EDEXCEL IGCSE ECONOMICS -
PAPER 1: MICROECONOMICS AND
BUSINESS ECONOMICS EXAM
QUESTIONS AND ANSWERS 100%
SOLVED
,Goods - ANSWERSThings that are produced in order to be sold
Finite - ANSWERSHaving an end or limit
Infinite - ANSWERSWithout limits
What are the four factors of production? - ANSWERSLand, Labour, Capital, Enterprise
Why do economists say that resources are scarce? - ANSWERSThere is only a limited
or finite quantity of resources
Needs - ANSWERSThe basic requirements for human survival
What are examples of needs? - ANSWERSWater, food, warmth, shelter, clothing
Wants - ANSWERSPeople's desires for goods and services
What are examples of wants? - ANSWERSHolidays abroad, better houses, bigger cars,
improved healthcare, better education
Basic economic problem - ANSWERSAllocation of a nation's scarce resources between
competing uses that represent infinite wants
Scarce resources - ANSWERSAmount of resources available when supply is limited
What three decisions have to be made when addressing the basic economic problem? -
ANSWERSWhat to produce, How to produce, For whom to produce
Opportunity cost - ANSWERSCost of the next best alternative that is given up when
someone makes a choice
What is the opportunity cost of a firm spending $100,000 on advertising? -
ANSWERSTraining its workforce, buying new machinery
Expenditure - ANSWERSSpending by a government
Capital goods - ANSWERSPurchased by firms and used to produce other goods
What are examples of capital goods? - ANSWERSFactories machinery, tools,
equipment
Consumer goods - ANSWERSPurchased by households
,What are examples of consumer goods? - ANSWERSFood, confectionery, cars, tablets,
furniture
Production Possibility Curve - ANSWERSLine that shows the different combinations of
two goods an economy can produce if all resources are used up
What happens when an economy moves from one point on the PPC to another? -
ANSWERSAn opportunity cost is incurred
Economic growth - ANSWERSIncrease in the level of output by a nation
What happens to the PPC if a country can produce more? - ANSWERSIt shifts
outwards
What are some reasons for economic growth/an outward shift in the PPC? -
ANSWERSNew technology, Improved efficiency, Education and training, New
resources
Why might negative economic growth/an inward shift in the PPC occur? -
ANSWERSResource depletion, Adverse weather, Increased outward migration, Wars
Variables - ANSWERSSomething that affects a situation in a way that you cannot be
sure what will happen
Maximise - ANSWERSTo increase something such as profit, satisfaction or income as
much as possible
Revenue - ANSWERSMoney that a business receives over a period of time, especially
from selling goods or services
What are the two underlying assumptions in economics? - ANSWERSConsumers aim
to maximise benefit, Businesses aim to maximise profit
Why may consumers not always maximise benefit? - ANSWERSThey have difficulty in
calculating the benefits, They develop buying habits, They are influenced by the
behaviours of others
Enterprises - ANSWERSCompanies, organisations or businesses
Why might producers not always maximise their profits? - ANSWERSPerformance may
be influenced by other people in the organisation, Alternative business objectives,
Operate as charities, Social enterprises
Administration - ANSWERSActivities involved with managing and organising the work of
a company or organisation
, Demand curve - ANSWERSLine drawn on a graph that shows how much of a good will
be bought at different prices
Demand schedule - ANSWERSTable of the quantity demanded of a good at different
price levels - can be used to calculate the expected quantity demanded
Effective demand - ANSWERSAmount of a good people are willing to buy at given
prices over a given period of time supported by the ability to pay
Inverse relationship between price and quantity demanded - ANSWERSWhen price
goes up, the quantity demanded falls and when price goes down the quantity demanded
rises
Demand - ANSWERSThe amount of a good that consumers are willing to and able to
buy at a given price
Shift in the demand curve - ANSWERSMovement to the left or right of the entire
demand curve when there is a change in any factor affecting demand except the price
Disposable income - ANSWERSIncome that is available to someone over a period of
time to spend - including state benefits and excluding direct taxes
Inferior goods - ANSWERSGoods for which demand will fall if income rises or rise if
income falls
Normal goods - ANSWERSGoods for which demand will increase if income increases
or will fall if income falls
What are the factors that may shift the demand curve? - ANSWERSFashion and tastes,
Price of substitutes, Price of complements, Income, Advertising, Demographic changes
Will an increase in advertising shift the demand curve to the left or to the right? -
ANSWERSTo the right
If disposable income rises, will the demand for a normal good rise or fall? -
ANSWERSRise
If disposable income rises, will the demand for an inferior good rise or fall? -
ANSWERSFall
If fashion tastes change to favour a certain clothing item, will demand for that item rise
or fall? - ANSWERSRise
Substitute goods - ANSWERSGoods bought as an alternative to another but perform
