Download year 11 Economics workbook sample pagesBB

Content
Page
1.1 Consumer Choices using Demand
Limited means relative to wants
07
Scarcity, choices and opportunity cost 13
Individual demand schedules
18
Individual demand curves
23
Consumer reaction to price changes
28
Consumers and non price changes
33
Household income and spending
44
Demand curves summary / flow chart 59
1.1 Checklist and evaluation
63
1.3 Producer Choices using Supply
Individual supply schedules
Individual supply curves
Producer reaction to price changes
Producers and non price changes
Supply curves summary / flow chart
Flow-on effects and impacts on firms
1.3 Checklist and evaluation
65
70
75
80
98
101
106
1.4 Choices and Market Equilibrium
Market demand schedules and curves
Market supply schedules and curves
Market equilibrium
Market reaction to a shortage/surplus
Changes in demand and supply
Effect of a sales tax
Effect of a direct tax
Effect of a subsidy
Effect of a max. / min. price control
1.4 Checklist and evaluation
108
112
109
122
128
136
143
145
152
157
Find out
what is
required
SUCCESS
Deliver
Content
Page
1.2 Producer Choices using Production
Resources and resource use
160
Renewable and non-renewable
163
Labour and capital intensive methods 167
Goals of producers
168
Factors affecting productivity
172
Business expansion
176
Economies and diseconomies of scale 180
Price marketing
184
Non-price marketing
186
1.2 Checklist and evaluation
191
1.5 Choices with Different Viewpoints
Scarcity and economic decisions
193
Costs, benefits and compromises
196
Justified recommendations
198
Internal planning page
200
Practice internal
201
1.5 Checklist and evaluation
204
1.6 Interdependence in NZ Economy
Interdependence in producer sector
Interdependence between sectors
Circular flow model
Impact of an event on a sector
Flow-on effects to other sectors
1.6 Checklist and evaluation
207
210
211
215
218
224
-
–
 Limited means relative to wants
Ben’s resources are his
four personal means.
F
I
T
S
Terms to memorise
He can use his personal endowments
to satisfy his needs and wants.
Family is limited:
 parents and grandparents.
 whanau / hapu / iwi.
 brothers / sisters.
Income is limited:
 wages or salary.
 gifts/donations/transfers.
 investment income.
Time is limited:
 only 24 hours in a day.
 we can only do one thing.
at a time etc.
Skills are limited:
 ability to do something.
 ability to make something.
 talents and qualifications.
Ben’s wants are unlimited as he always desires more than he has now.
Resources – personal
endowments we have (Family, Incom
Income, Time, Skills).
Means – personal resources.
Whanau – extended family.
Time – hours, days available.
Skills – abilities,qualifications.
Income - money earned.
Wants – desires. Goods and
services that we would like to
have but not essential for life.
Needs – essentials for living.
a) Individuals have N__________ and W____________. We use our P__________ R___________ (also called
M_______) to satisfy our needs which are E__________. Then we use our remaining means to satisfy our
W_______ which are D__________. Our means are L___________ where as our wants are U___________.
b) What are Ben’s four limited means? F ____________ I ______________ T _____________ S ____________
c) Why does being part of a larger family increase a person’s means? __________________________________
d) State three ways Ben could earn an income. 1 _______________ 2 ________________ 3________________
e) Identify two ways Ben could increase his skills. 1 ______________________ 2 ________________________
f) State the acronym that can be used to remember the four limited means all consumers have.______________
g) Why are Ben’s “means” limited? _____________________________________________________________
h) Why are Ben’s “wants” unlimited? ____________________________________________________________
i) Complete the table below by circling the correct “means”.(F = family. I = income. T = time. S = skills)
A
B
C
D
E
Personal resource Type of “means”
Saturday mornings
F I T S
Driving licence
F I T S
Wages
F I T S
Grandparents
F I T S
First Aid Certificate
F I T S
F
G
H
I
J
Personal resource
Type of “means”
Birthday money
F I T S
NCEA qualification
F I T S
Weekdays after school
F I T S
Parents
F I T S
Interest on savings
F I T S
1a. Draw and label each of your immediate family members on the inside circle.
1b. Draw and label each of your extended family members on the outside circle.
1c. Complete the table.
List each family
member here
How each person has helped you
satisfy a need or a want
ME
2. Use arrows to match the following situations to income and type of income earned.
Mow neighbour’s lawn
It’s my birthday
Wrote a book
Savings in the bank
Have a job as a teacher
Real estate agent sells a house
Gift of $30
$20 wages
$2 per item sold
3% earned on bank deposit
4% of final sale price
$50,000 per year
Annual salary
Transfer payment
Payment for labour
Interest received
Royalty payment
Commission
3. Complete your timetable for this week. Include the time you spend at school, travelling, working, activities
and sports, chores, volunteer work, eating, sleeping, on the internet, studying etc.
Monday
Tuesday
Wednesday Thursday
Friday
Saturday
Sunday
6-9am
9-12pm
12-3pm
3-5pm
5-8pm
8pm-12am
12-3am
3-6am
4. State an example for each of the following:
How do you use your income to be entertained and not bored? ______________________________________
How do you use your family to feel nourished and not hungry? ______________________________________
How do you use your skills to get around town and not be stuck at home? _____________________________
FITS: Ben’s Dad is helping him with his homework.
FITS: Ali is getting married. Her mum makes a
wedding dress for her.
1. Explain why Ben’s family increases his means.
1. Explain how Ali’s mum increases her means.
(D)Means = personal resources. Family = whanau (D)Means =
(E)Because Ben’s Dad is a family member he is
(E)Because
Family =
willing to help Ben out. Ben can achieve more with
the help of his family than he could on his own.
(R)Ben’s family helps him increase his means.
(R)
FITS: Ben has $200 in the bank. He wants to buy a
new iPod and a new PS2 games system.
FITS: Ali has $10,000 in the bank for her wedding
but she also wants to get new car.
2. Explain why Ben cannot buy everything he wants.
2. Explain why Ali cannot buy everything she wants.
(D)Wants = desires. Means = personal resources.
(E)Because Ben only has $200 in the bank and
(D)Wants =
(E)Because
Means=
an iPod and a PS2 cost more than $200.Ben doesn’t
have enough income so he needs to make a choice.
(R)Ben has $200 but wants an iPod and PS2.
FITS: Ben works at the supermarket on Saturdays.
This winter he wants to join a rugby team.
3. Explain the concept of limited means to Ben.
(D)Limited means =. personal resources eg. time.
(E)Because Ben has limited time on Saturdays he
(R)
FITS: Ali works full time but also wants to complete
a degree at university.
.
3. Explain the concept of limited means to Ali.
(D)Limited means =
(E)Because
can’t work at the supermarket and play rugby. Ben
needs to choose one option as his time is limited.
(R)Ben has limited means (eg. time).
(R)
FITS: Ben made a skateboard ramp out of old
plywood sheets he found in the garage.
FITS: Ali spent Saturday morning changing the oil
in her new car.
4. Explain how Ben’s skills increase his means.
4. Explain why Ali’s skills increase her means.
(D)Skills = ability. Means = personal resources.
(E)Because Ben had the skills required to make a
(D)Skills =
(E)Because
skateboard ramp, he had the ability to satisfy a want
that he may not have had the income to purchase.
(R)Ben’s ramp building skills increased his means. (R)
Means =
The marker is looking for:
Get it right! You need to:
 (D) define the limited means of the consumer.
 (E) explain the connection between the means being limited and
the consumer’s wants being unlimited.
 (R) refer to the information in the reference material.



limited means are identified.
reference is made to the
resource material.
connection between limited
means and unlimited wants.
Exam technique:
Common mistakes:
 write F.I.T.S in the margin of the exam paper to
help you remember: Family Income Time Skills.



