Economics

Examination Questions (Paper 1, Part (a) questions) 1. Distinguish between a shift of the demand curve for a product and a movement along the products demand curve. Movement along the demand curve is only affected by the price of the good. Which subsequently affects the quantity demand of the particular product. For example when the price of a shirt increases, the quantity demand for the shirt decreases causing a movement along the demand curve. Demand for Shirts

Price P2 Y

P1

The shift along the demand curve is from point X to point Y. It is a downward movement along the curve

Q2

Q1

Quantity

A shift of the demand curve on the other hand may be affected by a few factors such as income of consumer, number of buyers, expectations and many more. For example, if number of consumer increases, demand for the product (shirts) will also increase and vice versa. Demand for Shirts

Price

D1 D Quantity

When the number of consumers increases, demand for shirts also increases. Thus the curve shifts to the right. From D to D1

2. With reference to two different determinants of demand, explain why the demand curve for bicycles might increase. Use a diagram to support your answer. A few of the factors that affect demand are number of buyers and income of a consumer.

1. The factor of number of buyers - As the number of buyers for bicycles increase, the demand for bicycles also increases. Therefore the curve shifts to the right. Demand for Bicycles

Price D1 D Quantity Demand curve shifts to the right. From line D1 to line D2

2. The factor of income of a consumer - As the income of consumers increases, their disposable income also increases thus giving the consumer more purchasing power resulting in more demand for bicycles. Therefore the demand curve shifts to the right.

Demand for Bicycles

Price -

Demand curve shifts to the right. From line D1 to line D2

D1 D Quantity

3. Distinguish between a shift of the supply curve for a product and a movement along the products supply curve. Movement along the supply curve is only related to the price of the related product. Which affects the quantity supply of the particular product. For example, when the price of shirts increases, the supply for shirts also increases because the company wants to make more profit, causing movement along the supply curve. Market for shirts

Price P2 Y P1 X Movement along the supply curve from point X to Y. Upward movement along the supply curve.

Q1

Q2

Supply

A shift of the supply curve may be affected by a few factors such as cost of production, subsidies, and number of sellers, technology and many more. For example, if the cost of production of shirts were to decrease, the supply for shirts would increase as it would take less money to produce and increase profit, causing a shift in the supply curve Market for shirts

Price

S1 -

Supply curve shifts to the right. From S to S1

S1
Supply

4. With reference to two different determinants of supply, explain why the supply of coffee beans might decrease. Use a diagram to support your answer. A few factors that affect supply is temperature and taxes.

1. The factor of temperature. - As we know, coffee beans originate from the fruit that needs specific weather conditions to grow properly. Therefore due to bad weather conditions, supply of coffee beans is low. This causes supply curve to shift to the left.

Market for coffee beans

Price

S2 S

Supply curve shifts to the left. From S to S2

S2

Supply

2. The factor of Tax. - The coffee beans usually originate from foreign countries such as Brazil and Indonesia. Therefore these coffee beans are exported to other countries. For example, if the tax for exporting coffee beans were to increase this would technically increase the cost of production, thus reducing the supply of coffee beans. This causes the supply curve to shift to the left. Market for coffee beans

Price

S2 S S2 Supply curve shifts to the left. From S to S2

Supply