This website requires a browser which supports HTML5.
Some elements of this site will not work correctly until you upgrade your browser.
Question
1
The
main
economic
problem
is
……
Check
answer.
Scarcity
-
which
is
caused
by
unlimited
wants
but
limited
means.
Next
Question.
Click
to
enlarge
image.
Click
and
hold
to
reduce.
Question
2
Using
the
diagram
below,
fully
explain
the
impact
of
an
increase
in
price
from
$3.50
to
$4.50
for
Souraide
Sports
Drink
with
2
flow
on
effects.
Check
answer.
An
increase
in
price
will
cause
a
decrease
in
the
quantity
demanded
-
assuming
ceteris
paribus
.
As
the
price
of
Souraide
increases
from
$3.50
to
$4.50
Marama’s
quantity
demanded
decreases
from
4
to
2
bottles
because
as
the
price
increases
Marama
can’t
afford
to
buy
as
much
and
it
is
now
relatively
more
expensive
than
other
sports
drinks.
Marama
will
buy
less
Souraide
so
she
may
be
healthier
due
to
drinking
less
sugar.
May
change
to
a
cheaper
brand
which
is
not
as
good
so
her
sports
may
not
be
as
good.
Next
Question.
Previous
Question.
Click
to
enlarge
image.
Click
and
hold
to
reduce.
Souraide
and
Barginaide
are
substitute
goods
.
They
are
goods
used
instead
of
each
other.
An
increase
in
price
of
Souraide
from
P1
to
P2
means
that
the
quantity
demanded
will
decrease
from
Qd1
to
Qd2
because
Marama
can’t
afford
to
buy
as
much
and
now
Barginaide
is
relatively
cheaper
.
Marama’s
demand
for
Barginaide
will
increase
from
D
to
D2
because
it
is
now
relatively
cheaper
than
Souraide
and
Marama
is
willing
to
buy
more
of
it.
-Barginaide
is
not
as
good
a
sports
drink
and
has
more
sugar
so
Marama’s
health
may
suffer.
-
She
may
end
up
buying
a
lot
more
of
the
cheaper
sports
drink
which
may
affect
her
health.
-
Not
as
good
quality
so
not
as
good
for
her
sports
so
she
may
not
per
form
as
well.
Question
3
Using
the
diagram
below,
to
fully
explain
the
impact
of
an
increase
in
price
of
Souraide
on
the
demand
for
Bargin
aide.
Explain
2
flow
on
effects.
Check
answer.
Next
Question.
Previous
Question.
Click
to
enlarge
image.
Click
and
hold
to
reduce.
With
an
increase
in
income
Marama
can
afford
to
buy
more
Souraide.
Barginaide
is
a
cheaper
product
and
Marama
thinks
it
is
an
inferior
good
-
a
good
she
prefers
not
to
buy
because
it
is
lower
quality
and
so
with
an
increase
in
income
Marama’s
demand
decreases
from
D
to
D2.
With
an
increase
in
income
Marama
can
afford
to
buy
Souraide
-
a
better
quality
product,
a
good
she
prefers
to
have.
Her
demand
will
increase
from
D
to
D2.
Question
4
Using
the
diagram
below,
fully
explain
the
effect
of
an
increase
in
Marama’s
income
on
her
demand
for
Souraide
and
Barginaide
-
a
cheaper
budget
product.
Check
answer.
Next
Question.
Previous
Question.
Click
to
enlarge
image.
Click
and
hold
to
reduce.
Sammysing
phones
and
Sparky
Cellular
services
are
complements
for
Mila,
meaning
they
are
goods
that
she
consumes
in
conjunction
with
each
other.
When
the
price
of
Sparky
Cellular
services
decreases
from
P1
to
P2,
the
quantity
demanded
for
Sparky
Cellular
services
increases
from
Q1
to
Q2
because
Mila
can
afford
to
buy
more
and
it
is
now
relatively
cheaper
Mila’s
demand
for
Sammysing
phones
will
increase
from
D
to
D2
.
