Christian Alliance S C Chan Memorial College

Final Examination (2017-18)

F.3 Economics Answers
Section A & B MC 1-25 / Matching 26-30
DCCCC D C D C C CBA D B AC B B B AD C C C / BAC D B
Section C. Fill in the blanks. (12 marks)
1. price 2. factors 3.movement 4.shift 5.substitutes 6.rsie/increase
7.complements 8.fall.decrease 9.higher 10.superior/ 11.willing 12.different/
normal given

Section D. Questions. Answer ALL questions. (38 marks)

1. A good can be scarce even if human wants for it are limited because:
Its quantity available may not be sufficient for the wants. (3 marks)

2. (i) Opportunity cost is the highest-valued option forgone. (2 marks)

(ii)•Traffic congestion will increase the travel time of red minibus passengers, leading to a rise in
the value of the alternative use of that period of time (e.g. the income forgone during that
period). (2 marks)
• The opportunity cost of red minibus passengers will thus increase. (1 mark)
(iii)• No, because: (1 mark)
• this will only reduce the value of enrolling in the intensive course, but not the value
of the highest-valued option forgone. (2 marks)

3. (a) The law of demand states that the lower (higher) the price of a good, the greater
(smaller) its quantity demanded, other factors being constant. (2 marks)
(b) •No. (1 mark)
•Since the quantity demanded for heroin remains unchanged when the price changes, it
violates the law of demand. (3 marks)

(c) vertical demand curve

Demand curve of heroin
P D

(1 mark)
Q

1
 4. (diagram with correct labelling: 2)
pest control services As the number of mosquitoes is on the rise in
many places, more private housing estates will
P hire pest control contractors to eliminate
S mosquitoes. The demand for pest control
services will thus increase. As shown in the
P2 diagram, the demand curve for pest control
services will shift rightwards from D1 to D2. (1)
P1
The price and quantity transacted of pest control
services will rise (1 mark)
D2
D1
0 Q
Q1 Q2

5.  Their behaviour does not violate the law of demand. (1 mark)

 To Fun, Good A is a normal good. Her demand for Good A will increase when her wage
income increases. (2 marks)
 To Keung, Good A is an inferior good. His demand for Good A will decrease when his
wage income increases. (2 marks)
OR
 Law of demand: When the price of a good increases (decreases), its quantity demanded
decreases (increases), ceteris paribus. (2 marks)
 What they refer to is the relationship between wage rate and quantity demanded. (2
marks)
 Therefore, their behaviour does not violate the law of demand. (1 mark)
6. (a)

Price Indicate on the diagram:

S - The price is below the equilibrium
price (1 mark)
- The quantity demanded is greater than
the quantity supplied (1 mark)
- Correct position of excess demand (1
P mark)
Excess demand
D

Qs Qd Quantity

- Verbal explanation:
Excess demand/ shortage (1 mark). The selling price is set below the equilibrium price ( 1 mark)
- The quantity demanded is greater than the quantity supplied (1 mark)

2
(b)

Indicate on the diagram:

Price
- Demand curve shifts to the right (1
S
mark)
- Price and quantity increase (1 mark)

P1

P2

D1
D2

0 Q2 Q1 Quantity

Verbal explanation:
-iPhone SE and smartphones with similar functions are substitutes (1 mark).
-When the iPhone SE was released, people will buy more iPhone SE, the demand for other
smartphones with similar functions decreases (1 mark).
-Assume other factors being constant, the price and quantity transacted of other smartphones
with similar functions decreases (1 mark).
Bonus (4 marks)
• MTR services are the substitutes for minibus services.
• Passengers’ demand for the Shatin-to-Central Link services will increase if the fare of
minibus services increases greatly. As shown in the diagram, the demand curve for the
MTR Shatin-to-Central Link services will shift rightwards from D1 to D2. 1
• The equilibrium price will increase from P1 to P2. 1

Diagram: 2m

End of Paper