not writing “time is limited etc” in the answer.
not referring to the information in the question.
saying “money” instead of “income”.
Sam is considering between going to a Guitar Hero competition on Saturday, or going to the mall to cruise
round with his mates. His mum wants him to stay home and tidy his room and mow the lawn.
.
1. Explain how time is a limited means for Sam.
(D)Time =
(E)Because
Limited means =
(R)
Sam has $300 in the bank. He is saving up to buy his first car. In the weekend he also saw a guitar he
wants to purchase. During the week he wants to take his girlfriend out to see a movie.
.
2. With reference to the information above explain why Sam is not able to satisfy all his wants.
(D)Wants =
(E)Because
Limited means =
(R)
Sam is organising his 21st birthday. His mum will help make the food while his dad is going to set up the hall.
His uncle will operate the BBQ and his grandmother has written out all the invitations.
.
3. Explain with reference to the information above how Sam’s family increases his personal resources.
(D)Family =
(E)Because
(R)
Personal resources =
Assessor’s
use only
(circle)
Alice wants to play in the school basketball team. She would also like to be in Stage Challenge.
However, rehearsals are on Fridays, when her games are on. Alice’s mum drives her to after
school activities as she doesn’t have her licence yet. She is still saving up for driving lessons.
(a)
gfgf
From the information above, identify one of Alice’s means.
A
(b)
State one way Alice’s family increases her limited means.
A
(c)
Explain how Alice’s skills influence her ability to participate in after school activities.
(D)
(E)
(R)
(d)
M
Explain how income is a limited personal resource for Alice.
(D)
(E)
(R)
(e)
M
Alice wants driving lessons. Explain how Alice could use her income to satisfy her wants.
(D)
(E)
(R)
M
(f) Explain why Alice has to choose between playing basketball and participating in Stage Challenge.
(D)
(E)
M
(R)
My grade for this section: (circle)
ACHIEVED
MERIT
EXCELLENCE
A=2A
M=2A+3M
E=2A+4M
Price change
price
increase
Read the question. Is the price
of the good changing?
Law of
demand
applies
Ceteris paribus applies
What is happening to the
price?
movement
along the
curve
How do you draw the change
to the demand curve?
price
decrease
Price
change?
Change in
quantity
demanded
Price
increase?
Quantity
demanded
falls Q1 to Q2
Quantity
demanded
Price
decrease?
Price
increases from
P1 to P2
Quantity
demanded
rise Q1 to Q2
Price
$
Price
$
P2
P1
P1
P2
Price
decreases
from P1 to P2
D
D
Q2
Q1
Q1
Quantity
Q2
Quantity
Non price change
T.I.C.S
increase
Read the question. Is
something other than the price
changing?
Non-price
change?
Demand
Is there a change in Tastes,
Income, Complement price or
Substitute price? (T.I.C.S.).
Ceteris
paribus
broken
Does the T.I.C.S's factor
cause demand to increase or
decrease?
How do you draw the change
to the demand curve?
Shift of
the curve
T.I.C.S.
decrease
Change in
demand
T.I.C.S.
factor
decrease?
T.I.C.S.
factor
increase?
Shift of the
curve left
from D to D1
Demand
decreases
Demand
increases
Price
$
Price
$
P1
P1
D1
Q2
D
Q1 Quantity
Shift of the
curve right
from D to D1
D
Q11
D1
Q2 Quantity
Did the price of the
good itself change?
Did the price increase?
yes
Did the price decrease?
no
yes
yes
no
Price
$
Price
$
P2
P1
P2
P1
D
D
Q2
Q1
Q1
Quantity
Explain a decrease in quantity demanded.
Q2
Quantity
Explain an increase in quantity demanded.
D Quantity demanded is how many a consumer is
willing and able to demand at one price.
D Quantity demanded is how many a consumer is
willing and able to demand at one price.
E Because (state the good) price increases it is
relatively less affordable so consumers (state the
consumer’s name) switch to a relatively cheaper
substitute instead (Eg...). This follows the law of
demand.
E Because (state the good) price decreases it is
relatively more affordable so consumers (state the
consumer’s name) switch from a relatively more
expensive substitute instead (Eg...). This follows the
law of demand.
R As price of (state good) increases from P1 to P2
(state prices) the quantity demanded decreases from
Q1 to Q2 (state quantities).
R As price of (state good) decreases from P1 to P2
(state prices) the quantity demanded increases from
Q1 to Q2 (state quantities).
Did the consumer’s
Tastes, fashion or
preferences change?
Did Tastes, fashion
or preferences increase?
yes
no
yes
yes
no
Price
$
Price
$
P1
P1
D
Q11
D1
Q2 Quantity
Explain a demand increase.
Did Tastes, fashion
or preferences decrease?
D1
Q2
D
Q1 Quantity
Explain a demand decrease.
D Tastes, fashion or preferences increase.
D Tastes, fashion or preferences increase.
E Because (insert consumer’s name) is more
willing to demand (state good) as his/her tastes /
fashion / preferences for (state good) increase.
E Because (insert consumer’s name) is more
willing to demand (state good) as his/her tastes /
fashion / preferences for (state good) increase.
R (Insert consumer’s name) demand for (state
good) increases so his/her demand curve shifts
right from D to D1.
R (Insert consumer’s name) demand for (state
good) increases so his/her demand curve shifts
left from D to D1.
Did the consumer’s
Income or disposable
income change?
Did Income or disposable
income increase?
yes
Did Income or disposable
income decrease?
no
yes
Price
$
yes
Price
$
no
P1
P1
D
Q11
D1
D1
Q2 Quantity
Q2
Explain a demand increase.
Q1 Quantity
Explain a demand decrease.
D Income is money earned. Disposable
income is income after tax and transfers.
D Income is money earned. Disposable
income is income after tax and transfers.
E Because (consumer’s name) is more able
to demand as he/she is earning more /
disposable income increased due to a
decrease in income tax.
E Because (consumer’s name) is less able to
demand as he/she is earning less /
disposable income decreased due to an
increase in income tax.
R (Consumer’s name) demand for (good)
increases so his/her demand curve shifts right
from D to D1.
R (Consumer’s name) demand for (good)
decreases so his/her demand curve shifts left
from D to D1.
Did the price of a
Complement good
change?
Did the price of a
Complement decrease?
yes
no
Did the price of a
Complement increase?
yes
no
D
yes
Price
$
Price
$
P1
P1
D
Q11
D1
D1
Q2 Quantity
Explain a demand increase.
Q2
D
Q1 Quantity
Explain a demand decrease.
D Complements are goods/services used together.
(Good 1) and (good 2) are complements.
D Complements are goods/services used together.
(good 1) and (good 2) are complements.
E Because the price of (good 2) has decreased,
(consumer’s name) quantity demanded of (good 2)
increases (law of demand) so (consumers name)
demand for (good 1) increases as the (good 1) and
(good 2) are used together.
E Because the price of (good 2) has increased,
(consumer’s name) quantity demanded of (good 2)
decreases (law of demand) so (consumer’s name)
demand for (good 1) decreases as the (good 1)
and (good 2) are used together.
R (Consumer’s name) demand for (good 1)
increases from D to D1. Demand shifts right.
R (Consumer’s name) demand for (good 1)
decreases from D to D1. Demand shifts left.
Did the price of a
Substitute good
change?
Did the Substitute price
increase?
yes
Did the Substitute price
decrease?
no
yes
Price
$
yes
Price
$
P1
P1
D
Q11
D1
Q2 Quantity
Explain a demand increase.
D1
Q2
D
Q1 Quantity
Explain a demand decrease.
D Substitutes are goods/services used in
place of each other. (Good 1) and (good 2)
are substitutes.
D Substitutes are goods/services used in
place of each other. (Good 1) and (good 2)
are substitutes.
E Because the price of (good 2) has
increased, (insert consumer’s name) quantity
demanded of (good 2) decreases (law of
demand) so (consumer’s name) demand for
(good 1) increases as it becomes relatively
cheaper than the (good 2).
E Because the price of (good 2) has
decreased, (insert consumer’s name) quantity
demanded of (good 2) increases (law of
demand) so (consumer’s name) demand for
(good 1) decreases as it becomes relatively
more expensive than the (good 2).
R (Consumer’s name) demand for (good 1)
increases (from D to D1) when the price of
(good 2) increases. Demand shifts right.
R (Consumer’s name) demand for (good 1)
decreases (from D to D1) when the price of
(good 2) decreases. Demand shifts left.
Use the flow chart to complete the table below for Anne’s Demand for coffee.
Event
1
Price of coffee
increases.
2
Price of tea
decreases.
3
Price of muffins
decreases.
4
Drinking coffee
becomes more
fashionable.
5
Anne’s income
increases.
Demand or Shift of the curve
quantity
or movement
demanded along the curve
Explain the reason for the change
.

For Achievement I can:
Define needs, wants, means, scarcity.
Identify and state the four limited means (Family,
Income, Time, Skills) from resource material.
For Merit and Excellence I can:
Explain why the four means are limited.
Explain the conflict between limited means and
unlimited wants.
Explain how the four limited means can be used
to satisfy wants.
Explain that the economic problem (scarcity)
results in people making decisions.
Explain that due to limited means consumers
have to make decisions and give consequences.


For Merit and Excellence I can:
Explain the link between scarcity/limited means,
choices and opportunity cost.
Explain that all economic decisions will have an
opportunity cost.
Explain a consequence of the opportunity cost.

