Evangel College
2010/2011 Term 3
Economics – S.5 Summer Revision 05
Name:_____________________________(
)
`Class:S.5 _______
Part 7 Demand and Supply
1. Suppose an airline reduces the price of its air tickets. As a result, [2004]
A. the demand for its air tickets will increase.
B. the number of its passengers will increase.
C. the supply of its aircraft service will increase.
D. its sales revenue will increase.
2.
Support the government raised the water charge in January 1997. What would be the result? [1997]
A. a decrease in the demand for water
B. a decrease in average household water consumption
C. a decrease in the government revenue from the water charge
D. a decrease in the cost of production of restaurants because they would use less water
3.
If the market price of a good is equal to its equilibrium price, [1995]
(1) the sellers can sell all the quantity that they are willing to supply at that price.
(2) there is no pressure for the price to change.
(3) the sales revenue is maximized
(4) consumers’ want of the good is fully satisfied
A. (1) and (2) only
B. (1) and (4) only
C. (2) and (3) only
D. (3) and (4) only
4.
Lane Crawford 50% discount on all items!
This method of sales promotion can be explained by [1995]
A. the law of supply.
B. economies of scale.
C. the law of demand.
D. the principle of comparative advantage.
5.
Nowadays, more schools in Hong Kong have implemented reading programs to develop students' reading
habits. This would lead to an increase in [2006]
A. both the demand for and the supply of books.
B. both the demand for and the quantity supplied of books.
C. both the supply and the quantity demanded of books.
D. both the supply and the quantity supplied of books.
6.
An increase in the price of petroleum will lead to a decrease in [2006]
A. the demand for petroleum.
B. the demand for mini-bus services.
C. the supply of mini-bus services.
D. the supply of mini-bus drivers.
7.
The following diagram shows the private housing market. Point E is the original equilibrium point.
[2006]
Suppose there is an increase in both the home mortgage loan interest rate and the labour
cost of private house construction. The new equilibrium point in the diagram would be
A. W
B. X
C. Y
D. Z
8.
Suppose consumers of traditional eye-glasses gradually change to using contact lenses. As a result, the
equilibrium price of traditional eye-glasses will _______ and the sales revenue of traditional eye-glass
sellers will__________. [2005]
A. rise ... increase
B. rise ... decrease
9.
C. fall... increase
D. fall ... decrease
The labour supply will increase if [2004]
A. more job vacancies are available.
B. more universities offer 4 - year degree courses instead of 3 - year degree courses.
C. the number of public holidays in a calendar year is reduced.
D. the retirement age is reduced.
10. If a country reduces a per-unit tariff on its imported garments, [2003]
A. the domestic demand for imported garments would increase.
B. local consumers' expenditure on imported garments would increase.
C. the sales revenue of domestic garment producers would decrease.
D. the tariff revenue of the country coming from imported garments would decrease.
11. ‘Compared to last year, more watermelons were sold this summer and the price was lower.’ This is
because there was a (an) ______ in the ______ watermelons. [2001]
A. increase … demand for
B. decrease … demand for
C. increase … supply of
D. decrease … supply of
12. Suppose the rice production in Thailand suffers a serious fall in output and hence less rice
is exported to Hong Kong. Which of the following is a result of this event? [1998]
D
13. When the supply of a commodity increases, its price may rise if [1998]
A. The demand for it is perfectly inelastic.
C. The price of its complement decreases.
B. The demand for it is perfectly elastic.
D. The price of its substitute decreases.
14. An increase in the supply of leather which is used in the production of shoes will have the
following effects EXCEPT [1996]
A. an increase in the demand for shoes.
B. an increase in the supply of shoes.
C. an increase in the quantity demanded of leather.
D. an increase in the quantity demanded of shoes.
15. The supply of secondary school teachers will increase if [1996]
A. the government provides a subsidy for schools to employ more language teachers.
B. the government increases the salary of teachers.
C. the number of children eligible for secondary education increases
D. the number of job vacancies in the business field decreases
16. Suppose the price of paper falls drastically and the number of school children increases.
(i) Explain why the supply of and the demand for textbooks would be affected by these changes.
(ii) With the aid of a diagram, explain under what condition the price of textbooks would decrease.
(8 marks) [2003]
(i) -lower cost of production (1) => increase in supply (1)
-larger number of buyers (1) => increase in demand (1)
(ii)
Indicate in the diagram :
- supply curve shifts to the right (1)
- demand curve shifts to the right (1)
- larger shift of the supply curve and a fall in price (1)
Verbal elaboration:
increase in supply > increase in demand (1)
Quantity
17. A reporter wrote : '... The government has not allowed families with an income of more than $21 000 a
month to buy a living unit under the Home Ownership Scheme (HOS). Nevertheless, there are not
enough living units under this scheme available for applicants.'
(a) Use your knowledge of demand and supply to describe the HOS living units market. Illustrate your
answer with the aid of a diagram.
(b) If the income restriction on the applicants is lowered to $18 000, explain the effect on the HOS living
units market by using the diagram in (a). (7 marks) [2003]
Indicate in the diagram :
- a constant price (P) below the equilibrium price (1)
- excess demand at the income restriction of $21 000
(demand is D1 D1) (1)
- demand curve shifts to the left (1)
- resulting in a smaller excess demand or even no more excess demand (1)
Verbal elaboration:
- the fixed price is below the equilibrium price (1)
- excess demand at the beginning (1)
- demand falls due to further income restriction (1)
18. Some petroleum companies complained that their business was affected because some drivers bought
gasoline from smugglers who evaded import duties.
With the aid of a diagram, explain how the smuggling of gasoline would affect the sales revenue of
petroleum companies. (7 marks) [2000]
Answer:
substitute is available (1)
D (1)
P & Q (1)
TR (1)
The Legal Petroleum Market
Indicate in the graph:
- D (1)
-PQ reduces to P’Q’ (2)
19. Mr. Wong employs some imported workers in the restaurant.
(i) With the aid of a diagram, explain the effect of importation of workers on the equilibrium wage rate of
restaurant workers in Hong Kong. (4 marks)
(ii) Use the same diagram to illustrate the effect of importation of workers on the employment level of
local restaurant workers. (3 marks) [1998]
(i)
Diagram (2)
-an increase in the supply of restaurant workers (1)
-the equilibrium wage rate will fall (1)
(ii) Diagram showing:
-Q1: original employment level of local restaurant workers (1)
-Q2: new employment level of local restaurant workers (1)
The employment level decreases or diagram showing Q1
Q2 (1)