Economics Multiple Choice Question – 7 April 2019

Which of the following combinations of causes and consequences in the market for good X is correct?

Select ONE answer:

1. Cause – A government subsidy is given to firms producing good X / Consequence – There is a movement down the supply curve for good X
2. Cause – The price of good X decreases / Consequence – The demand curve for good X shifts to the right
3. Cause – The price of a substitute for good X increases / Consequence – The demand curve for good X shifts to the left
4. Cause – The wages paid to workers producing good X fall / Consequence – The supply curve for good X shifts to the right

Show your workings to arrive at your answer, and explain and justify your reasons:……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple choice question is suitable for Economics KS5 classes.

The answer is 1

1. A government subsidy lowers the costs of production and causes the supply curve to shift to the right. A contraction of the curve is caused by an increase in the price of good X.
2. A change in the price of the product causes a movement along the demand curve, not a shift.
3. If the price of a substitute good increases there will be less demand for the substitute and more demand for good X, the demand curve will shift to the right.
4. Correct: Wages are a cost of production. As costs of production fall, a firm is able to produce more units of product X to the market. The number of units supplied increases and the supply curve shifts to the right.

 

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