Tag: ACA

If potatoes are a Giffen good, then an increase in the price of potatoes will cause?

Select ONE answer:

1. An increase in demand for potatoes
2. A decrease in demand for substitutes for potatoes
3. A decrease in demand for potatoes
4. An increase in demand for substitutes for potatoes

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

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 1

1. Correct == > If potatoes are a Giffen good, then an increase in the price of potatoes will cause an increase in demand for potatoes
2. Not correct
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

Alex is a market trader who has noticed that when the price of cakes rises, his Stafford customers tend to buy more biscuits instead.

The effect operating here is?

Select ONE answer:

1. The income effect
2. The diminishing marginal utility effect
3. The substitution effect
4. The price elasticity of demand

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

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 3

1. Not correct
2. Not correct
3. Correct == > The effect of a price rise in one good is to make the prices of other goods relatively cheaper. The resultant shift in demand towards the relatively cheaper goods is an example of the substitution effect.
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

Alex trades as Stafford Reproduction, a manufacturer of classic furniture and furnishings for discerning clientele .

Alex predicts that if people’s incomes rise next year, then the demand for our furniture will increase.’

The accuracy of Alex’s prediction depends on whether the furniture and furnishings the company produces?

Select ONE answer:

1. Are normal goods
2. Have few substitutes
3. Have many complements
4. Have few complements

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

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 1

1. Correct == > With normal goods, a rise in incomes will be accompanied by a rise in demand for them as opposed to a fall in demand for inferior goods. The existence of complementary goods and substitute goods has no effect in this context.
2. Not correct
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.