For Achievement I can:
Define consumer demand, ceteris paribus.
Draw a fully labelled demand schedule / graph.
Read prices / quantities from a demand curve.

For Merit and Excellence I can:

For Achievement I can:
Define law of demand, ceteris paribus, quantity
demanded.
Describe the effect of a change in price on
quantity demanded.

For Merit and Excellence I can:
Explain why quantity demanded increases when
the price decreases (and vice versa).
Use dotted lines, arrows and labels to show a
price change on a demand curve (movement).
Explain a consequence on consumers of their
change in quantity demanded.

For Achievement I can:
Define change in demand, ceteris paribus,
complements, substitutes, disposable income.
Identify the four factors (T.I.C.S) that cause a
change in demand /shift of the demand curve.

For Merit and Excellence I can:
Explain why demand changes following a
change in a T.I.C.S factor.
Explain a consequence on consumers of their
change in demand.
Use dotted lines, arrows and labels to show a
non-price change on a demand curve (shift).

For Achievement I can:
Define opportunity cost.
Identify opportunity cost from resource
material.

For Achievement I can:
Define disposable income, luxuries, necessities,
inferior goods, direct tax, transfers, normal
goods.
Identify examples of luxuries, necessities and
inferior goods from resource material.
Calculate changes in spending / demand for
luxuries, necessities and inferior goods.
Describe the types of goods consumers
demand when their income falls / rises.

For Merit and Excellence I can:
Explain how a change in household income will
affect spending on luxuries, necessities and
inferior goods.
Read a graph to explain changes in spending
patterns following a change in income.
Explain why spending on luxuries, necessities and
inferior goods changes when income changes.
Explain a consequence / flow on effect of
changes in spending on a consumer’s demand.
Explain why demand for luxuries, necessities and
inferior goods changes when income changes.
-
–
 Producer reaction to non price changes / shifts of the curve
Ben’s weekly supply
curve for muffins
At every price
quantity supplied
has increased.
Price
$
S
S1
Ben’s weekly supply
schedule for muffins
Price Quantity Quantity
$
S
S1
0.50
10
12
1.00
12
14
1.50
14
16
2.00
16
18
Quantity (each)
A decrease in costs of production as a result of political decisions, environmental issues,
technology, restrictions on trade, legal requirements, cultural obligations or the decrease
in the price of other related goods results in an increase in supply (shift of the curve S
to S1) as the product becomes relatively more profitable to produce at each price.
Terms to memorise
Non price factors - changes in
(P.E.T.R.O.L.C.) factors
Political decisions – Eg. subsidies
and sales taxes.
Environmental factors – Eg. acts
of nature, weather, sustainability.
Technology – innovation that
results in a rise in productivity.
Restrictions on trade – Eg. quotas
and tariffs.
Other related goods – other
relatively more profitable goods.
Legal requirements – compliance.
Cultural obligations –Eg. resource
ownership
Cost of production -what firms pay.
(a) A change in anything other than the P________ results in a S_______ of the entire S_______ C_______.
This is called a change in S_________ (quantity supplied at each price has changed). The eight non-price
changes are P_________ D_________, E___________ I __________,T _____________, R _____________
O _______ T _________, O_________ R_________ G_________ P________, L_________ F___________,
C_________ O__________ and C_____ O__ P____________. The L_____ of S________ no longer applies.
(b) A change in “supply” causes what type of change to the supply curve?
(c) State the eight non-price changes.
(d) State the acronym used to remember the eight non price changes.
(e) Why does the law of supply no longer apply?
(f) How is the new supply curve labelled?
(g) List the three requirements of showing a non price change on the supply curve.
(h) State the acronym used to remember to draw the three requirements of a non-price change.
(i) Describe the difference between “supply” and “quantity supplied”.
1a. Show the effect of an increase in costs of production following a negative environmental event Eg. drought.
1b. Show the effect of a decrease in costs of production following a positive environmental event Eg. lots of sun.
(A) Adam’s weekly supply of avocados
Nicole’s monthly supply of nectarines
(B)
5.0
8
Price
7
$
Price
$ kg
S
6
4.5
S
4.0
3.5
3.0
2.5
2.0
5
4
3
1.5
1.0
0.5
2
1
0
05 10 15
20
25 30
0
35 40
05 10 15
Quantity (ea)
20
25 30
35 40
Quantity (kg)
2. Complete the table below by identifying two good and two bad environmental events for a dairy farmer.
Two good environmental events
Two bad environmental events
3. Match the correct terms with arrows.
Acts of nature
Costs of production
Relatively less profitable
Increase in supply
Sustainability
What producers pay to make goods and services
One product will make less profit than another related good
Resource use that enables resources to regenerate
An event that occurs which is outside of human control
Supply curve shifts to the right from S to S1
4. Complete the table below by stating why costs would increase or decrease for a potato farmer.
Event
Costs increase/decrease
Reason for costs to change
Flooding
Disease outbreak
High sunshine hours
5. Read the passages below and complete the questions that follow.
“Drought forces sheep farmers to buy in extra hay.”
“Hot summer is great news for strawberry growers.”
A. With reference to the information above explain
why a farmer’s supply of sheep would decrease.
B. With reference to the information above explain
why Sian’s supply of strawberries changed.
(D)Supply = quantity
at every price.
(E)Because extra hay was required by
,
of production
so
(D)Supply =
(E)Because
become
less profitable to produce.
(R)Farmers’ supply of sheep
from S to S1.
(R)
1. Describe what the term equilibrium means in Economics.
2. Explain how a railway crossing a road is similar to market equilibrium in Economics.
3. On each graph below label using dotted lines: a) the equilibrium price (EP) and b) the equilibrium quantity (EQ).
(A)
Market for iPads
800
(B)
S
Price
700
$
Price
$
Market for bottled water
4.5
S
4.0
3.5
3.0
2.5
2.0
600
500
400
300
200
D
100
1.5
1.0
0.5
D
0
0
05 10 15
20
25 30
35 40
05 10 15
Quantity (000)
20
25 30
35 40
Quantity (000)
4. (A) In Graph A the equilibrium price is $___ and the equilibrium quantity is __________. If the price was $700
then a __________ (or excess supply) would occur as quantity demanded would decrease to ________ iPads
and the quantity supplied would increase to ________ iPads. A surplus of ____________ iPads would occur.
5. (B) In Graph B the equilibrium price is $____ and the equilibrium quantity is __________. If the price was $1.50
then a __________ (or excess demand) would occur as quantity demanded would increase to ________ bottles
and the quantity supplied would decrease to ________ bottles. A shortage of ____________ bottles would occur.
6. Complete the following table by ticking true or false in the correct column.
Situation
If the price is above equilibrium then a shortage occurs.
True 
False

7. Match
If the price is above equilibrium then a surplus occurs.
Shortage is another name for excess demand.
Surplus is another name for excess supply.
7. Match the correct terms using arrows.
Market equilibrium
Shortage
Surplus
Disequilibrium
When there is a shortage or surplus
Where quantity supplied = quantity demanded
When quantity demanded > quantity supplied
When quantity supplied > quantity demanded
The market for porches is currently in disequilibrium.
The market for iPhones is currently in disequilibrium.
1. Show the market situation of a surplus of 15
Porshes. Fully label.
2. Show the market situation of a shortage of 10
iPhones. Fully label.
Market for Porshes
Market for iPhones
S
Price 8
$000 7
Price
$
80
S
70
P6
60
5
50
4
40
3
30
2
20
D
1
D
10
0
05 10 15
20
QD
25 30
0
35 40
05 10 15
20
QS Quantity (ea)
25 30
35 40
Quantity (ea)
The market for Air Guitars is currently in equilibrium.
The market for Teletubbie DVDs is currently in
equilibrium.
3. Draw a market supply curve that results in a
market equilibrium price of $40. Fully label.
4. Label the market equilibrium price and quantity.
Fully label.
Market for Air Guitars
Market for Teletubbie DVDs
Price 80
$
70
Price 80
$
60
60
50
50
40
40
30
30
S
70
20
D
10
0
05 10 15
20
25 30
35 40
20
D
10
0
05 10 15
20
25 30
Quantity (ea)
5. Use the market supply and market demand schedules
for silly putty to answer the questions that follow.
a) State the equilibrium price. _______________________
35 40
Quantity (ea)
Market Demand
schedule for silly putty
Price
Quantity
$
demanded
2.00
35
Market Supply
schedule for silly putty
Price
Quantity
$
supplied
2.00
65
b) State the equilibrium quantity. _____________________ 1.50
45
1.50
45
1.00
55
65
1.00
0.50
35
15
c) State the price where a surplus of 30 occurs. _________ 0.50
d) State the price where a shortage of 20 occurs. ________
e) State all the prices where market disequilibrium occurs. _______________________________
The marker is looking for:
Get it right! You must:
 (D) dotted lines showing price and quantities.
 (A) arrows between QD and QS to show any surplus/shortage.
 (L) labels on the dotted lines (EP,EQ, QD, QS).





