from the next best alternative

Answer explanation

Opportunity cost is defined as the benefit lost from the next best alternative when a choice is made. It emphasizes the value of the option not taken, making this choice the correct answer.

Front

Which of the following best describes a market economy?

Back

Supply and demand determine prices

Answer explanation

A market economy is characterized by prices determined by supply and demand, reflecting consumer preferences and resource availability. This contrasts with government-set prices or centrally made decisions.

Front

A production possibility curve (PPC) shows:

Back

Opportunity cost and trade-offs

Answer explanation

A production possibility curve (PPC) illustrates the opportunity cost and trade-offs involved in allocating resources between different goods. It shows how much of one good must be given up to produce more of another.

Front

If a country moves from a point inside the PPC to a point on the PPC, it shows:

Back

Improved resource allocation

Answer explanation

Moving from a point inside the PPC to a point on the PPC indicates better utilization of resources, leading to improved resource allocation. This reflects an increase in efficiency rather than inflation or contraction.

Front

Demand

Back

The quantity of a good that consumers are willing and able to buy at a given price

Answer explanation

Demand refers to the quantity of a good that consumers are willing and able to buy at a specific price, making the correct choice the most comprehensive definition of demand.

Front

What would most likely cause an increase in demand for air conditioners?

Back

Increase in temperature

Answer explanation

An increase in temperature typically leads to higher demand for air conditioners, as people seek relief from the heat. In contrast, a fall in population, increased electricity costs, or decreased income would likely reduce demand.

Front

A normal good is one where:

Back

Demand increases when income rises

Answer explanation

A normal good is defined as one where demand increases when income rises. This means that as consumers have more income, they tend to buy more of the good, distinguishing it from inferior goods.