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This document contains a 6 question test on economics. The questions cover topics like market equilibrium, supply and demand, price mechanisms, and opportunity costs. Key details assessed include identifying situations that represent market equilibrium, how markets typically respond to shortages or surpluses, and using supply and demand diagrams to analyze market adjustments.

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tamim haque
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65 views

Solution

This document contains a 6 question test on economics. The questions cover topics like market equilibrium, supply and demand, price mechanisms, and opportunity costs. Key details assessed include identifying situations that represent market equilibrium, how markets typically respond to shortages or surpluses, and using supply and demand diagrams to analyze market adjustments.

Uploaded by

tamim haque
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Interna'onal Hope School Bangladesh

2023-2024 Academic Year – Second Term – Class Test - 1

Name: Class/Sec-on:8/
Subject: Economics IHSB No: Date:

Circle the correct op,on:

1) A newspaper reported that ‘The world market for coffee has returned to equilibrium’. Which situa?on
supports this statement? (1)
A. A sequence of poor harvests resulted in shortages.
B. Decreased transport costs led to a surplus of supply.
C. Farmers matched demand by plan?ng more coffee bushes.
D. The price of coffee was fixed between producers.

2) When demand exceeds supply for a product, what does the price mechanism usually lead to? (1)
A. An increase in government interven?on to control prices.
B. A decreased in demand as consumers find subs?tutes.
C. An increase in the price of the product.
D. A surplus of the product in the market.

3) What does it mean when a market is in disequilibrium? (1)


A. Supply and demand are balanced.
B. Excess supply or demand exists.
C. The market is not func?onal.
D. Prices are fixed by the government.

4) In a market characterized by excess supply, what is likely to happen in the absence of interven?on? (1)
A. Producers will reduce prices to eliminated excess supply.
B. Producers will increase prices to match the excess supply.
C. Consumers will increase demand to match the excess supply.
D. Consumers will decrease demand to match the excess supply.

5) How do market forces typically respond to a shortage? (1)


A. Prices decrease to eliminates the shortage.
B. Prices increase to eliminate the shortage.
C. Prices remain unchanged despite the shortage.
D. Producers reduce supply to address the shortage.
6) Answer the following ques,ons:
a) What may be the opportunity cost of buying apples? (2)

Ans: Opportunity cost is the best alternative forgone. The opportunity cost of buying apples
may be, for instance, buying oranges. Money spent on apples cannot be spent on anything
else.

b) Explain why the market for apples may be in disequilibrium. (3)

Ans: The market for apples may be in disequilibrium because either demand exceeds
supply or supply exceeds demand. Demand will exceed supply if price is below equilibrium.
In this case, there will be a shortage. Supply will be greater than demand if price is above
equilibrium. This time there will be a surplus.

c) Analyse, using a demand and supply diagram, why a surplus of apples will be eliminated.
(4)

Ans: A surplus of apples will be eliminated by the downward pressure that market forces
put on the price. Producers, unable to sell all that they want to, will have to lower price. As
price falls, supply will contract and demand will extend until they are both again equal as
shown in the diagram below.
d) Discuss whether or not consumers will benefit from a market being in disequilibrium. (6)

Ans: Consumers will not benefit from a market being in disequilibrium if price is above the
equilibrium level. Those who do buy the product, Qd quantity on the diagram below, are
paying more than the market price. The quantity bought and sold, Qd, is also below the
equilibrium level of Qx. This means that there are some unsatisfied consumers.

Some consumers will benefit from the price being below the equilibrium. In the diagram
below, sales will be Qs at the price of P. There are, however, some unsatisfied consumers at
this price. Indeed, there is a shortage of Qd − Qs.

The greatest satisfaction for consumers in total is gained when the market is in equilibrium.
In this situation, all those willing and able to purchase the product are able to buy it and the
price is at the minimum producers would be prepared to accept to sell that quantity.

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