Mock Assessment :Economic Issues and Introduction:

Practice assessment for outcome 1

Question 1

Read the following passage

Meerkat & Co. are a small fishing tackle company based in the Aberdeen . They manufacture handmadefishing rods especially aimed at catching salmon . Most of the company's customers are resident in the U.K. but their reputation has grown as aworld class quality products and has led to an increasing number of enquiries from further afield, particularly Italy and the U.S.However, the global recession has meant that unemployment has risen significantly and there have been widespread wage freezes throughout the world.Despite the recession, Meerkat & Co. have experienced only a small impact uponsales.The demand for Meerkat & Co's goods to date, could be classed as income inelastic.

Meerkat & Co. have relatively low overheads but their premises need modernisation and refurbishment. The company were thinking of improving their computer databaseand installing a new computer network. Unfortunately they cannot afford to refurbishand install newtechnology.

A further complication for the company is that the high quality wood they use to make their rods from the Elm tree is becoming increasingly difficult to source due to a disease that is attacking and killing manyof them decreasing the supply available . Meerkat and Co. are consequently considering a review of their price range. The table below shows the number of rods the company is willing to supply at different price levels and the likely demand it now faces.

1 Making reference to the article above,

explain the basic economic problem.Points to be covered.Definition

Choices, opportunity cost, eg of all and reference to case study as appropriate

(7 marks)