Download Ceta 2012 Market Questions File

Educating Young People Who Will Be
Significantly Different!
NAME
CLASS
Level 1 Economics, 2012
90986 Demonstrate understanding of how consumer, producer
and/or government choices affect society, using market
equilibrium
Credits: Five
Achievement
Achievement with Merit
 Demonstrate understanding
of how consumer, producer
and/or government choices
affect society, using market
equilibrium.
 Demonstrate in-depth
understanding of how
consumer, producer and/or
government choices affect
society, using market
equilibrium.
Achievement with Excellence
 Demonstrate comprehensive
understanding of how
consumer, producer and/or
government choices affect
society, using market
equilibrium.
You should answer all questions in this booklet.
If you need more space for any answer, use the page(s) provided at the back of this booklet and
clearly number the question.
Check that this booklet has pages 1 – 8 in the correct order and that none of these pages is blank.
YOU MUST HAND THIS BOOKLET TO THE SUPERVISOR AT THE END OF THE
EXAMINATION
Total
Assessors use only
1
© NZCETA 2012 Economics Level 1 CETA Exam AS 90986 (1.4)
NZCETA has approval from NZQA to use their materials in the development of this resource.
Assessor
use only
Suggested time 60 minutes
QUESTION ONE:
MARKET EQUILIBRIUM
West Cape is a tourist destination renowned for its lovely beaches. Many firms own and operate
holiday homes for tourists to rent. The table and graph below represent the market for one night
stays in a holiday home in West Cape.
a) Complete the table below by calculating the market demand for holiday homes in West Cape.
Demand for Holiday Homes in West Cape
Quantity
Demanded
(homes) by
Nth Is tourists
Quantity
Demanded
(homes) by
Sth Is tourists
Quantity
Demanded
(homes) by
Foreign
tourists
100
150
75
125
150
100
50
100
200
80
40
80
250
60
20
70
300
20
10
20
Price
($ per night)
Quantity
Demanded
(Market)
b) Use your answer from question (a) above to complete the West Cape Holiday Home Market
diagram below. Ensure that you:
 Draw and label the market demand curve
 Use dotted lines to show the market equilibrium price and quantity. Label as Pe and Qe.
West Cape Holiday Home Market
Price ($/night) 350
S
300
250
200
150
100
50
0
0
50
100
150
200
250
300
350
400
Quantity (homes)
2
© NZCETA 2012 Economics Level 1 CETA Exam AS 90986 (1.4)
NZCETA has approval from NZQA to use their materials in the development of this resource.
Suppose the price of renting a holiday home in West Cape was $250 per day.
3
© NZCETA 2012 Economics Level 1 CETA Exam AS 90986 (1.4)
NZCETA has approval from NZQA to use their materials in the development of this resource.
Assessor
use only
c) On the graph you drew in question (b) show the market situation that exists at a price of $250.
Ensure that you:
 Use dotted lines to show the quantity demanded (label Qd)
 Use dotted lines to show the quantity supplied (label Qs)
 Fully label any shortage or surplus.
d) Use market forces to discuss how the market will react to this situation. In your answer you
should:
 Fully explain the effect on price
 Fully explain the effect on quantity demanded
 Fully explain the effect on quantity supplied
 Ensure you use data and refer to the graph you drew in question (b)
4
© NZCETA 2012 Economics Level 1 CETA Exam AS 90986 (1.4)
NZCETA has approval from NZQA to use their materials in the development of this resource.
QUESTION TWO:
Assessor
use only
CHANGE IN DEMAND
There has been an oil spill that has caused the closure of West Cape’s beaches.
a) Complete the graph below by showing the impact of the oil spill on the West Cape holiday
homes market. Fully label any changes.
West Cape holiday homes market
S
Price
($/night)
Pe
D
Qe
Quantity (homes)
b) Discuss the effect of the oil spill on the West Cape holiday homes market. In your answer you
should:
 Fully explain the change in market demand
 Fully explain how the market price and quantity change
 Fully explain the effect on resource use and profits of firms that operate holiday homes in
West Cape.
5
© NZCETA 2012 Economics Level 1 CETA Exam AS 90986 (1.4)
NZCETA has approval from NZQA to use their materials in the development of this resource.
QUESTION THREE:
Assessor
use only
CHANGE IN SUPPLY
The holiday home cleaners union has negotiated a new contract that has increased the labour
costs of holiday home firms.
a) Complete the graph below by showing the impact of higher labour costs on the West Cape
holiday home market. Fully label any changes.
West Cape holiday homes market
S
Price ($)
Pe
D
Qe
Quantity (rooms)
b) Discuss the effect of higher labour costs on the West Cape holiday home market. In your
answer you should:
 Fully explain the change in market supply
 Fully explain how the market price and quantity change
 Fully explain two effects on holiday home consumers because of the change.
6
© NZCETA 2012 Economics Level 1 CETA Exam AS 90986 (1.4)
NZCETA has approval from NZQA to use their materials in the development of this resource.
QUESTION FOUR:
Assessor
use only
MAXIMUM PRICE CONTROL
South Point is a competing tourist destination. The South Point council has passed a maximum
price law which states that hotel firms may not charge more than $80 per room for a one night stay
in a hotel. They hope this cheaper price will lead to more tourists coming to the town.
Complete questions (a) - (c) to fully explain the effect of the maximum price control on different
sectors of the South Point economy.
a) On the graph below show the effect of the $80 maximum price control. You must:
 Use dotted lines to show the original equilibrium. Label this price and quantity as Pe and Qe.
 Show the effect of the maximum price control on the graph.
 Use dotted lines to show the new equilibrium price and quantity. Label the new price and
quantity as P1 and Q1.
South Point Hotel Room Market
Price
($/night)
S
280
240
200
160
120
80
40
D
0
0
50
100
150
200
250
300
350
400
Quantity (rooms)
7
© NZCETA 2012 Economics Level 1 CETA Exam AS 90986 (1.4)
NZCETA has approval from NZQA to use their materials in the development of this resource.
Assessor
use only
c) Referring to the graph on the previous page identify:

Quantity of hotel rooms rented before and after the maximum price control
Before:

After:
(rooms)
Price received by producers before and after the maximum price control
Before: $

(rooms)
After: $
Price paid by consumers before and after the maximum price control
Before: $
After: $
And then calculate (show your working in the space provided):

Revenue of producers before and after the maximum price control
Before: $

After: $
Spending of consumers before and after the maximum price control
Before: $
After: $
Space for working
8
© NZCETA 2012 Economics Level 1 CETA Exam AS 90986 (1.4)
NZCETA has approval from NZQA to use their materials in the development of this resource.
d) Discuss the impact of the maximum price control on South Point. In your answer you should:
 Fully explain the effect of the maximum price control on hotel room consumers
 Fully explain the effect of the maximum price control on hotel room producers
 Fully explain any benefit or cost to South Point society
 Ensure you refer to the graph in question (a), and your answers to question (b) and (c).
9
© NZCETA 2012 Economics Level 1 CETA Exam AS 90986 (1.4)
NZCETA has approval from NZQA to use their materials in the development of this resource.
Assessor
use only