Exam Revision Practice Questions

A.S. 90983 (1.1) Demonstrate understanding of consumer choice using scarcity and or demand. QUESTION ONE Jimmy works every Sunday at a local Warehouse, earning around $80 which he will use in one of the following ways: OPTION 1: Spend $80 at the supermarket. OPTION 2: Donate $80 to World Vision. OPTION 3: Save for University. (a) Explain why Jimmy needs to make an economic decision. In your explanation: Refer to Jimmys limited means. Include the concept of scarcity.

(b) Explain why spending the $80 at the supermarket could be want for Jimmy or a need. In your explanation: Define needs and wants. Include examples.

(c) Explain how Jimmy values may influence the decisions he will make on using his $80. In your explanation: Define what is meant by values. Identify and explain possible values possible values which would result in Jimmy choosing each of the options.

Jimmy decides his preferred option is to save for University and his least preferred choice is to spend the $80 at the supermarket. (d) Explain why a World Vision donation is Jimmys opportunity cost of saving for University.

QUESTION TWO Zac enjoys energy drinks, especially on hot days when he has hockey practice. The demand schedule below shows the number of times Zac will buy an energy drink in a year. Zacs Annual Demand Schedule for Energy Drinks Price ($) each 0.50 1.00 1.50 2.00 2.50 3.00 Quantity 52 44 36 32 28 24

(a) Draw Zacs annual demand curve for energy drinks. Fully label your graph. (b) Zac is more likely to purchase energy drinks that only have natural colours in them. Which requirement of consumer demand does this illustrate? (c) Explain how your completed demand curve illustrates the law od demand. In your explanation: Define the law of demand Use data from your completed demand curve. Use economic terms.

Zac noticed that the price of energy drinks recently increased from $2.00 to $3.00 at the diary. (d) Fully explain Zacs economic decision based on the information above. In your explanation: On your graph from question 2 (a), show the effect of the price change from $2.00 to $3.00 Explain the relationship between the price and the quantity demanded. Explain the reason for Zacs response to the price change. Refer to your graph and use economic terms.

During the lead up to tournament week, Hockey practices increased to two days per week. (e) Fully explain how the increase in hockey practices will affect Zacs demand for energy drinks. In your answer you should: Provide a sketch graph. Fully label your graph. Explain the reason for any change in the amount of energy drinks Zac might demand. Use economic terms and refer to the information in your graph.

QUESTION THREE Recently the price of milksakes, which Zac sometimes bought instead of energy drinks, decreased. (a) Fully explain the effect of the decrease in the price of milkshakes on Zacs demand for energy drinks. In your answer: Complete the sketch graph for energy drinks. Explain the relationship between milkshakes and energy drinks. Explain the effect of the decrease in price of milkshakes on Zacs demand for energy drinks. Use economic terms and refer to your completed sketch graph.

Zac normally gets a brand new pair of hockey boots each season. However, this season he could only afford a second hand pair since he gave up his normal Saturday shift to play hockey. (b) Explain the effect of Zacs decreased income on his demand for hockey boots. In your answer: Define a luxury and an inferior good. Explain the effect of Zacs decreased income on his demand for new hockey boots. Identify and explain which type of hockey boots are luxury and inferior versions of footwear.