Name: _______________________________________________ Grade: 9 [IGCSE] Date: / /2023

Subject: Economics [0455] Topic: Unit 1 – The basic economic problem Marks: 50

Worksheet – 1.A
SECTION A – Multiple choice questions
Choose the correct option

1. Reena makes a living by selling paintings of the town in which she lives. She sells
them in an open-air market once a week. In order to be able to sell more pictures
in a week she decides to buy a studio, pay someone to help in the studio and try
to increase demand by advertising in the local paper. Which factors of production
were changed?

A capital only
B labour and capital
C labour and land
D labour only

2. What is the key role of an entrepreneur?

A inventor
B risk taker
C shareholder
D worker

3. Which example of a factor of production in the fishing industry is correct?

Factor Example

A capital charges on loan for fishing boat

B enterprise salaries of fish warehouse managers

C labour profits of fish shop owners

D land fish in the sea

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4. Which statement about factors of production is correct?

A Capital is the amount of money borrowed from a bank.

B Labour is output made by an employee.
C Land includes commercially grown rice crops.
D Profit is the reward for enterprise.

5. Why do consumers have to make choices when spending their income?

A Advertising encourages consumer spending.

B Consumers have unlimited incomes.
C Consumer wants cannot all be satisfied with their income.
D Not all products will be attractive to consumers.

6. Hospital services are provided by the government and paid for through taxation.
People cannot always get the treatment they require because of long waiting lists.
Of what is this an example?

A external cost
B market system
C perfectly inelastic supply
D scarcity

7. Which of the following is most likely to cause an inwards shift of a country’s

production possibility curve?

A A natural disaster in the economy

B An increase in the quantity of factors of production
C Better quality factors of production
D Higher opportunity costs of production

8. Juke bought a new Xbox One games console for $295 but has never used it. The
second-hand value of his Xbox One is $195.

What is the opportunity cost of Juke owning the games console?

A $0
B $100
C $195
D $295

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9. Using all available resources an economy produces different combinations of two
types of good, clothes and food, shown on the production possibility curve (PPC)
diagram.

What does the PPC indicate?

A It is more efficient to produce more of clothes than food.

B It is only possible to increase the output of clothes by reducing the output of food.
C The best situation is to produce equal units of clothes and food.
D The cost of producing a unit of clothes is always higher than the cost of producing a
unit of food.

10. As an economy becomes richer, what happens to resources and wants?

Resources Wants

A Decrease Decrease

B Decrease Increase

C Increase Decrease

D Increase Increase

11. On which factor of production does innovation directly depend?

A decisions of entrepreneurs
B high inputs of capital
C long hours of manual labour
D plentiful supplies of land

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12. The diagram shows the production possibility curve (PPC) of a country
producing at point T.

The country has an ageing population and decides to allocate more resources to the
production of health services.

Which movement shows this change in resource allocation?

A T to S
B T to U
C T to V
D T to W

13. What is the change in the opportunity cost of increasing the output of capital
goods from 20 to 30 when the PPC shifts to the right the diagram below?

A a reduction of 10 consumer goods

B a reduction of 20 consumer goods
C a reduction of 30 consumer goods
D a reduction of 40 consumer goods

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14. Using the diagram, determine the opportunity cost of increasing the output of
luxury goods from 25 to 35.

A 8 basic goods
B 10 luxury goods
C 25 luxury goods
D 92 basic goods

15. A country experiences a fall in unemployment. How would this be shown on a

PPC diagram?

