ECO1001
Business Economics 1
Preparation for Examination 20-21 S1
1
Final Examination
Date: 10 Dec 2020
 10 hours (10:30-20:30)
 Scope: Topic 1-11
 Section A (20%): 20 Multiple Choice Questions
Section B (80%): 6 Structured Questions

All questions are compulsory!
Plan your time well!
2
Attendance
(From Student Handbook)

Students whose attendance of a module is less
than 80% are not allowed to attend the End-ofModule examination.
⚫ The Registry will notify you by email if you
were NOT allowed to take the final exam.
3
Make-up Examination
(From Student Handbook)

Under normal circumstances, students
who fail to sit for the end-of-module
examination without prior approval will
receive Fail grade of the relevant module.

Students are required to retake the module
if they are unable to attend the End-ofModule examination.
NO make-up examination will be arranged
for them!

4
Recall the Assessments
Quizzes (4% x 5)
 Assignments (6% x 5)
 Final Exam

20%
30%
50%
100%
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Final Examination: Section A
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Do 20 MC Questions on the Moodle platform
named (2020-1) [Assessment] ECO1001
Business Economics 1
MCQs are randomly generated from the MC
question bank
Covers all topics
Only attempt once
Time limit: 40 minutes
6
Final Examination: Section B
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•
•
•
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Do 6 Structured Questions
Download the exam paper from the Moodle platform
named (2020-1) [Assessment] ECO1001 Business
Economics 1
Answer sheets
Students are expected to write answers on the answer
sheets.
Submit the scanned copy of handwritten answers in ONE
pdf file to the same Moodle platform
Typed answers are NOT marked
On-line submission deadline: 10 December at 20:30
Late submission is not accepted.
7
Tips for YOU!
8
Section A: 20 MC questions
(20%)
Attempt the problem sets in Moodle
 Attempt the exercises in MindTap
 Re-do the tutorial qtns in the lecture PPT

 Do
the ECO1001 Exam Revision
20S1 (Section A)
9
Section B: Q1 T/F Statements
(20%)
Question 1 contains 4 T/F statements
 Each statement carries 5 marks
 To get the full mark, you have to:

State your STANCE: True or False
⚫ Define and explain the KEY concept tested in the
statement
⚫ Explain why the statement is true or false
⚫ Sometimes you may use diagrams to assist your
explanations
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⚫
Section B: Q2 – 6 Application Qs
(60%)
Questions are in the style of Problem &
Application Questions in the textbook (in
MindTap), assignments and tutorial qtns
in the lecture PPTs
 Each question has more than 1 part
 Each question carries different marks
(8 – 15 marks)
 Total marks for Q2 – 6: 60 marks

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Topic Highlights
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Topic 1 Introduction &
Overview (Ch.1 & 2)
Ch.1 10 Principles of Economics
 How people make decisions
Principle 1: People Face Trade-offs
⚫ Principle 2: The Cost of Something is
What You Give Up to Get it
⚫ Principle 3: Rational People Think at the
Margin
⚫ Principle 4: People Respond to Incentives
⚫
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Topic 1 Introduction &
Overview (Ch.1 & 2)
Ch.1 TEN Principles of Economics
 How people interact
Principle 5: Trade Can Make Everyone
Better Off
⚫ Principle 6: Markets Are Usually a Good
Way to Organize Economic Activity
⚫ Principle 7: Governments Can Sometimes
Improve Market Outcomes
⚫
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Topic 1 Introduction &
Overview (Ch.1 & 2)
Ch.2 Thinking Like an Economist
 Economist as Scientist
 Scientific Method: Observation, Theory,
& Test
 Role of Assumptions
 Normative Economics Vs Positive
Economics
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Topic 2 Interdependence &
Gains from Trade (Ch 3)

Production Possibility Frontier (PPF)
⚫ Definition
⚫ Slope of PPF: opportunity cost
⚫ Shape of PPF: linear
⚫ Efficiency
⚫ Economic growth
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Topic 2 Interdependence &
Gains from Trade (Ch 3)
Absolute Advantage vs Comparative
Advantage
 Lower opportunity cost → Comparative
advantage → Specialization → Higher
total output → Higher consumption
 Table (Calculation) & Diagram (PPF)
 Terms of trade
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Topic 3 The Basics of Demand
& Supply (Ch 4)
Demand vs Quantity Demanded (Table &
Diagram)
 Law of Demand
 Change in Demand vs Change in Quantity
Demanded (Table & Diagram)
 Factors affecting Change in Demand
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Topic 3 The Basics of Demand
& Supply (Ch 4)
Supply vs Quantity Supplied (Table &
Diagram)
 Law of Supply
 Change in Supply vs Change in Quantity
Supplied (Table & Diagram)
 Factors affecting Change in Supply
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Topic 3 The Basics of Demand
& Supply (Ch 4)
Equilibrium: P & Q (Table & Diagram)
 Disequilibrium: Shortage & Surplus (Table &
Diagram)
 Change in D &/or Change in Supply →
Change in Equilibrium P & Q (Table &
Diagram)
 How prices (invisible hand) allocate
resources
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Topic 4 Elasticities (Ch 5)
If P increases, how much will Qd decrease?
Smaller? Bigger?
 Price elasticity of demand (Ed)
⚫ Definition
⚫ Calculation & meaning
⚫ Demand & Ed
⚫ Total revenue & Ed (Calculation &
Diagram) (e.g. P decreases & Q
increases, will TR increase?)
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⚫ Factors affecting Ed

