Economics IGCSE Allocation of Resources

What is the law of supply and demand?

• The law of supply and demand states that prices remain constant regardless of market conditions.

• The price of a good or service is determined by the supply and demand for it in the market.

• Supply and demand have no impact on the price of goods and services.

• The law of supply and demand only applies to luxury items, not necessities.

Explain the concept of market equilibrium.

• Market equilibrium is when there is a shortage of products in the market.

• Market equilibrium is the point where the quantity of a product supplied by producers equals the quantity demanded by consumers, resulting in a stable price.

• Market equilibrium is when the price is constantly fluctuating.

• Market equilibrium is when the quantity supplied is greater than the quantity demanded.

List and explain the factors of production.

• Machinery, equipment, and tools

• Water, air, and sunlight

• Money, goods, and services

• Land, labor, capital, and entrepreneurship

Define opportunity cost and provide an example.

• The cost of going to college instead of working and earning money is the opportunity cost of going to college.

• The cost of eating out at a restaurant instead of cooking at home is the opportunity cost of eating out.

• The cost of buying a car instead of taking a vacation is the opportunity cost of buying a car.

• The cost of watching a movie instead of reading a book is the opportunity cost of watching a movie.

What is elasticity of demand and how is it calculated?

• Elasticity of demand measures the responsiveness of quantity demanded to a change in income. It is calculated by dividing the percentage change in quantity demanded by the percentage change in income.

• Elasticity of demand measures the responsiveness of quantity supplied to a change in price. It is calculated by dividing the percentage change in quantity supplied by the percentage change in price.

• Elasticity of demand measures the responsiveness of quantity demanded to a change in price. It is calculated by dividing the percentage change in quantity demanded by the percentage change in price.

• Elasticity of demand measures the responsiveness of quantity demanded to a change in cost. It is calculated by dividing the percentage change in quantity demanded by the percentage change in cost.

Explain the concept of consumer surplus.

• The difference between what producers are willing to sell a good for and what they actually receive.

• The difference between what consumers are willing to pay for a good or service and what they actually have to pay.

• The total amount of money consumers spend on a good or service.

• The amount of money consumers are willing to pay for a good or service.

What is price elasticity of supply and how does it affect the market?

• Price elasticity of supply has no impact on the market

• Price elasticity of supply measures the responsiveness of quantity supplied to a change in price. If the supply is elastic, a small change in price will cause a proportionally larger change in quantity supplied. If the supply is inelastic, a change in price will cause a smaller change in quantity supplied.

• Price elasticity of supply measures the demand for a product based on its price

• Price elasticity of supply measures the responsiveness of quantity demanded to a change in price

Define price elasticity of demand and provide an example.

• Price elasticity of demand is a measure of how much the quantity demanded of a good responds to a change in the quality of that good

• Price elasticity of demand measures the change in supply of a good in response to a change in price

• Price elasticity of demand is a measure of how much the quantity demanded of a good responds to a change in the price of that good. For example, if the price of a product increases by 10% and the quantity demanded decreases by 20%, the price elasticity of demand would be 2.

• Price elasticity of demand is a measure of how much the quantity supplied of a good responds to a change in the price of that good

Discuss the concept of market failure and its causes.

• Market failure occurs when the allocation of goods and services by a free market is not efficient, leading to a net welfare loss. Causes of market failure include externalities, public goods, imperfect competition, information asymmetry, and income inequality.

• Market failure is a rare occurrence and does not have significant impact on the economy

• Market failure occurs when the allocation of goods and services by a free market is always efficient

• Causes of market failure include perfect competition and equal distribution of income

Explain the characteristics of a mixed economic system.

• Completely controlled by the government

• Relies solely on supply and demand

• No private ownership of resources

• Combines elements of both capitalism and socialism