141 Economics O Level IGCSE P-1 (MCQ’s) Topical Worked Solutions

/ 15
1 BASIC ECONOMIC IDEAS 9
1.1 Basic economic problem 10
1.1 ANSWER KEY 15
1.2 Opportunity cost calculations 19
1.2 ANSWER KEY 21
1.3 Basic of production possibility curve & opportunity cost (PPC) 23
1.3 ANSWER KEY 30
1.4 Shape of production possibility curve (PPC) 33
1.4 ANSWER KEY 37
1.5 Shifts of production possibility curve (PPC) 39
1.5 ANSWER KEY 52
1.6 Normative & positive statements 57
1.6 ANSWER KEY 60
1.7 Economic systems 62
1.7 ANSWER KEY 67
1.8 Ceteris peribus 71
1.8 ANSWER KEY 72
1.9 Division of labour 73
1.9 ANSWER KEY 75
1.10 Labour productivity 76
1.10 ANSWER KEY 78
1.11 Marginal concept 80
1.11 ANSWER KEY 81
2 DEMAND, SUPPLY & EQUILIBRIUM 85
2.1 Basics of demand 86
2.1 ANSWER KEY 88
2.2 Market demand 89
2.2 ANSWER KEY 90
2.3 Shifts in demand curve 91
2.3 ANSWER KEY 96
2.4 Basics of supply 99
2.4 ANSWER KEY 100
2.5 Market supply 101
2.5 ANSWER KEY 103
2.6 Shifts in supply curve 105
2.6 ANSWER KEY 108
2.7 Equilibrium 110
2.7 ANSWER KEY 114
2.8 Changes in equilibrium 118
2.8 ANSWER KEY 137
2.9 Effects of changes in demand & supply 145
2.9 ANSWER KEY 149
2.10 Functions of price 151
2.10 ANSWER KEY 153
3 ELASTICITY 155
3.1 Price elasticity of demand (PED) calculations 156
3.1 ANSWER KEY 158
3.2 Price elasticity of demand (PED) 160
3.2 ANSWER KEY 171
3.3 Price elasticity of supply (PES) 175
3.3 ANSWER KEY 182
3.4 Varying price elasticity of demand (PED) and price elasticity of supply (PES) 186
3.4 ANSWER KEY 189
3.5 Determinants of price elasticity of demand (PED) 190
3.5 ANSWER KEY 192/td>
3.6 Determinants of price elasticity of supply (PES) 193
3.6 ANSWER KEY 195
3.7 Tax incidence 197
3.7 ANSWER KEY 200
3.8 Income elasticity of demand (YED) 202
3.8 ANSWER KEY 206
3.9 Cross elasticity of demand (XED) 208
3.9 ANSWER KEY 213
4 ROLE OF GOVERNMENT IN PRICE MECHANISM 219
4.1 Consumer surplus and producer surplus 220
4.1 ANSWER KEY 226
4.2 Changes in consumer & producer surplus 229
4.2 ANSWER KEY 239
4.3 Taxes 243
4.3 ANSWER KEY 246
4.4 Subsidies 247
4.4 ANSWER KEY 249
4.5 Maximum price limit 250
4.5 ANSWER KEY 259
4.6 Minimum price limit by law 262
4.6 ANSWER KEY 266
4.7 Minimum price limit by stock purchase 268
4.7 ANSWER KEY 272
4.8 Minimum guaranteed price limit 273
4.8 ANSWER KEY 276
4.9 Privatization and nationalization 277
4.9 ANSWER KEY 284
4.10 Transfer payments 287
4.10 ANSWER KEY 289
4.11 Price mechanism and role of government 291
4.11 ANSWER KEY 293
4.12 Classification of Goods 295
4.12 ANSWER KEY 301
5 AGGREGATE DEMAND & AGGREGATE SUPPLY 305
5.1 Aggregate demand (AD) & aggregate supply (AS) 306
5.1 ANSWER KEY 323
6 MONEY & INFLATION 329
6.1 Features & functions of money 330
6.1 ANSWER KEY 333
6.2 Measurement of inflation 335
6.2 ANSWER KEY 338
6.3 Rates of inflation 340
6.3 ANSWER KEY 348
6.4 Real & nominal values 354
6.4 ANSWER KEY 357
6.5 Causes of inflation 359
6.5 ANSWER KEY 362
6.6 Effects of inflation 365
6.6 ANSWER KEY 367
7 INTERNATIONAL TRADE 371
7.1 Theory of absolute & Comparative Advantage 372
7.1 ANSWER KEY 380
7.2 Trading possibility curve (TPC) 386
7.2 ANSWER KEY 388
7.3 Mutually benefits rate of exchange 389
7.3 ANSWER KEY 392
7.4 Gains from trade 394
7.4 ANSWER KEY 396
7.5 Protectionism 397
7.5 ANSWER KEY 406
7.6 Trading blocs 410
7.6 ANSWER KEY 413
8 EXCHANGE RATE 417
8.1 Exchange rate system and changes 418
8.1 ANSWER KEY 426
8.2 J–Curve and marshal–lerner condition 429
8.2 ANSWER KEY 431
8.3 Effects of exchange rate changes 433
8.3 ANSWER KEY 436
8.4 Terms of trade 438
8.4 ANSWER KEY 443
8.5 Purchasing power parity theory 448
8.5 ANSWER KEY 449
8.6 Other 450
8.6 ANSWER KEY 451
9 BALANCE OF PAYMENTS 453
9.1 Balance of payments transactions 454
9.1 ANSWER KEY 457
9.2 Balance of payments accounts 460
9.2 ANSWER KEY 465
9.3 Effect of balance of payments surplus or deficit 468
9.3 ANSWER KEY 469
10 MACROECONOMIC POLICIES 471
10.1 Macroeconomic policies 472
10.1 ANSWER KEY 476
10.2 Marginal and average rate of tax 479
10.2 ANSWER KEY 480