equilibrium labelled EP and EQ.
dotted lines showing equilibrium.
arrows showing any surplus.
arrow showing any shortage.
labels (EP,EQ,QD,SD).
Exam technique: write D.A.L next to your graph:
Common mistakes:





(D) = dotted lines.
(A) = arrows showing any surplus / shortage.
(L) = labels.
check units when calculating surplus/shortage.
do not shade in any surplus or shortage.
1. “Shortage of pies in the tuck shop.” On the graph below 2. With reference to the graph explain the situation
show the situation of 30 students wanting pies and the
that you have drawn and fully labelled.
tuckshop only having 10 pies left in the pie warmer.
Shortage = Quantity demanded is
than
(D)
Market for mince pies in the school tuckshop
4.5
quantity supplied. Also called
demand
(E)Because consumers are demanding
S
pies
4.0
3.5
tick 
D
3.0
2.5
A
2.0
L
1.5
D
1.0
while the tuckshop only has
of
05 10 15
20
25 30
pies results in a current
disequilibrium situation.
(R)A disequilibrium situation called a
or
0
pies, a situation of
of 20 pies occurred.
35 40
3. “Cartoon socks proving popular with teenagers.” On
the graph below use dotted lines and labels to show the
equilibrium price (EP) and equilibrium quantity (EQ).
4. Use your completed graph to answer the
questions below.
a) State the equilibrium price. $________________
Market for cartoon socks
b) State the equilibrium quantity. _____(check units!)
Price $
80
70
S
60
tick 
D
50
40
A
30
L
20
D
10
0
1
2
3
4
5
6
7
8
Quantity (000)
c) Use a blue highlighter to shade in all the prices
that would result in a surplus of cartoon socks being
created.
d) Use a yellow highlighter to shade in all the prices
that would result in a shortage of cartoon socks being
created.
e) State the price that would result in an equilibrium
market situation. __________________
f) State all the prices that would result in a
disequilibrium market situation. ________________
 Market reaction to shortage / surplus
Market reaction to a surplus
Market reaction to a shortage
Market for Burgers
Market for Petrol
S
Price $
S
Price $
Terms to memorise
Market situation – either
equilibrium (QD=QS) or
disequilibrium (shortage QD>QS
or surplus QS>QD).
EP
EP
D
Q
D
Q
E
D
s
Q Quantity
Surplus occurs at current price.
Firms lower price to clear stock.
Quantity demanded increases
and quantity supplied decreases.
Equilibrium is restored at Eq, Ep.
Market equilibrium – the price
and quantity where the quantity
demanded equals quantity
supplied.
Q
S
Q
E
Q
D
Market reaction / equilibrium
restored – as price changes,
how does QD and QS change?
Quantity
Shortage occurs at current price.
Consumers bid up price so don’t
miss out. Quantity demanded falls
and quantity supplied increases.
Equilibrium is restored at Eq, Ep.
Shortage – quantity demanded
is more than quantity supplied
(excess demand).
Surplus – quantity supplied is
more than quantity demanded
(excess supply).
(a) When the current price is above the E______________ P________ a S___________ occurs. F_________
lower their P_________ to C________ S_________. As a result, consumers Q_____________ D__________
increases (follows the L____ of D__________), and producers Q______________ S__________ falls (follows
the L_____ of S_________). This process continues until the E____________ is restored at the price where
quantity D________ is the same as quantity S________. The O__________ occurs when there is a shortage.
(b) State the term that describes situation when quantity demanded is greater than quantity supplied.
(c) State market situation that occurs when quantity supplied is greater than quantity demanded.
(d) Use a double ended arrow to label the surplus that occurs at the current price on the market for burgers on
the graph above.
(e) Show and label the shortage that occurs at the current price on the market for petrol graph above.
(f) State why quantity supplied increases in response to a shortage.
(g) What is the first thing that happens when there is a shortage in a market?
(h) What is the first thing that happens when there is a surplus in a market?
(i) State the term used to describe the situation when the market is not at equilibrium.
(j) Explain how a market reacts to a shortage.
1a. Show the current price of $30 on Graph A (label fully using a solid line and label it “current price”).
1b. Show the current price of $200 on Graph B (label fully using a solid line and label it “current price”).
(A) Market for Blu Ray Discs
Price 40
$
(B) Market for Surfboards
Price 800
$
700
S
35
30
600
25
500
20
400
15
300
10
0
200
D
05
1
2
3
4
5
6
7
S
D
100
8
0
Quantity (000)
1
2
3
4
5
6
7
8
Quantity (000)
2a. Use a double headed arrow and label to show the market situation that occurs on Graph A at the current
price.
2b. Use arrows and labels to show how the market reacts to the market situation on Graph A.
3a. Use a double headed arrow and label to show the market situation that occurs on Graph B at the current
price.
3b. Use arrows and labels to show how the market reacts to the market situation on Graph B.
4. Use your competed graphs above to complete the following.
(A) In Graph A a ____________ currently exists at the current price. This means that ______________ supplied
is _____________ than quantity ______________. Firms will ___________ the ____________ to clear excess
stock. As a result, quantity __________ will ____________ (following the law of demand) as the blu-ray discs
become relatively more ____________. At the same time quantity ___________ by firms will ____________
(following the law of supply) as the blu-ray discs become relatively less ___________ to produce. This process
continues until the ___________ is restored.
(B) In Graph B a ____________ currently exists at the current price. This means that ______________ demanded
is _____________ than quantity ______________. Consumers who think they will miss out will bid _____ the
price. As a result, quantity __________ will ____________ (following the law of demand) as the blu-ray discs
become relatively less ____________. At the same time quantity ___________ by firms will ____________
(following the law of supply) as the blu-ray discs become relatively more ___________ to produce. This process
continues until the ___________ is restored.
How to show market reaction to shortage:
S
1. Draw a horizontal line across at the current price (below equilibrium).
2. Draw a dot where the current price line intersects the supply curve
and draw a dotted line down. Label this line QS.
3. Draw a dot where the current price line intersects the demand curve
and draw a dotted line down. Label this line QD.
EP1
4. Draw an arrow between QS and QD and label this “shortage.”
Current price
5. Consumers bid up price so draw an arrow on the price axis from the
current price line to the equilibrium. Draw an arrow up the demand
4.curve
fdfdfdfdf
(since it’s a price change) from the QD dot to the equilibrium.
Firms increase quantity supplied as relatively more profitable so draw
an arrow up the supply curve from the AS dot to the equilibrium.
D
QS
Q
shortage
QD
Practice 1: Show market reaction to a shortage Practice 2: Show how the equilibrium is restored following a shortage
S
P
S
P
D
D
Q
Q
How to show market reaction to surplus:
S
1. Draw a horizontal line across at the current price (above equilibrium).
2. Draw a dot where the current price line intersects the supply curve
and draw a dotted line down. Label this line QS.
3. Draw a dot where the current price line intersects the demand curve
and draw a dotted line down. Label this line QD.
Current price
EP1
4. Draw an arrow between QS and QD and label this “surplus.”
5. Producers lower price so draw an arrow on the price axis from the
current price line to the equilibrium. Draw an arrow down the demand
curve (since it’s a price change) from the QD dot to the equilibrium.
Firms decrease quantity supplied as relatively less profitable so draw
an arrow down the supply curve from the AS dot to the equilibrium.
D
QD
Q
surplus
QS
Practice 3: Show market reaction to a surplus Practice 4: Show how the equilibrium is restored following a surplus
S
P
S
P
D
Q
D
Q
The marker is looking for:
Get it right! You must:
 (D) define the market situation (shortage or surplus).
 (E) explain why consumers bid up price/firms lower price then
explain why quantity demanded and quantity supplied changes.
 (R) refer to specific prices and quantities in the question/graph.




market situation defined.
price change explained.
changes in quantity demanded
and quantity supplied explained.
reference to price and quantities.
Exam technique: write D.A.L next to your graph:
Common mistakes:





