QUESTION 21 stard and relish are complements. Mustard is a normal good During th

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QUESTION 21 stard and relish are complements. Mustard is a normal good During the summer, about 50% of all mustard was r by manufacturers and removed from store shelves As a result of the recall, you would expect that the price of mustard would O b the suply of mustard would increase, and the quantity demanded of the isupply of decrease. the price of mustard would increase, and would decrease. the d would ncrease. and the ard would mustard QUESTION 22 3.45 if the unemployment rate decreases from 9% to 6%, the economy will b remain on the Cmove away from the pof toward the o d remain on the ppf origin ppf 3.45 points Save QUESTION 23 The idea that consumers determine what is produced in the economy through their demands is known as b a laissez-faire economy C free enter Cliek Save and Submit to save and 249 PAM Type here to search

Explanation / Answer

Question 21: Mustard is a normal good and one summer, 50% of it was recalled. That means the supply has decreased. Therefore there is shortage of mustard in the market. As earlier 'x' amount of mustard was being sold. But now there is only x/2 amount being sold. Hence there is a shortage of mustard.

Due to this shortage, price will increase because there is excess demand for mustard for the current level of mjstard. Therefore, suppliers in order to drive away this excess demand, will raise their prices. hence price of mustard will increase.

Due to this incraese in price, several people no longer demand the good. That is, at the increased price, the quantity demanded is less than what is what when the price was low. Therefore the quantity demanded will decrease.

Hence supply will decrease, price will increase and quantity demanded will decrease. Therefore option b is the correct option.

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Question 22: The production possibility frontier or the ppf is the curve which depicts all possible combinations of the production of two goods, produced at maximum effeciency. That is, by employing all the resources in the economy, what combination of two goods an economy can produce, is given by the ppf.

Here the resources are fixed. PPf also tells us that in order to produce one more unit of a good, an economy has to sacrifice production of the other good.

Any point inside the PPF tells are that the economy is not using the resources effeciently. That is, there are some resources in the economy which is going to waste, and are not used to produce any of the two goods. The more you go towards the PPF curve, the more effecient you become, or the economy is using its resources better.

Unemployment is a case like that. Unemployment implies that there are some workers who don't have jobs, and they are not used to produce any good. Therefore when unemployement decreases, it implies that some wokers have found jobs and are used to produce more goods. Therefore, the economy will move closer to a point on PPF.

Therefore answer = option A.

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Question 23:

Command economy: economy where government decides the quantity of goods to be produced and sold and their prices.

Lassez Faire: Economic system where governement intervention is very little and all the transactions occur between private agents. Therefore it is the free market system where role of the governement is minimal.

Free enterprise: Free enterprise again is kind of a free market system where govenment's role is minimal on the type of business and ownership activities in which the citizens want to participate.

Consumer sovereignty: An economic system where consumer preferences determines the output produced in the economy.

Therefore answer is option d: consumer sovereignity.

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