A-Level H2 Economics 1 — Questions and Answers
Question 1: What is 'ceteris paribus' in economics?
- All variables change simultaneously
- All other things being equal or held constant (Correct answer)
- A type of market failure
- A government policy tool
Correct answer: All other things being equal or held constant
'Ceteris paribus' is a Latin phrase meaning 'all other things being equal'. It is used to analyse the effect of one variable by assuming all other variables remain constant.
Question 2: What happens to the demand curve for a normal good when consumer income rises?
- Demand curve shifts left
- Demand curve shifts right (Correct answer)
- Demand curve becomes steeper
- There is a movement along the demand curve
Correct answer: Demand curve shifts right
For a normal good, demand increases as income rises. This shifts the entire demand curve to the right (an increase in demand), not a movement along the curve.
Question 3: What is price elasticity of demand (PED)?
- The percentage change in price in response to a change in quantity
- The percentage change in quantity demanded divided by the percentage change in price (Correct answer)
- The total revenue at each price
- The slope of the demand curve
Correct answer: The percentage change in quantity demanded divided by the percentage change in price
PED = (% change in quantity demanded) / (% change in price). It measures the responsiveness of quantity demanded to a change in the price of the good.
Question 4: In Singapore, which market structure best describes the mobile telecommunications industry?
- Perfect competition
- Monopoly
- Oligopoly (Correct answer)
- Monopolistic competition
Correct answer: Oligopoly
Singapore's mobile telecommunications market is an oligopoly — a few large firms (Singtel, StarHub, M1, and TPG) dominate, with high interdependence, barriers to entry, and strategic pricing.
Question 5: What is a 'public good' in economics?
- A good provided by the government
- A good that is non-excludable and non-rival in consumption (Correct answer)
- A good that is available to the public at a price
- A good with many substitutes
Correct answer: A good that is non-excludable and non-rival in consumption
A pure public good is non-excludable (cannot prevent anyone from consuming it) and non-rival (one person's consumption doesn't reduce availability to others), e.g., national defence.
Question 6: What is 'consumer surplus'?
- The amount consumers save by not buying a product
- The difference between the maximum price a consumer is willing to pay and the actual price paid (Correct answer)
- The government's tax revenue from consumers
- Total expenditure on a good
Correct answer: The difference between the maximum price a consumer is willing to pay and the actual price paid
Consumer surplus is the difference between the price consumers are willing and able to pay (as shown by the demand curve) and the price they actually pay. It represents consumer welfare benefit.
A-Level H2 Economics 1
What is 'ceteris paribus' in economics?