Topic 4 Elasticities (Ch 5)
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Price elasticity of supply (Es)
⚫ Definition
⚫ Meaning
⚫ Supply & Es
⚫ Factors affecting Es
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Topic 5 Market Efficiency (Ch 7)
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Buying decision: (Table)
⚫ WTP (Value) = P at the margin → max Consumer
Surplus (CS)
⚫ CS = WTP (Value) – P
Demand & WTP (Diagram)
⚫ CS = Area under D & above P
Selling decision: (Table)
⚫ MC = P at the margin → max Producer Surplus (PS)
⚫ PS = P - MC
Supply & Cost (Diagram)
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⚫ PS = Area under P & MC curve
Topic 5 Market Efficiency (Ch 7)

Market efficiency (Table & Diagram)
⚫ D & S → P → Resource allocation
→ Max Total Surplus
⚫ WTP (value) = P = MC at the
margin
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Topic 6 Government
Interventions (Ch 6 & 8)
Chapter 6 Supply, Demand, & Government
 Controls of Price
⚫ Price floor
• Definition
• Binding if price floor > equilibrium price
• Table & Diagram
⚫ Price ceiling:
• Definition
• Binding if price ceiling < equilibrium price
• Table & Diagram
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• Non-price competition
Topic 6 Government
Interventions (Ch 6 & 8)
Chapter 6 Supply, Demand, & Government
 Taxes
⚫ How taxes on sellers (Buyers) affect market outcomes
(P & Q)
⚫ Elasticities of demand & supply & tax incidence (more
elastic demand than supply → buyers are more
sensitive to price change than sellers → smaller price
increase but larger price decrease → buyers bear less
tax burden than sellers)
⚫ Table & Diagram
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Topic 6 Government
Interventions (Ch 6 & 8)
Chapter 8 The Costs of Taxation

How does a tax affect consumer surplus,

producer surplus, and total surplus
Deadweight loss (DWL) of taxation (Diagram)
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Topic 7 Cost of Production (Ch 13)
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Opportunity costs: implicit & explicit costs
Economic profit Vs Accounting profit
Production function: input-output relationships
(Table & Diagram)
⚫ MP & TP
⚫ Diminishing MP (Short-run)
Cost of production: output-cost relationships (Table
& Diagram)
⚫ SR: fixed & variable costs; inverse relation
between MC & MP; short-run cost curves
⚫ LR: LRATC curve; economies & diseconomies of
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scale
Topic 8 Firms in Competitive
Markets (Ch 14)
Features of a competitive market
 Price taker
 P = AR = MR & TR (Table & Diagram)
 Short Run (Table & Diagram)
⚫ Rules for Maximization (MR=MC
given P covers AVC → Q)
⚫ Profit & loss
⚫ Short-run Supply curve (individual
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firm & market)

Topic 8 Firms in Competitive
Markets (Ch 14)
Long Run (Table & Diagram)
⚫ Rules for Maximization (MR=MC
given P covers ATC)
⚫ Entry & exit
⚫ Long-run equilibrium (P=ATC)
 SR Vs LR
 Efficiency of a competitive market
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Topic 9 Monopoly (Ch 15)
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Why does a monopolist arise?
Downward sloping market demand & P > MR (Single
price monopoly) (Table & Diagram)
Profit maximization (MR=MC) → P, Q, profit or loss
(Table & Diagram)
No supply curve
Welfare cost of monopoly (DWL) (P>MC → higher P &
lower Q) (Diagram)
Price discrimination: same good, different prices to
different buyers
Perfect price discrimination (Vs Single price monopoly)
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(P=WTP for each unit) (Table & Diagram)
Topic 10 Monopolistic
Competition (Ch 16)
Features of monopolistic competition:
many sellers, differentiated product, free
entry & exit
 Downward sloping demand & P > MR
 Monopolistic competition vs Monopoly vs
Perfect competition
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Topic 11 Oligopoly & Game
Theory (Ch 17)
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Strategic behaviour: cooperation (collusion
→ cartel) vs self-interest
Oligopoly vs Monopoly vs Perfect
Competition
Game Theory
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Players
Strategies
Payoff matrix
Dominant strategy?
Nash equilibrium? (one type: prisoners’ dilemma)
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Sample Questions
See (and practice) ECO1001 Exam
Revision 20S1
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