Theme 1 AO2

Question 1

Cigarettes increase in price. How does demand respond?

Answer 1

Demand is likely to stay unchanged as cigarettes are an inelastic good.

Question 2

The price of Coke increases. How does this affect demand for Pepsi?

Answer 2

Demand for Pepsi is likely to increase as less consumers will purchase Coke.

Question 3

A Gucci jacket has increased in price. How does this affect the demand for the Gucci jacket?

Answer 3

The demand for the Gucci jacket is likely to decrease as luxury goods are usually price elastic.

Question 4

Give three examples of a public good.

Answer 4

A street lamp, a park and national defense

Question 5

Give an example of specialisation.

Answer 5

A firm decides to produce phone screens rather than the whole phones.

Question 6

Give two examples of government intervention.

Answer 6

Giving subsidies to farmers and setting a maximum price on rent

Question 7

The UK government say that landlords may charge £1500 a month at most. What is this policy?

Answer 7

A maximum price of rent.

Question 8

Give an example of a command economy.

Answer 8

North Korea as the government controls price and the allocation of resources.