Diocesan Girls’ School

S4 Economics Test 2 (2018-2019)

Name: ____________________ S4___( ___) Group ____ November 2018

Topic: Demand and supply

Mark total: 30 marks Time allowed: 38 mins

Section A: Multiple Choice Questions (10 marks)

Choose the BEST answer for each question.

1. When drawing the demand curve for Good X, which of the following items are
held constant?
(1) Consumers’ expectation of the change in price of Good X
(2) The price of the major input used for the production of Good X
(3) The price of Good X

A. (1) and (2) only

B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)

2. When the market equilibrium is attained, and market demand and supply are kept
unchanged,
A. total suppliers’ revenue is maximized.
B. quantity transacted will necessarily decrease when the selling price rises above
or falls below the equilibrium level.
C. consumers do not need to engage in competition for the good as quantity
supplied is equal to quantity demanded.
D. All of the above

3. Which of the following statements about shortage is correct?

A. Shortage exists when demand is larger than supply.
B. Shortage exists when the increase in demand is larger than the increase in
supply.
C. The quantity transacted is equal to quantity supplied when shortage occurs.
D. None of the above is correct.

4. Study the following information about the market of Good Y:

Unit price ($) Quantity supplied (units)
10 200
20 300
30 400
40 500
50 600

Given the demand curve for Good Y is downward sloping, which of the following
are correct if the market equilibrium price is $30?
(1) At $20, the quantity transacted is 300 units.
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 (2) At $40, the total expenditure on Good Y must be less than $20,000.
(3) At $10, the quantity demanded is larger than 400 units.
A. (1) and (2) only
B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)

5. A sharp increase in the demand for ________ will cause the price of __________ to
increase.
(1) frozen chicken … live chicken
(2) coffee…coffee beans
(3) flour…bread
A. (2) only
B. (1) and (2) only
C. (1) and (3) only
D. (2) and (3) only

6. Other things being constant, when the bus fare is raised,

A. the total revenue of taxi services must increase.
B. the total sales revenue of gasoline will decrease.
C. the total spending on bus services will increase.
D. All of the above

7. Which of the following would lead to a decrease in the price and an increase in the
quantity transacted of motor cars?
A. An increase in the taxi fare
B. An increase in the average parking fee
C. An increase in the price of steel
D. An improvement in technology in the production of motor cars

8. Computer manufacturers cut down the production of notebook computers as a

response to a shift of consumers’ preference from notebook computers to tablet
computers.

Which of the following statements about the above situation is correct?

A. The above situation shows that there is a decrease in the market supply of
notebook computers.
B. The decrease in the production of notebook computers will not cause a decrease
in the market price of notebook computers.
C. There is a surplus of notebook computers in the market.
D. The market price of notebook computers will eventually rise.

9. The demand for private residential housing in Hong Kong will decrease if
(1) the government increases the supply of housing properties under the Home
Ownership Scheme.
(2) the government sells more land to private land developers.
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 (3) banks tighten the ratio of mortgage loans to property values so that home
buyers need to pay a higher percentage of the property price as instalments.

A. (1) only
B. (2) and (3) only
C. (1) and (3) only
D. (1), (2) and (3)

10. The vacancy rate of business offices in Economy A remains high. If the
expectation on the economic performance of Economy A become more optimistic,
while the rental price of business office remains unchanged. Which of the
following diagrams best describes the above situation?
B.
A. Rental Price
C.
D. Rental Price SS
S1 S2
S
Section B: Short Questions (23 marks)
Answer ALL questions.

1. Recently, as a result of emergence some unfavourable factors in the property

D1 rate and a fall in the wage increase, both the price
market such as a rise in interest
D2
D1 D2
and transaction volume in theD1 secondary property market have decreased.
D2
In response to the market changes, more property owners put up their residential
Quantity
properties for rent rather thanQuantity
for sale.

(a) State the law of supply. (2 marks)

(b) In the above case, does it involve a change in supply or quantity supplied of
properties for sale in the market? Explain. (3 marks)

(c) With the aid of a diagram, explain how the equilibrium rental price and quantity of
properties in the residential rental market will be affected. (5 marks)
2. The following table shows the unemployed population of construction workers in
Hong Kong.

2016 2017 2018

Number of
13,852 15,741 18,970
unemployed persons
Source: Census and Statistical Department

Suppose the wage rate of construction workers has remained the same during the
above period.

(a) Explain with the aid of a diagram why unemployment exists in the labour market
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 of construction workers. (3 marks)

(b) Consider the following description about the construction labour market made by
a government official:

State the
condition under
which the
description made
by the
government
official can explain the change in the unemployment situation of construction
workers.
Explain your answer with the aid of the diagram you drew in part (a). (7 marks)

- End of Paper -

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 S4 Economics Test 2
Answers Sheet

Name: ______________________________ S4 ____ (____) Group _____

Section A: MC Questions
Section A:
1 2 3 4 5 6 7 8 9 10

Section B: Short Questions

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S4 Economics Test 2 (2018-2019)
Marking Scheme
1 2 3 4 5 6 7 8 9 10
A B C D D A D B C A
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Section B:
1 (a) the law of supply states that when price of a good increases, its quantity supplied
will increase, vice versa, holding other factors constant. [2]

(b) a change in quantity supplied because [1]

When the demand for property decreases [1], it causes property prices to fall
[1]and thus quantity supplied decreases according to the law of supply.

(c) Verbal explanation: [2]

- supply of rental services increases
- rental price decreases but quantity transacted will increase
Show in diagram: [3]
- rightward shift of supply curuve
- decrease in price
- increase in quantity

2. (a) Verbal explanation:

- Unemployment exists because the wage rate is set above the equilibrium level
causing a surplus (excess supply) in the market. [2]
Indicate in the diagram:
- surplus at a price above equilibrium level [1]

(b) Verbal explanation:

- The completion of infrastructural projects causes a decrease in (derived)
demand for construction workers [1]
- When imported workers returned to their home countries, supply of
construction workers decreases. [1]
- When the decrease in demand is larger than the decrease in supply, at the same
wage rate, the surplus will increase. As a result, unemployment will increase.
[2]
Indicate in the diagram:
- leftward shift of demand curve [1]
- leftward shift of supply curve [1]
- new surplus > old surplus [1]