(D) = dotted lines (for EP,EQ, QD,QS).
(A) = arrows showing equilibrium being restored.
(L) = labels (EP,EQ, QD,QS).
1. “Surplus of pizza”. On the graph below show how the
market responds to a current price of $4 per pizza.
check units (ooo) means thousands.
do not shade in any surplus or shortage.
2. With reference to the graph explain how the
market reacts to the current market situation.
(D)Surplus = Quantity supplied is
Market for Pizza
than
quantity demanded.
S
4.5
(E)Because firms lower the
4.0
tick 
D
3.5
3.0
2.5
A
2.0
L
1.5
D
1.0
0
05 10 15
20
25 30
35 40
quantity demanded
and quantity
to clear stock
(relatively more affordable)
decreases (relatively less profitable).
Process continues until equilibrium is restored.
(R)Quantity demanded increases from
to
and quantity supplied decreases from
to
until equilibrium is restored at $
and
pizzas.
3. “Shortage of potatoes”. On the graph below show
4. With reference to the graph explain how the
how the equilibrium is restored following a price of $2kg.
equilibrium is restored.
(D)Shortage = Quantity demanded is
Market for Potatoes
than
Price $
quantity supplied.
8
(E)Because consumers bid up the
S
7
tick 
D
6
5
A
4
3
L
2
0
1
2
3
4
5
6
7
and quantity
(relatively more profitable)
decreases (less affordable).
Process continues until there is no surplus or shortage.
(R)Quantity supplied increases from
D
1
quantity supplied
8
Quantity (000kg)
and quantity demanded decreases from
until equilibrium is restored at $
and
to
to
kgs.
Show the effect of an increase in demand
(practise yourself)
1. Show the effect of an increase in demand on graph 1:
S
a) label the original equilibrium price (P) and quantity (Q) with dotted lines.
b) draw and label the new demand curve – to the right (D1).
c) draw two arrows pointing from the old to the new curve.
d) label the new equilibrium price (P1) and quantity (Q1) with dotted lines.
e) draw an arrow from the old equilibrium price to the new equilibrium price.
f) draw an arrow from the old equilibrium quantity to the new equilibrium quantity.
D
2. As a result of an increase in demand, the equilibrium price ____________
from P to P1 and the equilibrium quantity ________________ from Q to Q1.
Show the effect of a decrease in demand
(practise yourself)
1. Show the effect of a decrease in demand on graph 2:
S
a) label the original equilibrium price (P) and quantity (Q) with dotted lines.
b) draw and label the new demand curve – to the left (D1).
c) draw two arrows pointing from the old to the new curve.
d) label the new equilibrium price (P1) and quantity (Q1) with dotted lines.
e) draw an arrow from the old equilibrium price to the new equilibrium price.
f) draw an arrow from the old equilibrium quantity to the new equilibrium quantity.
D
2. As a result of a decrease in demand, the equilibrium price ____________
from P to P1 and the equilibrium quantity ________________ from Q to Q1.
Show the effect of an increase in supply
(practise yourself)
1. Show the effect of an increase in supply on graph 3:
S
a) label the original equilibrium price (P) and quantity (Q) with dotted lines.
b) draw and label the new supply curve – to the right (S1).
c) draw two arrows pointing from the old to the new curve.
d) label the new equilibrium price (P1) and quantity (Q1) with dotted lines.
e) draw an arrow from the old equilibrium price to the new equilibrium price.
f) draw an arrow from the old equilibrium quantity to the new equilibrium quantity.
D
2. As a result of an increase in supply, the equilibrium price ____________
from P to P1 and the equilibrium quantity ________________ from Q to Q1.
Show the effect of a decrease in supply
(practise yourself)
1. Show the effect of a decrease in supply on graph 4:
S
a) label the original equilibrium price (P) and quantity (Q) with dotted lines.
b) draw and label the new supply curve – to the left (S1).
c) draw two arrows pointing from the old to the new curve.
d) label the new equilibrium price (P1) and quantity (Q1) with dotted lines.
e) draw an arrow from the old equilibrium price to the new equilibrium price.
f) draw an arrow from the old equilibrium quantity to the new equilibrium quantity.
D
2. As a result of a decrease in supply, the equilibrium price ____________
from P to P1 and the equilibrium quantity ________________ from Q to Q1.
 Effect of a sales tax
Supply decreases
1
(S to S ) as the tax
increases firm’s
costs of production..
The amount of the
sales tax is the
vertical distance
between the
two supply curves.
Totals
Terms to memorise
Price paid by
consumers rises
C
from P to P .
Price received by
producers falls
P
from P to P .
Quantity bought
1
falls Q to Q .
Quantity sold falls
1
from Q to Q .
Total spending
decreases from
C
1
P × Q to P × Q .
Government
imposes a per unit
sales tax to raise
revenue/decrease
consumption.
Government
collects tax
revenue
C
P
1
(P - P × Q ).
Total revenue
decreases from
P
1
P × Q to P × Q .
Sales tax
S1
S1
S
S
government
revenue
P
C
total producer
revenue after
P
P
new total
consumer
spending after
P
P
Revenue – price multiplied by
quantity sold.
Profit – revenue minus
expenses. Return to owner.
Consumer spending – price
paid multiplied by quantity
purchased.
Tax revenue – amount of tax
per unit sold multiplied by
quantity sold. Revenue for the
government.
C
P
PP
D
Q1 Q
Indirect tax – a tax collected by
a third party on behalf of the
government. Eg. Sales tax.
D
Q1 Q
Sales tax – same as indirect
tax. Also called excise tax.
(a) A sales tax (also known as an I_________ T_____) might be imposed by the G_________ to raise
R___________ or to reduce C_____________ by consumers. The sales tax I___________ a firm’s C______
of P____________ so the supply curve moves V_________ and to the left by the A________ of the tax. The
new reduced quantity sold is Q_ and the new price paid by consumers is P_ while the new price received by
firms is P_. The government collects T___ R_________. This is calculated: P_ minus PP multiplied by Q_.
(b) Describe why supply decreases when the government imposes a sales tax.
(c) State what the vertical distance between the supply curves represents.
(d) Identify the letter from the graph that illustrates the new price paid by consumers with the sales tax.
(e) Identify the letter from the graph that illustrates the new price received by firms with the sales tax.
(f) Identify the letter from the graph that illustrates the new quantity sold with the sales tax.
(g) Describe two reasons the government may impose a sales tax on a particular good or service.
(h) State the formula used to calculate the change in total consumer spending.
(i) State the formula used to calculate the change in total producer revenue.
(j) State the alternative name for a sales tax.
(k) Approximately what percentage of the tax is paid by consumers?
Producers?
’
Instructions:
S1
1. Label equilibrium price as old price to consumer/producer and
equilibrium quantity as old quantity with dotted lines and labels.
S
2. Choose 3 points on supply curve: one near the bottom of the
supply curve (Huey), one at equilibrium (Duey) and one near
the top of the supply curve (Luey).
3. Draw an arrow up from each point by the dollar amount of the
tax (use price scale), marking points at the top.
4. Sketch a new curve through these points and label it S1.
5. At the new equilibrium draw a dotted line down. label Q1.
PC
P
OLD
P
P
6. Where Q1 dotted line cuts old supply curve draw a dotted line
P
across to price axis and label “price producer”(P ).
D
7. At the new equilibrium draw a dotted line across to the price
C
axis and label this “price consumer pays” (P ).
1
Q
Practice 1
OLD
Q
Practice 2
S
S
D
D
1. On your completed practice 1 graph above:
S1
a. Shade in total consumer spending before tax
S
b. Shade in total producer revenue before tax
2. On your completed practice 2 graph above:
a. Shade in total producer revenue after tax
b. Shade in total tax revenue to the government
c. Total consumer spending after tax
PC
P OLD
PP
3. On the graph provided (right):
D
a. Shade in the change in producer revenue
Q1
QOLD
-
 Resources
Resources are inputs used in the production process.
Natural resources
Human resources
Capital Resources
Raw materials that occur
naturally in the
environment (rent)
People who work in
production. Can be labour
or entrepreneurs (wages)
Man made goods used to
make other goods
(interest)
Examples
Examples
Examples
Water, wind, soil, animals,
plants, sunlight, mineral
deposits, oil
Labour: driver, workers
Entrepreneur: business
owner, manager
Machines, computers,
tools, factories, buildings,
vehicles, electricity
Resource use: Dairy farming
Natural resources: cows, grass, water, superphosphate fertiliser.
Human resources (labour): farm worker, tractor driver.
Human resources (entrepreneurship): farm owner, farm manager.
Capital resources: milking shed, tractor, fences, milk truck, electricity.
Terms to memorise
Resources – inputs or raw
materials used in production.
Natural resources – gifts of
nature.
Human resources – people
working to produce output.
Labour – physical human
effort.
Entrepreneurship – risk taker
who organises the factors of
production to produce output.
Capital – man made goods
used to make other goods.
Factor payments – costs to
firms for using resources. Eg.
rent, wages, interest.
(a) R___________, also known as I________ are factors of production. They are R_____ M____________
used by F_______ to make G________ and S__________. Resources are divided into T_________ main
types; N_________ resources are raw materials that occur naturally. H__________ resources are P_______
and are divided into two sub categories, L__________ resources which is P_________ H___________
E_________ and E____________ which is the O____________ or M_____________ of a firm. C_________
resources are M_____ M______ G________ used to make other G________ eg M__________.
(b) Define the term “resources”.
(c) State the three main types of factors of production/inputs.
(d) State the two types of human resources used in production.
(e) Describe why cows on a dairy farm are a natural resource.
(f) Identify the type of resource that a shop assistant would be classified as.
(g) Describe why a hammer would be classified as a capital resource.
(h) Describe five resources that would be used in the production of a burger.
1. Complete the table by classifying the resources in the box below.
builder delivery truck soil rain plumber author laptop
checkout operator coal lawyer factory accountant wool
Natural
Human
gold
sewing machine
Capital
2. Match the correct terms using arrows.
Gifts of nature
Physical human effort
Inputs in the production process
Goods used to make other goods
Organises the factors of production
Capital resources
Natural resources
Resources
Entrepreneurship (human)
Labour (human resource)
Chainsaw
Crude oil
Shop worker
Manager
Factors of production
3. Close your eyes and imagine you were the owner of a blueberry farm. Complete the table below by identifying
three examples of each type of resource that would be required to produce blueberries.
Natural
Labour
Human
Entrepreneurship
Capital
4. Read the newspaper advertisements and complete the table that follows.
FURNITURE-MAKING BUSINESS FOR SALE
This business must be sold. Situated on a one
acre property it includes a 1000m2 building
with five furniture making machines, an office, own
well for water, pump house and is situated for
good all day sun.
Currently operated by a manager and office staff,
two trained carpenters and a delivery driver.
Identify examples of each type of resource from the advertisement above.
Natural
Human
Labour
Entrepreneurship
Capital
 Overview
Terms to memorise
A government, city council, school board of trustees etc. has to make an economic
decision due to a resource (eg. funding) being scarce.
Different groups who will be affected (eg. may or may not benefit from different possible
options) have different viewpoints on which option/compromises should be chosen
depending on their values. There are costs and benefits of each option.
