6.5 Equity in the distribution of

Answers to Quantitative ‘Test your understanding’ questions in Chapter 1

Test your understanding 1.9 1 a from A to B: opportunity cost = 5 microwave ovens b from D to C: gain = 11 microwave ovens; opportunity cost = 6 computers c from C to B: gain = 9 microwave ovens; opportunity cost = 8 computers

Answers to Digital Coursebook Paper 1 questions in Chapter 1

Core (SL and HL) Chapter 1 has only Part (a) questions. 1.1 (a) Explain whether the production possibilities model is useful in explaining the concept of a free good. Answers may include • Defi nition: free good, scarcity, opportunity cost • Theory: to explain that the production possibilities model is useful to illustrate scarcity, choice and opportunity cost which apply to goods that are subject to scarcity, but cannot be applied to free goods as they are not scarce • Diagram: production possibilities curve model 1.2 (a) Distinguish between a free market economy, planned economy and mixed economy in the methods they use to answer the basic economic questions. Answers may include • Defi nition: free market economy, planned economy, mixed economy, basic economic questions • Theory: to explain the reliance on private sector or public sector or both private and public sectors to determine resource ownership, economic decision-making and rationing systems in order to answer the three questions. • Diagram: no diagram needed 1.3 (a) Use the circular fl ow of income model to explain the interdependence between economic decision-makers in a mixed economy. Answers may include • Defi nition: circular fl ow of income, mixed economy, leakages, injections • Theory: to explain the interdependence between consumers and fi rms both acting as buyers and sellers in the market, along with the government through taxes and spending, foreigners through imports and exports, and the fi nancial sector through saving and investment • Diagram: circular fl ow of income model

HL only Chapter 1 has no HL only questions