Business economics

Part A
Q1. What is opportunity cost? Describe some of the opportunity costs when you decide to do the following.
a. Attend college instead of taking a job
b. Ride a bus instead of driving your car
Total marks for question:11
Q2. Define price elasticity of demand. Explain how you will use it to define an ‘inferior good’?
Give two examples of an inferior good.
Total marks for question:11
Q3. Explain the differences between demand pull and cost push inflation.
Total marks for question:11
Q4. Define what the multiplier is. Which is more effective, tax multiplier or Government expenditure multiplier? Explain your answer.
Total marks for question:11
Q5. Identify the key factors causing a change in the demand for currency.
Total marks for question:11

Part B Answer either question a) or b) within each question.
Q1) Thames water PLC is the only company supplying water in the south east of UK, operating in fourteen countries. It offers water and wastewater services, supplying around 2,600 million litres of tap water to 9 million customers and removing and treating more than 4 billion litres of sewage for 15 million customers.
With reference to appropriate diagrams, answer only one of the two questions:
a) Explain the factors that affect the demand for water services. Discuss the “price elasticity of demand” for this service: is it elastic or inelastic? Justify your answer.
b) Identify the market structure that best explains this market. Considering water services have strong economies of scale, would it be more or less beneficial to have more than one company supplying these services in the south east.
Total marks for question:22
Q2) It seems that Britain is recovering from the economic crisis. It is thought that UK’s GDP will grow by2.7% in 2015. However, budget surplus will only be achieved by 2018
With reference to appropriate diagrams answer one of the two questions:
a) Explain how businesses in UK might be affected by this economic growth
b) Explain what a budget surplus is and how British government could achieve that situation 
Total marks for question:23
Total marks for section 2: 45


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