A A movement of the production point away from the curve

B A movement of the production point towards the curve
C A shift of the PPC to the left
D A shift of the PPC to the right

[1 mark each question]

[Total Marks: 15]

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 SECTION B – Structured Questions
Read the questions and write your answers on the lines provided

1. Read the source material carefully before answering Questions. [Only Q.1]

Source material: The destruction of forests in Indonesia

Indonesia is the world’s largest producer of palm oil. The costs involved in producing
palm oil include rent of land, fertiliser, palm oil seeds, maintenance of irrigation systems
and casual labour. Fires are set to clear forests to make way for palm oil plantations.
These fires destroy the homes of many species of wildlife and release harmful gases into
the air. Since 2011, Indonesia has been paid to conserve its forests by the Norwegian
government.
While Indonesia is the largest producer of palm oil, it is the third largest producer of rice.
Indonesia exports 85% of its palm oil but sometimes has to import rice to meet domestic
demand. Its international trade in palm oil and rice is influenced by changes in its
foreign exchange rate. The price of the Indonesian currency, the rupiah, fell in 2017.
Rice production also contributes to air pollution. Rice farmers burn the stubble left after
harvesting to clear the fields and to raise the fertility of the land so they can produce
more rice. Some environmentalists argue that stubble burning should be banned.
The Indonesian economy, along with the world economy, continues to grow. Economic
growth can cause pollution. It can also affect a country’s GDP per head ranking and
Human Development Index (HDI) ranking as shown in Table 1.1.

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Indonesia experiences net emigration. Some Indonesians work abroad and send money
home to their families. People also come from abroad to work in Indonesia, some in
relatively highly paid jobs in the country’s expanding tourism industry. Indonesia
currently attracts fewer tourists than its neighbours, Singapore and Malaysia. It does,
however, have many natural tourist attractions and is currently price competitive.

a) Explain one opportunity cost of conserving forests in Indonesia. [2]

b) Explain using information from the source, an opportunity cost of working. [2]

2. The economic problem results in people having to make choices. In Bulgaria, in recent
years, people have changed how much they spend. The Bulgarian government is
encouraging people to spend more. It is trying to ensure that deflation does not return
and that the country will continue to experience an increase in output.

Explain how the economic problem results in people having to make choices. [4]

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3. Analyse why the mobility of labour may increase over time. [6]

4. What is the difference between a point inside and a point on a PPC? [2]

5. Study the source material carefully and then answer Question 5.

Source material: Agricultural output in Africa

The output of more fertilisers and better irrigation have contributed to higher
agricultural output for each unit of land in Africa in recent years. More significant,
however, has been the increase in the quantity of land used to grow crops. For
example, in 1975 12% of land was used for agriculture. By 2015 this had increased to
25%. In Mauritania, agricultural expansion is particularly high at 7% per year.
Despite the rise in agricultural output, the quantity of high-quality food that people
would like to consume is not keeping pace with the rise in population in all African
countries. Africa’s population is set to double by 2050, which will increase even
further the demand for food. As incomes increase in Africa, the desire for a range of
products is increasing. People in Africa are, for example, wanting more and better
housing. Indeed, the desire for housing usually outstrips the growth in resources
devoted to housing. People constantly strive for better living standards. The
expansion of the house building industry is encouraging some farm workers to
switch to working in the building industry. Changes in the pattern of demand are
causing not only agricultural workers, but also other workers to change their
occupation and where they work.
Agricultural output can fluctuate quite significantly as it can be influenced by, for
example, floods, droughts and heatwaves. The contribution of agricultural output
varies between countries. For example, in 2015 agriculture accounted for only 2% of
South Africa’s output, but 21% of Nigeria’s output.
The total output that a country produces is influenced by the size of the labour force.
The table shows the size of the labour force and total output for a group of selected
African countries.
Country Labour force (millions) Total output (US$ Billions)
Ethiopia 49 62
Ghana 12 38
Mali 6 13
Nigeria 58 481
South Africa 21 315

The labour force and total output of five African countries

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Referring to the source material in your responses, complete all parts of Question 5.

a) Identify two reasons why the productivity of land has increased in Africa. [2]

b) Explain the opportunity cost of working on a farm. [2]

c) Analyse, using a PPC, the effect on an economy of a flood [4]

d) Analyse the relationship between the size of a country’s labour force and its output
shown in the table [5]

[Total Marks: 35]

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