Scarce resources – not enough
relative to demand for them.
Limited means – time, skills
or income.
Values – strongly held beliefs.
Part B
1. Identify the options that different
groups want and suggest a
compromise they might be prepared
to make.
2. Identify the main factors you will
consider when evaluating each
option/compromise.
3. Identify and explain the major costs
and benefits of each
option/compromise.
4. Rank the options/compromises.
5. Recommend and justify the best
option.
Part A
1. Identify the scarce resource / limited
means.
2. Describe the economic decision that
must be made.
3. Collect / process information about
the different options.
 Scarce resources / Economic decisions (PART A)
A hockey club has a $100,000 grant that they can spend on improvements. The grant is a
scarce limited resource as the club members have more options to spend the money than
the grant will cover. The newer club members want to buy a new all weather turf. The
older club members want new clubrooms. Younger players want lighting for winter.
1. Limited means
Resources are scarce as they are
limited relative to the demand for
them.
2. Economic decisions
The club needs to make a choice from the
various options as to how the grant should be
spent.
Resources can be time, skills or
money.
This could involve a compromise where all the
groups give up some of what they want so
that all groups are satisfied to some degree.
In this example the scarce
resource is limited money, the
$100,000 grant.
3. You need to collect / process
information from at least two
different groups that want the
money spent on different options.
Viewpoint 1: new turf (new clubbies)
Viewpoint 2: new clubrooms (older clubbies)
Viewpoint 3: outdoor lighting (young clubbies).
Information on different viewpoints can be
collected by interviews, newspaper articles,
surveys, etc.
 Values / Compromises (Part B)
Compromise – to make a deal
where each group gives up
something that they want.
Costs and benefits –
advantages and disadvantages.
Evaluation – an assessment
as to the costs and benefits of
each option.
Recommendation– best
option overall.
Terms to memorise
Grant – donation or allocation of
funding for a specific project.
Scarcity – limited in relation to
demand.
Economic decisions –
choices made on how
resources are used.
Compromise – to make a deal
where each group gives up
something that they want.
Viewpoints – different options
wanted by different people.
Options – different possibilities.
Choices – decisions made.
Terms to memorise
Values – strongly held beliefs.
Values
Values are perspectives that
people hold. They are strongly held
beliefs and are often influenced by
our upbringing, religion, culture,
age, or gender. They are
assumptions that determine our
expectations and actions. They
explain why we do what we do and
are used when we make decisions.
Eg. good manners, sustainability,
helping others, healthy living etc.
Compromises
Finding a way to get people with different wants
to mutually agree on an option they will accept.
Each group gives up part of what they would
like so that one option can be agreed upon.
For example: The hockey club could spend
some money renovating the clubrooms, buy
new turf for half the hockey pitches and put up
lighting for one of the hockey turfs.
Each group gets part of what they want.
Examples of values – honesty,
healthy eating, loyalty, respect,
teamwork, freedom, tolerance,
reliability, family, fairness,
sharing.
Compromise – to make a deal
where each group gives up
something that they want.
The local City Council has some surplus land available that they would like to use for a facility for locals.
A survey showed ratepayers were keen on the following options:
1. Teenagers wanted a skateboard park.
3. Young families wanted a children’s playground.
2. Elderly people wanted a library.
4. Older families wanted a swimming pool.
Teenagers responded, “We want a place to hang out with our friends and play safely on our skateboards.
We would consider a smaller skateboard park and an adventure playground.”
Elderly people said, “We would like better access to books and relax in beautiful surroundings. We would
consider a smaller library and a place to swim.”
Young families said, “We want a safe place for our children to play and socialise with other children. We
would also consider a smaller playground and a library that had a good children’s section.”
Older families responded, “We would like a pool so we can increase our fitness. We would consider a
smaller pool and a playground as long as the playground had a BBQ area.”
1. Identify the limited means/scarce resource in this situation. _______________________________________
2. Describe the economic decision the City Council must make. ______________________________________
3. Explain how the economic decision is affected by limited means and/or scarce resources. _______________
4.Complete the table below by using the information in the resource material above to show the different
viewpoints of different groups affected by the council’s decision.
Person
or
group
Teenagers
Young families
Elderly people
Older families
What should
the land be
used for?
Why do they
have this
viewpoint?
How could they What options
be affected by
are they
this decision?
proposing?
(list their values)
(costs/benefits)
What
compromises
are they willing
to make?
 Identify and explain the options and compromises (PART B)
Identify the possible options on how the scarce resource could be used.
Eg. The Hockey Club has a $100,000 grant to spend on improvements.
Viewpoint 1: new turf (wanted by new club members).
Viewpoint 2: new clubrooms (wanted by older club members).
Viewpoint 3: outdoor lighting (wanted by young club members).
Terms to memorise
Scarce resources – not enough
relative to demand for them.
Limited means – time, skills
or money.
Values – strongly held beliefs.
Suggest a possible compromise
Factors used to evaluate options
Identify the main factors you will
consider when evaluating each option or
compromise. Examples of these factors
could include:
The hockey club could spend $50,000 on
renovating the clubrooms instead of
building completely new clubrooms, or
buy new turf for half the hockey pitches
(costing $40,000) rather than all of them.
This means the club still has some
funding available to put up lighting for one
of the hockey turfs ($10,000).
 the number of club members
benefitting.
 how well it fits the club’s goals.
Give weightings to the importance of
each factor based on how significant
they are. Eg. the number of club
members who would benefit may have a
higher weighting than club goals.
Each group of club members get part of
what they want.
 Identify and explain the costs and benefits (PART B)
Identify and explain the major costs (disadvantage/ negative factor) and benefits
(advantage/positive factor) of each option and the compromise by considering the factors
and how each group feels about them. You need to provide enough evidence for each
cost and benefit so the options can be ranked and the compromise can be considered.
Major benefits (example)
New club rooms: Nicer facilities will
encourage new member to join the club.
Facilities can be hired out to gain
revenue for the club.
Major costs (example)
New club rooms: Larger building footprint
involves the removal of some car parks.
Artificial turf: Requires ongoing
maintenance. Can cause injuries to
players.
Artificial turf: Games can be played all
year round and in bad weather. Can be
hired out to other groups to gain
revenue for the club.
Lighting: Additional ongoing costs of
maintenance and increased electricity
will have to be paid for by the club in the
future.
Lighting: Games and practices can be
played at night so facilities can be used
more often especially during winter.
Compromise option: Renovated rooms
will be too small to hire out. Doing
lighting and turf upgrades in two stages
is more expensive than all at once.
Compromise option: improvements to
the club benefit everyone.
 Rank the options and compromises (Part B)
Ranking
Put the various options and
compromises in order from best to
worst based on your cost and benefits.
Ranking (example)
st
1 choice: renovated clubrooms and one
lighted artificial turf.
2
Ranking
Your ranking must be consistent with
your costs and benefits analysis.
nd
best choice: new clubrooms.
rd
3 best choice: artificial surface for all turfs.
th
4 best choice: outdoor lighting for all turfs.
Compromise – to make a deal
where each group gives up
something that they want.
Costs and benefits –
disadvantages and advantages.
Evaluation – an assessment
as to the costs and benefits of
each option.
Recommendation– best
option overall.
Terms to memorise
Grant – donation or allocation of
funding for a specific project.
Scarcity – limited in relation to
demand.
Economic decisions –
choices made on how
resources are used.
Compromise – to make a deal
where each group gives up
something that they want.
Viewpoints – different options
wanted by different people.
Options – different possibilities.
Choices– decisions made.
Terms to memorise
Ranking – put in order best to
worse.
Costs – negative factors or
disadvantages of an option.
Benefits – positive factors or
advantages of an option.
First choice – best option
overall.
The local City Council has the following goals and objectives:
“We want to make the city a more liveable and safe place for people to work, rest and play.”As a result the Council is
using the following guidelines in making the decision.
Priority 1. The facility needs to benefit as many ratepayers as possible.
Priority 2. A facility that will help improve the fitness of ratepayers has priority.
Priority 3. A facility that provides safer and more accessible recreation opportunities is important.
A council commissioned report included the following section:
“It is expected a skateboard park will create noise for local residents but will keep the youth off the streets and will
help them keep out of trouble. The swimming pool will increase the fitness and health of everyone
in the community but will have significant ongoing maintenance costs. The library will have some ongoing
running costs but will keep people’s minds active and engaged. The playground will help young families socialise and
help keep children fit and healthy but will only be used by a relatively small proportion of the local population.”
1. Identify the main factors that will be used to evaulate the options. _________________________________
2. Suggest two possible compromises using the information on page 195.
Compromise 1:
Compromise 2:
3.Complete the table below by using the information in the resource material above and your own ideas to
state the major costs and benefits of each option and the two compromises you stated above.
Option
large
skateboard
park
Major costs
Major benefits
large
playground
large
library
large
swimming
pool
Compromise 1:
Compromise 2:
4. Rank the options and compromises above based on their costs and benefits.
1st choice
2nd choice
3rd choice
4th choice
5th choice
6th choice
Identify the scarce resource:
Describe the choice that must be made:
Collect information from groups with differing viewpoints:
Group 1 name:
Viewpoint:
Group 2 name:
Viewpoint:
Group 3 name:
Viewpoint:
Group 4 name:
Viewpoint:
Identify possible options and compromises from the different groups:
Possible Option 1:
Possible Option 2:
Possible Option 3:
Possible Option 4:
Possible Compromise Option A:
Possible Compromise Option B:
Identify 1-3 costs (negatives) and identify 1-3 benefits (positives) for each option and compromise in detail:
Options
Costs
Costs Weightings
Benefits
Benefits Weightings
1.
2.
3.
4.
5.
6.
Rank the options and compromises (be consistent with your cost-benefit analysis above).
Ranking: Best to Worst
1st
2nd
3rd
4th
5th
6th
Options
Recommend the 1st option: _______________________
Justify your recommendation by referring to
your cost-benefit analysis:
Justify your recommendation by explaining your
weightings given to the various factors:
