BK013 Principles of Economics 1

Revision 1 Semester 1 May 2016

Structured Questions

2. The diagram below shows the production possibilities curve (PPC) of cactus and
pineapples for the country Nigeria.

Cactus

.C
.A

.B .D
Pineapples

(a) Define production possibilities curve.

(b) Identify the points which represent:

(i) Scarcity
(ii) Choices
(iii) Inefficiency

(c) (i) Is the opportunity cost faced by country Nigeria increasing or decreasing or
constant?
(ii) Give TWO (2) reasons for your answer in (ci).

(d) Explain what happens at point A.

(e) List down the points that would be attainable.

(f) Illustrate in separate diagrams the effect of the following on the production
possibilities curve (PPC).
(i) Climate change has caused the production of pineapples to decrease.
(ii) There is a huge drop in Nigerian economy growth.
(iii) When the country struck by national disaster.
(iv) An increase in population.

GEYATHIRI GOPI
BK013 Principles of Economics 1
Revision 1 Semester 1 May 2016
3. The table below shows the relationship between the price of product Z and the
quantity demanded for products Z and Y.

Price of Z Quantity demanded for Quantity demanded Consumers

(RM) product Z (gram) for product Y (gram) income (RM)
4.00 100 30 1800
4.50 90 40 1600
5.00 70 60 1400
5.50 40 80 1200
6.00 10 95 1000

(a) Define cross price elasticity of demand.

(b) Calculate the price elasticity of demand for Z if the price of Z increases from RM5.00
to RM6.00 per gram.

(c) Based on the question (a) above, indicate whether the demand is elastic or inelastic.

(d) Calculate the cross price elasticity of demand for Y when the price of Z decreases
from RM5.50 to RM4.50 per gram.

(e) Based on the question (d) above, indicate whether the product Z and Y are
complements or substitutes?

(f) When the income of consumers increases from RM1200 to RM1600:

(i) Calculate income elasticity of demand for product Z.

(ii) Calculate income elasticity of demand for product Y.
(iii) Indicate and explain the type of product Z and product Y?

GEYATHIRI GOPI