Question | Answer |
Define opportunity cost | The benefit from the next best alternative sacrificed.
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What is an inferior good? | a good where demand falls as consumer income increases
| What is the correlation between price and quantity demanded? | Negative
| Give an example of a pair of substitute goods | e.g. Starbucks and Pacific coffee
| Give an example of a pair of complementary goods | e.g. Tennis racquets and tennis balls
| Draw a demand and supply diagram, and label the equilibrium point. | accurately drawn diagram
| Consumer income increases. Which way will the demand curve shift? | Right
| Wages go up. How will employers likely react? | Replace labour with capital.
| Define “merit good” | A good that is underprovided by the free market.
| Give one government policy that would reduce the consumption or production of demerit goods | e.g. advertising.
| Give two examples of public goods | e.g. the police, streetlights
| Give one example of a service that government might provide in a mixed economy | e.g. education
| Which economy is considered to be the ‘freest’ in the world by the Heritage foundation? | Hong Kong
| Use a PPC to show an economy which is using its resources inefficiently. | Accurately drawn diagram
| Give one advantage of a command economy | e.g. can react quickly to natural disasters
| Give one disadvantage of a market economy | e.g. inequality of income
| Draw a diagram showing a shortage of a given good | Correctly drawn diagram
| Use a PPC to show an economy that has experienced long run economic growth e.g. because of technology | accurately drawn diagram
| What is the rate of inflation in Hong Kong? | 3.6% approx
| What is rate of unemployment in the UK | 6% approx |