Global Pathways International School

Mock 1 Examination (Economics)

IGCSE Batch 6
WRITE ALL YOUR ANSWERS IN THE SEPARATE
ANSWER BOOKLET PROVIDED
TOTAL MARKS: 100 MARKS
Date: 17- Feb- 2025 TIME: 2 HOUR 30 MINUTES
Multiple Choice Question (30 Marks)
1. What encourages firms to produce what consumers demand?
A. The chance to earn a high profit
B. The chance to experience high unit costs of production
C. The desire to attract new firms into the industry
D. The desire to keep revenue as low as possible

2. Which factor of production is the most mobile?

A. Capital
B. Enterprise
C. Labor
D. Land

3. What is price elasticity of demand?

A. A measure of the extent to which price changes when the quantity
demanded changes
B. A measure of the extent to which the quantity demanded changes when
price changes
C. A measure of the extent to which total revenue changes when price
changes
D. A measure of the extent to which price changes when total revenue
changes

4. Who decides what is produced in a market economy?

A. consumers
B. managers
C. shareholders
D. the government
 5. Demand for a product is inelastic. What effect will a fall in price have?
A. Demand will not change
B. Demand will change by a greater percentage
C. Total revenue will fall
D. Total revenue will rise

6. Price is initially set above equilibrium. Market forces then move it towards
equilibrium. As price falls, what will happen to demand and supply?
Demand Supply
A. contracts contracts
B. contracts extends
C. extends extends
D. extends contracts

7. Which of the following is likely to cause the price of the lamb to decrease?
A. an decrease in the number of sheep farmers
B. an increase in the price of beef
C. a subsidy given to sheep farmers
D. a successful advertising campaign for lamb

8. The table shows the demand and supply of a book published by a Japanese
firm
Price per book ($) Quantity demanded per week Quantity supplied per week
10 5000 2000
15 4000 3000
20 3000 4000
25 2000 5000
When the price rises from $10 to $15 per book, what is the price elasticity of
demand for the book?
A –0.4 B –0.8 C –1.0 D –2.5
9. What could make demand for a product become more elastic?
A. a fall in its price
B. a fall in the proportion of income spent on the product
C. a decrease in the time period under consideration
D. an increase in the number of close substitutes
 10. What does a PED of 0.8 indicate?
A Demand is elastic B Demand is perfectly elastic
C Demand is perfectly inelastic D Demand is inelastic

11.Why does travel by private jet have elastic demand?

A. It is a luxury form of travel
B. It is a necessity
C. It has to be arranged some time in advance
D. It has no close substitutes

12. Which pair of products is an example of joint supply?

A. Bread and butter
B. Cars and petrol
C. Beef and leather
D. Computers and printers

13.Equilibrium price is the price at which:

A. Everything that is produced is sold
B. The amount consumers demand is equal to the amount sellers supply
C. The number of buyers equals the number of sellers
D. Supply exceeds demand

14. Study the demand and supply schedule below and answer the question that
follow.
Price ($) Quantity demanded Quantity supplied
(units per week) (units per week)
15 9,000 2,000
20 8,000 4,000
25 7,000 6,000
30 6,000 8,000
35 5,000 10,000
At a price of $25, what situation does the market show?
A Market equilibrium C Excess demand
B Excess supply D Stockpiling
 15. What are the three questions faced by all economies?
A. What to produce, when to produce it and who receives it
B. What to produce, how to produce it and who receives it
C. Where to produce, how to produce and when to produce
D. Where to produce, when to produce and why to produce

16. A country experiences a fall in unemployment. How would this be shown

on a PPC diagram?
A. A movement of the production point away from the curve
B. A movement of the production point towards the curve
C. A shift of the PPC to the left
D. A shift of the PPC to the right

17. Which of the following is most likely to cause an inwards shift of a

country’s production possibility curve?
A. A natural disaster in the economy
B. An increase in the quantity of factors of production
C. Better quality factors of production
D. Higher opportunity costs of production

18.Which of the following is not microeconomics?

A. Why is the output of India greater than the output of Sri Lankha?
B. Why are pilots paid more than cabin crew?
C. What can be done to reduce road congestion in Paris?
D. Why is the diamond industry expanding in China?

19.On his birthday, Kamran receives $200 from his aunt, $50 of which he
decides to save. He is taken out by his father for lunch. His father pays the
bill. Kamran spends the afternoon playing football. Which of these activities
involves an opportunity cost?
Eating the free lunch Playing football Saving
A No No No
B No No Yes
C No Yes Yes
D Yes Yes Yes
 20. Payment for capital; one of factors of production is
A. Rent C. Profit
B. Wages D. Interest

21.Why will scarcity continue to be a problem in the future?

A. Prices will rise
B. The quantity of resources will decline
C. Wants will continue to increase
D. World population will fall

22.The diagram shows the market equilibrium E for product X. product X has a
downward sloping demand curve and an upward sloping supply curve.
The price of a substitute good falls. Into which area of the diagram would
the market equilibrium for product X move?