TASK TWO
A. Identify the options that the different people suggest and the compromises they are prepared to make.
Possible option
People who most favour this option
1
2
3
4
Compromise 1:
Compromise 2:
B. Identify the main factors you will consider when evaluating each option and compromise.
Main factors (priorities)
considered by the decision makers
Weightings of relative importance
of each factor/priority (high, medium, low)
1
2
3
C. Identify and explain the major costs and benefits (positive and negative factors) of each option and
compromise by considering the factors (priorities) and how each person feels about them (ie. give them
weightings of importance).
Options
1
2
3
4
compromise
1
compromise
2
Major costs (negatives)
and their weightings
Major benefits (positives)
and their weightings
-
 Interdependence within the producer sector
Interdependence
Two way reliance. Firms in one different
productive sector rely on firms in the other
productive sectors.
Example: primary sector firms rely on secondary
sector firms and secondary sector firms
rely on primary sector firms.
Producer Sector – All individual firms together
Primary
Sector
Secondary
Sector
Tertiary
Sector
Firms that
harvest or
extract natural
resources
Firms that
process or
manufacture
goods
Firms that
provide
services
Eg. agriculture
forestry
horticulture.
Eg. electronics,
vehicles, food
processing.
Eg. marketing,
finance, shops,
communication,
legal services.
Dairy farmer
Terms to memorise
Interdependence – mutual
reliance.
Milk factory
The dairy farmer (primary
sector firm) needs the milk
factory to buy their milk solids.
The milk factory (secondary
sector firm) needs the farmer to
sell them milk solids so they
can process it and sell milk.
The farmer and the milk factory
need the milk trucking firm
(tertiary sector) to move their
milk and the milk truck firm
needs milk to transport to make
a profit.
This is mutual reliance.
Producer Sector – private
firms manufacturing goods.
Productive sector – primary,
secondary or tertiary sector: all
within the producer sector.
Primary Sector – firms that
extract raw (natural) resources.
Eg. mining, farming fishing etc.
Secondary Sector – firms that
process raw (natural) resources
into finished goods. Eg. milk
plants, breweries, factories etc.
Tertiary Sector – firms that
provide services Eg. tourism,
transport, builders, shops etc.
(a) T____ way reliance called I_________________ in Economics is when two firms are R____________ on
each other for their success. There are T_______ main types of productive S_________ that together make
up the P_____________ S_________ in the circular flow model of the E____________. F_________ in the
P_________ sector E_________ natural resources. Examples include M__________ and F__________.
S_____________ sector firms P___________ or M______________ the N_________ resources into goods.
F______ in the T________ sector provide S_________ to other firms. Firms in each sector are I___________.
(b) Define interdependence.
(c) Describe what firms in the primary sector do.
(d) State what firms in the secondary sector do.
(e) Describe what firms in the tertiary sector do.
(f) Describe how a timber mill and a forest owner are interdependent.
(g) Describe the difference between interdependence and independence.
(h) Describe the difference between sectors in the circular flow and productive sectors.
1. Match the correct terms using arrows.
Interdependence
Tertiary sector
Productive sectors
Primary sector
Secondary sector
Firms that process or manufacture goods
Mutual reliance
Firms that extract natural resources
Three sectors within the producer sector
Firms that provide services
Criminal and lawyer
Primary, secondary, tertiary.
Accountant
Vegetable canning factory
Vegetable grower
2. Complete the table below identifying examples of firms in each productive sector.
Primary
Secondary
Tertiary
3. Complete the table below by identifying the productive sectors each firm operates in (circle).
Firm
Bill’s Hardware
SD Engineering
Lee’s Lawyers
Olly’s Orchard
Tim’s Towtrucks
Sector
P S T
P S T
P S T
P S T
P S T
Firm
PB Oil Refinery
Ken’s Car Repairs
Kate’s Cupcakes
Tom’s Tutoring
Bob’s Blueberries
Sector
P S T
P S T
P S T
P S T
P S T
4. Describe why a supermarket needs a soft drink manufacturer.
5. Describe why a soft drink manufacturer needs a supermarket.
6. State the economic term used to describe the relationship you described in questions 4 and 5 above.
7. Identify three examples of workers that could be employed by firms operating in each productive sector.
The first one has been done for you as an example.
Primary
tractor driver
Secondary
sawmill operator
Tertiary
checkout operator
8. Trademe sellers and courier firms are interdependent. Describe why.
 Impact of an event on a sector
Government decreases income tax
Household
Sector
Disposable income increases as less taken by government.
Demand for goods and services rises. More income left over
to save. Can buy more luxuries and less inferior goods.
Producer
Sector
Sales, revenue and profits increase as consumer spending
increases. Confidence to invest increases. Increase in
production. Hire more workers and purchase capital goods.
Financial
Sector
Investment loans to firms increase. Profits increase. Require
more deposits from households to lend to firms. Household
savings in banks rise as their disposable incomes increase.
Government
Sector
Overseas
Sector
Income tax revenue decreases. However, GST and
company tax increases as spending increases. Less
revenue available to spend on transfers and subsidies.
Producer
Sector
Financial
Sector
Government
Sector
Disposable income –
household income after tax paid.
Luxuries – high quality versions.
Inferior goods – low quality
versions (cheaper) of goods.
Confidence – predictions of
future sales and revenue.
Investment – firms borrowing
to purchase capital goods.
Importers’ sales, revenue and profit increases as consumer
spending rises as disposable incomes increase. Increase
production. Hire more workers and purchase capital goods.
Company tax – direct tax paid
by firms on their profit.
Increase in production
More employment. Higher incomes. Pay more income tax.
Work longer hours. Save more. Greater variety of goods
available to purchase.
Production increases. Sales, revenue and profits rise. Demand
for raw materials increases. Employ and train more staff.
Investment in capital goods rises. More investment loans.
Investment loans to firms increase. Profits increase. Require
more deposits from households to lend to firms. Household
savings in banks rise as their incomes increase.
Income tax revenue increases as more jobs available and
people working longer hours. GST and company tax also
increases as spending increases. Less spent on transfers.
Importers’ sales, revenue and profit increases as consumer
Overseas
Sector
Income tax – direct tax paid on
income to government.
Transfers – welfare payments
to households by government.
 Impact of an event on a sector
Household
Sector
Terms to memorise
spending rises as incomes increase. Exports increase as
firms sell more goods overseas. Export receipts increase.
(a) State an impact of an increase in income tax on households.
(b) Describe an impact of an increase in income tax on producers.
(c) State an impact of an increase in income tax on the government.
(d) State an impact of a decrease in production on the overseas sector.
(e) Identify an impact of a decrease in production on the producer sector.
(f ) State an impact of a decrease in production on the household sector.
Terms to memorise
Savings – income not spent.
Disposable income –
household income after tax paid.
Revenue – price × quantity sold.
Profit – revenue - expenses.
Investment – firms borrowing
to purchase capital goods.
Transfers – welfare payments
to households by government.
Company tax – direct tax paid
by firms on their profit.
Export receipts – revenue
earned from exports.
1. Match the correct terms using arrows.
Interest rates rise
Production increases
Income tax rates fall
Decrease in tourism
GST increases
Government revenue increases
Firms’ profits increase
Household deposits in banks increase
Firms lay off staff
Household disposable incomes increase
Can employ more workers
Can buy more goods and services
Banks have more funds to lend
Household incomes decrease
Can give teachers a pay rise
2. Complete the table below by identifying two sectors affected by the following events.
Event
Impacted
sector 1
Impacted
sector 2
Wages increase
Company tax rate falls
Transfers increase
3. Describe how an increase in household incomes would affect each sector of the economy
Sector
Producer
Describe Impact
Describe a money flow that would increase
Government
Households
Overseas
Financial
4. Describe how an increase in exports would affect each sector of the economy.
Sector
Producer
Describe Impact
Describe a real flow that would increase
Government
Households
Overseas
5. For each of the following events identify and predict a possible cause beyond the control of the sector upon
which the event impacts directly. The first one has been done for you.
(a) Government revenue decreases
Decrease in exports so firms export receipts and profits fall. Company tax paid to government decreases.
This results in a decrease in government revenue.
(b) Household savings increase
(c) Imports increase
(d) Investment spending by firms decreases
Examples of events:
The government reduces income tax rates, overseas demand for New Zealand exports increases,
financial institutions increase interest rates, the government increases subsidies to firms, demand for your firms
products decreases, the cost of imported raw materials increases, consumer savings increase,
employment increases, company tax rates decrease, government increases the rate of GST.
Craig is a dairy farmer in Southland. He received a letter from his bank saying interest rates are increasing.
Step 1: Impact:
Identify and explain the impact of the event on your firm.
State the event:
Explain the impact on Craig the dairy farmer:
(D) Interest rates =
(E) Because
(E)
(E)
(R) Real flows:
Money flows:
Step 2: flow on effects on other firms:
Identify and explain the flow on impact of the effect on your firm on other firms in the producer sector
(primary, secondary and tertiary productive sectors).Refer to the productive sectors chart or diagram you
completed.
Identify and explain the flow on impact of the effect
on your firm on other firms (eg. Secondary Sector).
(D) Secondary Sector =
(E) Because
(E)
(E)
(E)
(R) Real flows:
Money flows:
Identify and explain the flow on impact of the effect on
your firm on other firms (eg. Tertiary Sector).
(D) Tertiary Sector =
(E) Because
(E)
(E)
(E)
(R) Real flows:
Money flows:
Step 3: Flow on effects on other sectors:
Identify and explain the flow on impact of the effect on your firm on other sectors in the circular flow model
(eg. Household, Government, Financial and Overseas Sectors). Refer to the flows in the circular flow model
you completed).
Identify and explain the flow on impact of the effect on your firm on another sector (eg. Government Sector).
(D) Government Sector =
(E) Because
(E)
(E)
(E)
(R) Real flows that increase/decrease:
Money flows that increase/decrease:
Identify and explain the flow on impact of the effect on your firm on another sector (eg. Household Sector).
(D) Household Sector =
(E) Because
(E)
(E)
(E)
(R) Real flows that increase/decrease:
Money flows that increase/decrease:
Identify and explain the flow on impact of the effect on your firm on another sector (eg Overseas Sector).
(D) Overseas Sector =
(E) Because
(E)
(E)
(E)
(R) Real flows that increase/decrease:
Money flows that increase/decrease:
Get it right! You must:
 (D) define the event and the sectors involved.
 (E) explain the impact of the event in detail. Explain the flow-on
effects of the event on two sectors.
 (R) make specific reference to specific real and money flows in
the circular flow diagram.
The marker is looking for:

