Economics practice problems;
6. China will host the Beijing Olympic Games in August 2008 and 7 million tickets are available for the event. On the diagram below draw the supply curve for tickets and explain the reason for its shape. P Explanation: Q (17 marks) 7. 'Ireland's current account in the Balance of Payments is in deficit'. Explain the meaning of this statement and state two reasons why this situation exists. Explanation: Reasons: (i) (ii) (17 marks)8. The diagram below represents the long run equilibrium of a firm in imperfect competition, which seeks to maximise profits. Label the diagram and use it to describe the long run equilibrium position for a firm in Imperfect Competition. Description: P (i) (ii) LAC (iii) (iv) Q (17 marks)(b) The data below represents the market demand and supply schedules for MP3 Players. Price Quantity Demanded Quantity Supplied E (units) (units) 20 100 20 30 80 40 40 60 60 50 40 80 60 20 100 (i) Using the above data, draw the diagram showing the market demand and supply curves for MP3 Players. (ii) Show on your diagram the price and quantity of MP3 Players at which this market is in equilibrium. (iii) Using this data, calculate the price elasticity of demand when price changes from 640 to 650. (Show all your workings). For this price change, is demand for MP3 Players elastic or inelastic? Explain your answer. (30 marks) (c) (1) With reference to your diagram in 1(b) (i), assume that consumer demand for MP3 Players increases by 40 units at each price listed above, while supply remains unchanged, draw the new demand curve for this situation and show the new equilibrium price and quantity. (ii) Explain two possible reasons for the shift in the demand curve.8. (a) (i) Explain, with the aid of an example, how it is possible for banks to create credit. (ii) Outline how a desire by banks to reduce their level of bad debts might affect their ability to create credit. (iii) Explain two other factors which could affect their ability to create credit. (30 marks) (b) Irish citizens experienced an increase in the rate of price inflation during 2007. (i) Explain the underlined term, Discuss the economic effects of this development on the Irish economy. (20 marks) (c) For a composite (weighted) price index covering three categories of expenditure given in the following table, calculate the index for the current year. The base year value is 100. (Show all your workings). Category of Income Price of Item(s) Price of Item(s) spent on item(s) in base year in current year E E Food 40% 20.00 24.50 Clothing & Footwear 25% 42.00 40.00 Other Items 35% 30.00 36.00 100% (25 marks)
