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Economic Resources
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1.1.3 Economic resources
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Class:
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Date:
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Time: 107 min.
Marks: 84 marks
Comments:
Page 1 of 16
,Q1.
Which one of the following is an example of the economic resource capital?
A A bank loan to a small business
B A scientific research laboratory
C Government subsidies for wind power
D Money in a savings account
[1 mark]
Q2.
COMMODITY PRICES
Extract E: Competition in the potash market
Potash is one of three main fertiliser products which farmers use to increase their output 1
before planting crops such as wheat. Potash is an important natural resource, but for
many years, the majority of the world’s potash has been sold through two companies,
which set the same prices. The companies effectively worked together as a monopoly.
However, it has recently been announced that the arrangement between these two 5
companies has ended. As a result, the price of potash is expected to fall from around
$400 to $300 per tonne by the end of 2013. It has been estimated that this would cut
total costs by 3% an acre for many producers. This is good news for farmers and it could
also lead to lower food prices in the supermarkets.
The fall in potash prices is in contrast to the situation in the first decade of this century, 10
during which prices tripled, partly due to higher demand in China and India. Although this
encouraged an increased supply, the higher price made the product less affordable,
particularly in India, where the government had also cut farming subsidies.
Although prices may now fall in the short term, this may not last due to continued
population growth and changing patterns in the demand for food. However, with more 15
competition between firms, there should be some gains for buyers, at least for a while.
Source: News reports, October 2013
Q3.
Commodity Prices Extract E (lines 1−2), states ‘Potash is one of three main fertiliser
products which farmers use to increase their output before planting crops such as wheat.ߣ
Explain the possible effects on the market for wheat of a fall in the price of a fertiliser such
as potash.
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Page 2 of 16
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[10 marks]
Q4.
Which one of the following would be classified by an economist under the factor of
production known as land?
A a tractor
B a chemical fertiliser
C fish in the ocean
D a farmer
[1 mark]
Q5.
Which one of the following would be classified by an economist as an example of the
factor of production known as capital?
A A delivery van
B Stocks and shares
C Savings in the bank
D Underground reserves of coal
[1 mark]
Q6.
GOVERNMENT SUBSIDIES: TO GIVE OR NOT TO GIVE?
Extract F: What, how, for whom − who is more deserving?
Government support is not provided to all firms. For instance, the DVD and games rental 1
firm, Blockbuster, and the music and film retailer, HMV, have, arguably, suffered as a
result of new technology and structural change. Whilst HMV is still trading, just over
800 jobs were lost at Blockbuster when the firm closed its remaining stores. Nowadays,
many consumers find downloading more convenient, and further advances in technology 5
have led to the streaming of music and films. The online TV and film streaming firm,
Netflix, reported a huge increase in demand for its services; it ended 2013 with 44 million
Page 3 of 16
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