the same function
PAPER 1: MICROECONOMICS AND
BUSINESS ECONOMICS EXAM
QUESTIONS AND ANSWERS 100%
SOLVED
,Goods - ANSWERSThings that are produced in order to be sold
Finite - ANSWERSHaving an end or limit
Infinite - ANSWERSWithout limits
What are the four factors of production? - ANSWERSLand, Labour, Capital, Enterprise
Why do economists say that resources are scarce? - ANSWERSThere is only a limited
or finite quantity of resources
Needs - ANSWERSThe basic requirements for human survival
What are examples of needs? - ANSWERSWater, food, warmth, shelter, clothing
Wants - ANSWERSPeople's desires for goods and services
What are examples of wants? - ANSWERSHolidays abroad, better houses, bigger cars,
improved healthcare, better education
Basic economic problem - ANSWERSAllocation of a nation's scarce resources between
competing uses that represent infinite wants
Scarce resources - ANSWERSAmount of resources available when supply is limited
What three decisions have to be made when addressing the basic economic problem? -
ANSWERSWhat to produce, How to produce, For whom to produce
Opportunity cost - ANSWERSCost of the next best alternative that is given up when
someone makes a choice
What is the opportunity cost of a firm spending $100,000 on advertising? -
ANSWERSTraining its workforce, buying new machinery
Expenditure - ANSWERSSpending by a government
Capital goods - ANSWERSPurchased by firms and used to produce other goods
What are examples of capital goods? - ANSWERSFactories machinery, tools,
equipment
Consumer goods - ANSWERSPurchased by households
,What are examples of consumer goods? - ANSWERSFood, confectionery, cars, tablets,
furniture
Production Possibility Curve - ANSWERSLine that shows the different combinations of
two goods an economy can produce if all resources are used up
What happens when an economy moves from one point on the PPC to another? -
ANSWERSAn opportunity cost is incurred
Economic growth - ANSWERSIncrease in the level of output by a nation
What happens to the PPC if a country can produce more? - ANSWERSIt shifts
outwards
What are some reasons for economic growth/an outward shift in the PPC? -
ANSWERSNew technology, Improved efficiency, Education and training, New
resources
Why might negative economic growth/an inward shift in the PPC occur? -
ANSWERSResource depletion, Adverse weather, Increased outward migration, Wars
Variables - ANSWERSSomething that affects a situation in a way that you cannot be
sure what will happen
Maximise - ANSWERSTo increase something such as profit, satisfaction or income as
much as possible
Revenue - ANSWERSMoney that a business receives over a period of time, especially
from selling goods or services
What are the two underlying assumptions in economics? - ANSWERSConsumers aim
to maximise benefit, Businesses aim to maximise profit
Why may consumers not always maximise benefit? - ANSWERSThey have difficulty in
calculating the benefits, They develop buying habits, They are influenced by the
behaviours of others
Enterprises - ANSWERSCompanies, organisations or businesses
Why might producers not always maximise their profits? - ANSWERSPerformance may
be influenced by other people in the organisation, Alternative business objectives,
Operate as charities, Social enterprises
Administration - ANSWERSActivities involved with managing and organising the work of
a company or organisation
, Demand curve - ANSWERSLine drawn on a graph that shows how much of a good will
be bought at different prices
Demand schedule - ANSWERSTable of the quantity demanded of a good at different
price levels - can be used to calculate the expected quantity demanded
Effective demand - ANSWERSAmount of a good people are willing to buy at given
prices over a given period of time supported by the ability to pay
Inverse relationship between price and quantity demanded - ANSWERSWhen price
goes up, the quantity demanded falls and when price goes down the quantity demanded
rises
Demand - ANSWERSThe amount of a good that consumers are willing to and able to
buy at a given price
Shift in the demand curve - ANSWERSMovement to the left or right of the entire
demand curve when there is a change in any factor affecting demand except the price
Disposable income - ANSWERSIncome that is available to someone over a period of
time to spend - including state benefits and excluding direct taxes
Inferior goods - ANSWERSGoods for which demand will fall if income rises or rise if
income falls
Normal goods - ANSWERSGoods for which demand will increase if income increases
or will fall if income falls
What are the factors that may shift the demand curve? - ANSWERSFashion and tastes,
Price of substitutes, Price of complements, Income, Advertising, Demographic changes
Will an increase in advertising shift the demand curve to the left or to the right? -
ANSWERSTo the right
If disposable income rises, will the demand for a normal good rise or fall? -
ANSWERSRise
If disposable income rises, will the demand for an inferior good rise or fall? -
ANSWERSFall
If fashion tastes change to favour a certain clothing item, will demand for that item rise
or fall? - ANSWERSRise
Substitute goods - ANSWERSGoods bought as an alternative to another but perform
the same function
