IGCSE Economics Paper-1: Specimen Questions with Answers 54 - 55 of 64

Question 54

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Question

MCQ▾

Russia is a major producer and exporter of several agricultural commodities. In 2010, Russia was severely affected by a hazardous drought. As a result, some of its agricultural exports were reduced. In relation to the world supply/demand model for the affected agricultural commodities, we should observe:

Choices

Choice (4)
a.Increase in supply and no change in demand.
b.Reduction in demand and supply
c.Decrease in supply and decrease in demand.
d.Increase in supply and decrease in demand

Answer

c.

Explanation

  • It is very common to see the impact of drought or other natural factors on the supply of a commodity. These hazardous conditions cause a graphical leftward shift in the supply curve indicating a decrease in supply and increase in equilibrium and price of the produce.
  • Drought makes the growth of agricultural produce slow, which affects the supply of the agricultural produce in the world market. On the other hand, the demand for the agricultural produce will also decrease due to the change in equilibrium and rise in prices.

Question 55

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Question

MCQ▾

If the price of a good X increases as well as the quantity of the good X supplied in markets increases, then there has been

Choices

Choice (4)
a.Decrease in demand
b.Increase in demand.
c.Decrease in supply
d.Increase in supply

Answer

b.

Explanation

  • Supply curve refers to the graphical representation of price and quantity supplied of a commodity that a seller is willing to supply at a particular price during a particular period of time. Supply of a commodity is affected by various factors like-
    • Input price
    • Cost of production
    • Natural factors
    • Change in technology
    • Government taxes and subsidies
  • There is a positive relationship between the price and supply of a commodity as the seller to earn more profit would be willing to sell more quantities of a product at higher prices. So, increase in price and quantity will eventually increase the supply of good X.

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