Loading subjects
Micro-economic concepts · Part 1 of 3
6 exam-style questions with model answers, plus 7 quick multi-choice questions — every question on this part of the standard, grouped by the 2 pages of notes they come from.
Write a full answer before you reveal the model one. That comparison is where the learning happens.
Explain the law of diminishing marginal utility and state what happens to total utility while marginal utility is falling but still positive.
Using a marginal utility model, explain in detail why the demand curve slopes downwards.
A café owner is deciding whether to introduce a loyalty card that gives every sixth coffee free.
Using marginal utility data and a model, justify the implications of diminishing marginal utility for this producer's pricing decision.
A price rise from $10 to $12 causes quantity demanded to fall from 500 to 425 units.
Calculate the price elasticity of demand and state whether demand is elastic or inelastic.
A local bakery calculates the PED for its bread as 0.4.
Explain in detail what this means, why demand is likely to be this inelastic, and what it implies for the bakery's total revenue if it raises the price.
A government is considering a new excise tax and can place it either on a good with PED = 0.2 or on a good with PED = 2.4.
Using elasticity data and a model, justify the implications of price elasticity of demand for the government's decision.