These seven questions are original, with invented markets, surveys and figures. Write your own answer first, then open the model answer.
The timed original practice session builder can set a timer. The lessons behind each question are in evidence-based economic answers.
Questions 1 to 3: assumptions and chains
Question 1. A fictional shop’s sales of pens fall from 300 to 270 a week after a price rise from RM2 to RM2.50.
Sort as Fact, Assumption or Conclusion: (a) Sales fell by 30 pens. (b) No other factor affecting pen sales changed. (c) The price rise caused the fall.
Answer
(a) Fact: a reported change, 300 − 270 = 30 pens, which is 10%.
(b) Assumption: ceteris paribus, needed for the cause claim and not reported.
(c) Conclusion: it follows only if (a) and (b) hold. A careful version reads: “If nothing else changed, the price rise explains the fall in sales.”
Question 2. A fictional market for mangoes has Qd = 500 − 50P and Qs = 50P. A festival raises demand by 100 at every price. Find the old and new equilibrium and write a four-link chain.
Answer
Old: 500 − 50P = 50P, so P = 5 and Q = 250.
New demand is Qd = 600 − 50P. Set 600 − 50P = 50P, so 100P = 600 and P = 6. Quantity is 600 − 300 = 300. Check in supply: 50 × 6 = 300.
Chain: the festival raises buyers’ wants, so demand shifts right. At RM5, buyers want 350 but sellers offer 250, a shortage. The shortage raises the price to RM6. The higher price encourages sellers to offer more, so quantity rises to 300.
Question 3. State one limiting condition for your chain in Question 2 and say what would change if it failed.
Answer
Condition: provided that supply does not change, for example because the harvest stays the same. If a poor harvest cut supply at the same time, price would rise further and the quantity change would become uncertain.
Another acceptable condition: provided that the festival does not shift tastes permanently. A temporary rise in demand would reverse afterwards.
Questions 4 to 5: claims and motives
Question 4. A fictional school surveys 50 of its 1 000 students and finds 35 prefer buying lunch at the canteen. A student writes: “All students at the school prefer the canteen.” Rewrite it so the data supports it.
Answer
35 ÷ 50 × 100 = 70% of the sample.
Rewrite: “Of the 50 students surveyed, 70% prefer buying lunch at the canteen. A sample of 50 from 1 000 students is too small to show the preference of the whole school.”
The rewrite states the sample, the percentage and the limit.
Question 5. A passage says a fictional firm raised its price by 10% and sales fell by 6%. A student writes: “The firm greedily raised prices to boost profit.” Identify the problem and rewrite the sentence.
Answer
The motive, greed and profit, is invented. The passage gives no reason for the price rise, so the claim has no support.
Rewrite: “The firm raised its price by 10%, and sales fell by 6%.” If an effect on revenue is wanted, add: “Sales fell by less than price rose, so revenue rose, assuming quantity is the only thing that changed.”
Questions 6 to 7: compare and separate
Question 6. In a fictional market, price rises from RM4 to RM5 and quantity traded falls from 800 to 700.
Explanation A: a poor harvest reduced supply. Explanation B: a festival raised demand. Which does the data fit better, and why?
Answer
A leftward shift of supply raises price and lowers quantity, which matches the data: price up, quantity down.
A rightward shift of demand raises price and also raises quantity, so B does not fit the fall in quantity. The data fits A better.
Careful ending: “If both happened together, price would rise in both cases, and the quantity change would depend on the sizes. The fall in quantity points to a larger supply shift, but the data cannot rule out a smaller demand rise as well.”
Question 7. A student writes: “Vegetable prices rose 15%, so the market should lower its stall fees.” Separate the descriptive part from the preference and say what extra information a fair answer would need.
Answer
Descriptive: vegetable prices rose by 15%.
Preference: the market should lower its stall fees. This does not follow from the figure. The data does not say that fees caused the price rise, how much of the vendors’ costs the fees make up, or who would pay for a cut.
Extra information needed: how large stall fees are compared with other costs, whether fees changed, and what the lost fee income would affect.
If you got these wrong
Question 1 links to separating a model assumption from an observed fact. Questions 2 and 3 link to developing a short causal chain with a stated limiting condition.
Question 4 links to using the supplied data to qualify a broad claim. Questions 5 to 7 link to comparing two explanations without inventing motives. Record each slip in the mistake log and paper-error review.
For a teacher to go through your answers with you, see online one-to-one Economics tuition.