Edexcel Economics Theme 1

What does the ceteris paribus assumption imply in economic modeling?

• The economy is in a state of equilibrium

• All variables change at the same time

• Only one variable changes while all others are held constant

• All variables are irrelevant

Which of the following best describes a normative economic statement?

• The government should increase minimum wage

• A rise in consumer spending increases GDP

• Inflation rates are predicted to rise

• The unemployment rate is 5%

What is the main problem addressed by the economic problem?

• Government intervention

• Inflation

• Scarcity of resources

• Income inequality

What does a point inside the production possibility frontier represent?

• Unattainable production

• Inefficient allocation of resources

• Economic growth

• Efficient allocation of resources

Who is associated with the concept of division of labour?

• Karl Marx

• Adam Smith

• Friedrich Hayek

• John Maynard Keynes

What is a characteristic of a free market economy?

• Prices determined by supply and demand

• Central planning by the government

• Equal distribution of income

• High level of government intervention

What does the concept of diminishing marginal utility explain?

• Decrease in supply with an increase in demand

• Decrease in demand with an increase in price

• Decrease in satisfaction with each additional unit consumed

• Decrease in production costs with increased output

What does price elasticity of demand measure?

• The responsiveness of supply to a change in price

• The responsiveness of quantity demanded to a change in price

• The responsiveness of quantity demanded to a change in income

• The responsiveness of quantity supplied to a change in income

What is an example of a public good?

• National defense

• A concert ticket

• A cup of coffee

• A branded smartphone

What can cause a shift in the supply curve?

• A change in technology

• A change in consumer preferences

• A change in the price of the good

• A movement along the supply curve