QUESTION TWO(20 Marks)

Match the economic concepts given in COLUMN A with its description in COLUMN B. Write down the question number and the correct letter next to it. E.g. 2.11 A

COLUMN A

COLUMN B

2.1

Price floor

A

These goods are exactly the same.

2.2

Homogeneous goods

B

Refers to a situation where quantity supplied equals quantity

demanded. (double coincidence of sellers' and buyers' plans)

2.3

Normal goods

C

Shows a combination of two different products that could be

produced to their maximum if resources are being fully utilised.

2.4

Economies of scope

D

This is when the quantity demanded is not equal to the quantity

supplied at the actual price.

2.5

Microeconomics

E

This is the continuous and considerable increase in the general

level of prices.

2.6

Increasing returns to

scale

F

Occur when the marginal product of an additional worker exceeds

the marginal product of the previous worker.

2.7

Disequilibrium

G

This is when a given percentage increase in inputs will lead to a

larger increase in output.

2.8

Economic costs

H

Focuses on the economic decision-making of individuals and firms.

2.9

Law of supply

I

A situation where costs per unit of output falls as the scale of productions increases

2.10

Production Possibility

Curve (PPC)

J

As income increases, the quantity demanded for these goods

increases.

K

This is when average cost falls as output increases.

L

These goods are highly differentiated

M

The cost savings achieved by producing related goods in one firm

rather than in two separate firms.

N

A legally mandated minimum price designed to maintain the price

above the equilibrium level.

O

This branch of economics focuses on the whole economy as

opposed to individual parts.

P

Other things being equal, the higher the price of a good, the higher

is the quantity supplied.

Q

This is a combination of implicit and explicit costs.

R

Measures the responsiveness of quantity supplied and demanded

given a change in consumer income.