CLASS TEST ON ME.CS PS PM SECTION A xl 1,During a recession, economies experience increased unemployment and a reduced level of activity. How would a recession be likely to affect the market demand for new cars? a. Demand will shift te the right. b, Demand wil shift to the left. ¢. Demand will not shift. but the quantity of cars sold per month will decrease. d. Demand will not shift, but the quantity of cars sold per month will increase. 2.1f automobile manufacturers are producing cars faster than people want to buy them, a. there is an excess supply and price can be expected to decrease. b, there is an excess supply and price can be expected to increase. «. there is an excess demand and price can be expected to decrease. d there is an excess demand and price can be expected to increase. 3.Market equilibrium refers to a situation in which market price a. is high enough to allow firms to earn a fair profit. b. is low enough for consumers to buy alll that they want. 6. Is at a level where there is nelther a shortage nor a surplus. d. is just above the intersection of the market supply and demand curves. 4,An increase in the demand for a good will cause a, an increase in equilibrium price and quantity. b. a decrease in equilibrium price and quantity. ¢. an increase in equilbrium price and a decrease in equilibrium quantity. d. a decrease in equilibrium price and an increase in equilibrium quantity. ° ‘quantity ‘What effect does the change in demand have on producer surplus? A docroase by P.YWP, 1B cocroase ty P,VYP, increase by P,YWP, 1D increase by P:VYP, Scanned with CamScanner6.Between August 2018 and August 2019 the world price of sweet potatoes increased from $12 to $22.50 per box. This was caused by Hurricane Florence and heavy rains in the USA, the world's largest supplier. Explain the likely impact of this change in price on consumer surplus in the market for sweet potatoes. Illustrate your answer with a diagram. 4 MARKS SECTIONB Sources for use with Section ¢. “The market for sugar Figure 1 World price of supa USE per hg, Mune 2016 June 2019 040 50 Extract A Global production of sugar Between August 2017 and August 2018 the world price of sugar fellas a result of favourable weather leading to good harvests. In 2018, India, the worlds second largest sugar producer and Thailand, the world’s fourth largest sugar producer, had record levels of production. In 2018 global production was 11% higher than in 2017. In 2018 world production was so high that there was a surplus cf 17 milion tonnes. This led to large quantities of sugar being held in storage, In recent years, consumption of sugar has fallen because of increasing health concems. There is also competition from substitutes such as artificial sweeteners, In the USA, Europe, China and Australia sugar consumption has fallen or remained unchanged Sugaris grown in 119 countries. It takes sugar cane one year to mature in countries with ‘warm temperatures and two years In cooler countries. Scanned with CamScannerQ7. With roferonce to Figure 1 and Extract A, asses two reasons why the world prico of sugar fell between August 2017 and August 2018, illustrate your answer with a supply and demand diagram. (10) Scanned with CamScanner