23. A country produces 3000 new capital goods in a week. 500 of these replace
worn out capital goods. What is the net investment made?
A 500 B 2500 C 3000 D 3500
24. Households’ decision to buy less rice reduced the profit of rice farmers.
Which branch of economics covers these two changes?
Household’s decision Rice farmers’ profit
A Microeconomics Microeconomics
B Microeconomics Macroeconomics
C Macroeconomics Macroeconomics
D Macroeconomics Microeconomics
25.The table shows the maximum production possibilities for goods and
services for a country.
Goods (millions of units) Services (millions of units)
100 0
80 20
60 40
40 60
20 80
0 100
The country originally produced only goods but now produces 20 million
units of services. The country continues to operate at maximum production
possibility. What is the opportunity cost for this country?
A. 20 million units of goods
B. 100 million units of goods
C. 20 million units of services
D. zero

26.What could have caused the change in the shape of the production
possibility curve (PPC) shown below?

A. All resources are equally good at producing films and TV programmes

B. Resources cannot be switched between producing films and TV
programmes
C. The country is able to produce 50 films and 200 TV programmes
D. TV programmes take more resources to produce them than films
27. Which combination of economic concepts is illustrated by a production
possibility curve?
A. Cost and price
B. Demand and price
C. Economic goods and free goods
D. Opportunity cost and scarcity

28. Which type of factor of production are a football stadium and an owner of a
football club?
Football stadium Owner of a football club
A capital entrepreneur
B capital labour
C land entrepreneur
D land labour

29. What is a mixed economy?

A. One in which both capital and consumer goods are produced
B. One in which both necessities and luxuries are produced
C. One in which there is both an agricultural and a manufacturing sector
D. One in which there is both a private and public sector

30. What is meant by a contraction in demand?

A. A reduction in demand due to a rise in the price of the product
B. A reduction in demand due to a fall in the income of the population
C. A rise in demand due to a rise in the price of a substitute product
D. A rise in demand due to a fall in the price of a complement
Read the source material carefully before answering Question 1. (25 Marks)
Source material: The price of basmati rice
The price of basmati rice fluctuates. In 2016, it fell due to an excess supply. The
reduction in price resulted in a fall in revenue for the basmati rice farmers. In contrast
in 2013, the price of basmati rice increased. There had been a poor harvest that year,
whilst demand increased.
The aromatic, long-grain rice is grown in northern India and Pakistan and is eaten
throughout the world. People are, however, increasingly having a greater range of
food items to choose from. For example, quinoa is becoming more popular because
of the health benefits it is thought to possess.
The cultivation of basmati rice is relatively costly, and yields between one and two
tonnes per hectare, compared with six tonnes for rival cereals. Wheat, for example,
fluctuates less in price than basmati rice and some basmati rice farmers are switching
to higher-yielding and more profitable crops. Figure shows how the world price of
cereals and sugar changed over the period 2010-2016.

Figure: Index of world cereal prices and index of world sugar prices, 2010-2016
Attempts have been made to grow the Himalayan rice strain in Italy and some other
rice growing countries. These have, however, failed to produce an acceptable
product. Some basmati growers in India and Pakistan are trying to make the supply
of the rice more elastic, but this may not prove to be easy.
1 Referring to the source material in your responses, answer all parts of Question
1.
a. Identify an opportunity cost to farmers of growing basmati rice. [1]
b. Explain whether or not demand for basmati rice was elastic or inelastic in
2016. [2]
c. Explain who is the entrepreneur in the case of basmati rice farming. [2]
d. Explain two influences on supply for basmati rice. [4]
e. Analyse the changes in the price of cereals and the price of sugar between
2010 and 2016. [5]
f. Analyse, using a demand and supply diagram, why the price of basmati rice
changed in 2013. [5]
g. Discuss whether or not changes in demand or changes in supply have a large
influence on basmati rice market. [6]
Four-part questions (45 Marks)
1. In late 2016 an Australian firm announced that it would be starting a project
to use the power of waves off the coast in Cornwall in the UK to generate
electricity. More entrepreneurs are becoming interested in making use of wave
power which is a free good. More labour is likely to be employed in the
industry. The quantity of labour has increased in recent years.
a. Define an entrepreneur. [1]
b. Explain the difference between a free good and an economic good. [3]
c. Analyse, using a PPC, the effect on an economy of an increase in the
supply of labour. [5]
d. Discuss whether or not the quantity of labour in the UK is likely to
increase in the future. [6]

2. In 2016 the sales of smartphones increased most rapidly in the Philippines.

The equilibrium price of smartphones has fallen in recent years. It is thought
that demand for some smartphones is price inelastic.
a. Define equilibrium price. [1]
b. Explain two of the main factors that influence the demand for
smartphone. [3]
c. Explain, using a demand and supply diagram, why demand for
smartphones has increased in many countries, but their price has fallen.
[5]
d. Discuss the possible degrees of price elasticity of demand. [6]
3. A number of countries are increasing the role of market forces and reducing
the role of the government in their economies. For example, Cuba is
increasing the role of market forces in its economy. The country’s government
has legalised the private sale of cars and homes, and removed some price
controls and regulations.
a. Define price mechanism. [1]
b. Explain the differences between three main economic systems. [3]
c. Analyse what effect the building of an airport may have on the
decision of how to use an area of land nearby by using opportunity
cost concept. [5]
d. Discuss how market forces move price from disequilibrium to
equilibrium. [6]

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