explain the impact on one sector
and explain the flow on effects
on other sectors. Make specific
reference to money and real
flows in the CFM.
Exam technique: write D.E.R in the margin:
Common mistakes:






(D) = define key terms.
(E) = explain impact and flow-on effects.
(R) = relate to the circular flow model (CFM).
not defining the event.
forgetting to explain money and real flows.
not explaining flow-on effects on two sectors.
Unemployment is increasing according to the latest statistics released by the Department of Labour.
1. Describe how the increase in unemployment will affect the Household Sector.
Mention:
 impact on income
 impact on spending
 impact on savings
2. Explain the flow-on effects that an increase in unemployment will have on the Producer Sector.
(D)Producer Sector =
(E)Because
(R)Real flows:
Money flows:
Mention:
 impact on profits
 impact on sales
 impact on
investment spending
 impact on company
tax paid
 impact on business
confidence

3. Explain the flow-on effects that an increase in unemployment will have on the Government Sector.
(D)Government Sector =
(E)Because
(R)Real flows:
Money flows:
Mention:
 impact on income
tax revenue
 impact on company
tax revenue
 impact on GST
revenue
 impact on transfer
payments spending
 impact on spending
4. Explain the flow-on effects that an increase in unemployment will have on the Overseas Sector.
(D)Overseas Sector=
(E)Because
(R)Real flows:
Mention:
Money flows:
 impact on imports
and import payments
 impact on importer
profits
 impact on exports
and export receipts
 impact on exporter
profits
Sam’s shop sells healthy fruit shakes. Sam, the owner reads in the newspaper that “There is an
increase in consumer demand for healthy fruit shakes.” Sam wonders how other producers such as
the apple growers and fruit processing factory she buys her shakes from will be affected. She also
thinks about how other sectors in the economy will be affected by this increase in demand.
Assessor’s
use only
gfgf
Identify the productive sector the apple growers, shakes factory and Sam’s shop operate in.
(a)
A
Apple growers:
Shake Factory:
Sam’s Shake Shop:
Fully explain how the change in consumer demand will affect the Producer Sector and explain the flow
on effects the change in consumer demand will have to the other sectors and firms identified above.
(b)
Explain the affect of increased consumer demand on the Producer Sector.
(D)
(E)
(R)
(c)
M
Explain the affect of increased consumer demand on apple growers and the shake factory.
(D)
(E)
(R)
(d)
M
Explain the flow-on effects of increased consumer demand on the Government Sector.
(D)
(E)
(R)
(e)
M
Explain the flow-on effects of increased consumer demand on the Financial Sector.
(D)
(E)
M
(R)
My grade for this section: (circle)
ACHIEVED
MERIT
EXCELLENCE
A=1A
M=1A+3M
E=1A+4M