The
increase
in
the
quantity
demanded
for
Sparky
Cellular
services
is
shown
by
a
movement
along
(down)
the
demand
curve
from
Qd1
to
Qd2.
The
increase
in
demand
for
Sammysing
Phones
is
shown
by
a
shift
of
the
demand
curve
right
from
D
to
D2
,
meaning
more
phones
will
be
demanded
at
each
and
every
price.
Possible
flow-on
effects:
•
Mila
will
consume
more
cellular
services
and
spend
a
lot
more
time
on
her
smart
phone
leaving
less
time
for
other
things.
Question
5
Using
the
diagram
below,
discuss
the
relationship
between
Mila’s
demand
for
Sammysingy
Phones
and
Sparky
Cellular
Services.
Fully
explain
the
impact
of
a
decrease
in
price
for
Sparky
Cellular
Services
on
Mila’s
demand
for
Sammysing
phones
and
1
possible
flow
on
effect.
Check
answer.
Next
Question.
Previous
Question.
Luxury
goods
,
such
as
holidays,
are
goods
that
are
not
necessary/
don’t
need
to
survive.
The
demand
for
luxury
goods
increases
if
income
increases.
Necessity
goods
are
essentials.
The
demand
for
necessity
goods,
such
as
bread,
increases
if
income
increases.
However,
because
there
is
only
so
much
that
a
person
can
consume,
when
income
increases
the
increase
in
demand
for
necessities
is
proportionally
less
than
the
increase
in
income.
Inferior
goods
are
cheap,
lower
appeal
goods
such
as
budget
brands.
The
demand
for
inferior
goods
falls
as
income
increases.
The
demand
for
luxury
goods
increases
as
income
increases.
Luxury
goods
are
brought
if
there
is
a
surplus
or
leftover
cash
after
all
essentials
have
been
bought.
Luxury
goods
are
nice
to
have
but
not
necessary;
so
because
the
budget
would
not
allow
for
it,
Mila
does
not
buy
many
luxury
goods
.
Question
6
Most
of
Mila’s
disposable
household
income
is
spent
on
necessities
like
food,
rent,
power,
insurance,
and
health.
Often
with
grocery
shopping
Mila
has
to
buy
the
cheaper
options
such
as
budget
brands.
There
is
little
left
over
for
luxuries
like
new
clothes,
entertainment,
or
holidays.
Explain
why
most
of
Mila’s
household
income
is
spent
on
Necessities.
In
your
answer
explain
the
difference,
with
examples,
between
inferior
goods,
luxuries
and
necessities
and
explain
why
Mila
does
not
buy
many
luxury
goods.
plain
why
most
of
Annie's
income
is
spent
on
necessities.
In
your
answer,
you
should:
Explain
why
most
of
Annie's
income
is
spent
on
necessities.
In
your
answer,
you
should:
Explain
why
most
of
Annie's
income
is
spent
on
necessities.
In
your
answer,
you
should:
Check
answer.
Next
Question.
Previous
Question.
With
an
increase
in
income
Mila
can
now
afford
to
buy
more
luxury
items.
Mila
will
also
buy
less
inferior
goods
as
she
can
now
afford
to
buy
better
quality
items
and
so
spending
on
budget
brands
will
decrease.
Spending
on
necessities
will
stay
about
the
same
.
Although
they
may
spend
a
little
more
by
buying
better
quality
items,
overall
spending
will
not
change
much.
e.g.
One
flow
on
effect
could
be
with
buying
less
inferior
goods
and
more
better
quality
items,
Mila
may
now
be
eating
healthier
and
so
their
health
may
improve,
leading
to
less
doctor's
visits
and
less
spending
on
medicine
etc.
Question
7
Mila
has
had
a
large
increase
in
income.
Explain
the
impact
of
Mila’s
increase
in
income
and
how
her
spending
patterns
might
change.
Describe
the
kind
of
goods
Mila
will
buy
more
of.
Describe
the
types
of
goods
Mila
will
buy
less
of.
Explain
the
reasons
for
this
change
in
spending
and
explain
one
flow
on
effect.
Check
answer.
Previous
Question.