Unit 1&2 Test Review

If the price of a good increases, it will tend to reduce the demand for its complementary good.

• True

• False

The value of PED tends to increase over time as consumers have the time to seek or switch to alternative products.

• True

• False

The supply of a particular product is likely to be price inelastic if the production process is long.

• True

• False

What does an economist mean by the factor of production called 'capital'?

• a good that can be used to produce other goods

• money used to start a business

• resources that cannot be replaced

• the profits of a company

The table illustrates the demand and supply for coffee in a market in Africa.

When the price rises from $20 to $30 per kg, what is the price elasticity of demand for coffee?

• 0.2

• 0.5

• 2.0

• 5.0

A country is operating at point X on its production possibility curve (PPC). A drought significantly reduces agricultural output. Which point represents the new position?

• A

• B

• C

• D

The diagram shows the market for a product. Which statement about the points marked on the diagram is correct?

• The distance from W to X shows a shortage of the product.

• The distance from Z to Y shows a surplus of the product.

• The movement from W to Y shows a fall in the quantity demanded of the product.

• The movement from X to Z shows a fall in the quantity supplied of the product.

In response to an increase in price from $5 per kilo to $6 per kilo a chicken farmer increased supply from 400 kilos to 500 kilos per week.

What is the price elasticity of supply?

• 0.8

• 0.9

• 1.2

• 1.25

A person can make 10 items to sell on a craft stall in a day. What is the opportunity cost if the person decides to paint a picture instead?

• 10 craft items

• the cost of the materials for the craft items

• the cost of the paint for the picture

• the value of the picture

There is excess demand in the market for a product. What change will cause the market to reach equilibrium?

• A decrease in market supply

• A fall in price

• An increase in market supply

• A rise in price