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Winter Exam

1. The law of diminishing marginal utility explains the downward sloping demand curve. As consumers consume more of a good, each additional unit provides less utility or satisfaction. This causes consumers to be willing to pay less per unit as the quantity consumed increases. 2. The law of diminishing marginal returns explains why production costs tend to increase as more of a single input is added to production in the short run. In the short run, other inputs remain fixed so adding more of one input reaches a point of diminishing productivity. 3. Price elastic and inelastic demand can be illustrated on the same diagram with the elastic portion higher on the curve and further from the vertical axis, representing greater responsiveness to price

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36 views4 pages

Winter Exam

1. The law of diminishing marginal utility explains the downward sloping demand curve. As consumers consume more of a good, each additional unit provides less utility or satisfaction. This causes consumers to be willing to pay less per unit as the quantity consumed increases. 2. The law of diminishing marginal returns explains why production costs tend to increase as more of a single input is added to production in the short run. In the short run, other inputs remain fixed so adding more of one input reaches a point of diminishing productivity. 3. Price elastic and inelastic demand can be illustrated on the same diagram with the elastic portion higher on the curve and further from the vertical axis, representing greater responsiveness to price

Uploaded by

Juhee Seo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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Grade 12 IB Economics HL.

Name:_____________________

“End-of-term Exam”
Winter

Short Response
– write the answer to the following questions

1. Explain how the law of diminishing marginal utility is related to the downward sloping demand curve.
[2 marks]

2. Complete the following table. [2 marks]

3. Explain why the law of diminishing marginal returns holds true only in the short run. [3 marks]

4. Outline four biases that affect consumer choice. Provide an example for each of these. [8 marks]
5. a) On each of the diagrams below, draw marginal product and marginal cost curves. Label appropriately.
(x,y-axis, curves, and the maximum/minimum points on the curves) [4 marks]

b) Explain why marginal cost falls as marginal product increases, and why it increases as marginal product
falls. [2 marks]

c) On the diagram above, illustrate a supply curve. Explain why supply curve is a portion of the upward
sloping marginal cost curve. [3 marks]
6. Answer the following questions:

a) Illustrate the change in consumer surplus following the increase in demand on the diagram. [1 mark]
b) Calculate the change in consumer surplus. [1 mark]
c) Illustrate the change in producer surplus following the increase in demand on the diagram. [1 mark]
d) Calculate the change in producer surplus. [1 mark]

7. Answer the following questions:

a) Illustrate consumer and producer surpluses and deadweight loss when the price is set at $2.00. [3 marks]
b) Calculate the consumer surplus, producer surplus and deadweight loss when the price is set at $2.00. [3 marks]

8. Calculate a) the change in consumer surplus and b) the change in producer surplus
due to the shift in the supply curve below.
[2 marks]
9. With a diagram, explain how price elastic and price inelastic demand could be illustrated on the same
diagram. Label appropriately. [4 marks]

10. During a period of sustained economic growth, average incomes in an economy increased by over 10%.
Distinguish what type of goods A, B and C are, with a valid reason. [3 marks]

11. Using diagrams, explain why prices of primary commodities are likely to be more volatile (fluctuate more) in
the short-term compared to manufactured goods. [5 marks]

Extra Credit
1. Explain how the income and substitution effects can explain the downward sloping demand curve.
[2 marks]

2. Explain how income elasticity of demand can account for changes in the different sectors of an economy as
countries progress from less-developed countries through to developed nation status. [3 marks]

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