Unit notes and practice questions
Everything here is for unit 2 of the Grade 10 Economics textbook: what the chapter covers, the short notes, practice questions with their answers, and the lesson video where one exists.
The cards filed under this chapter on the Grade 10 Economics page. Open one at a time.
When you use it
Use this formula to calculate the price elasticity of demand over a price range between two points on a demand curve.
Watch out
Always use the sum of quantities and prices in the second term, not just the base values.
Drafted from Grade 10 Economics, pages 17-48, then checked twice before it went up
When you use it
Use when distinguishing between a movement along a single curve and a shift of the entire curve.
Watch out
A change in the good's own price causes a movement along the curve (change in quantity demanded). Only non-price determinants (income, tastes, related goods) shift the entire curve (change in demand).
Drafted from Grade 10 Economics, pages 17-48, then checked twice before it went up
| Cross Elasticity | Relationship | Consumer Behaviour |
|---|---|---|
| Substitute goods | Price of Y rises, Demand for X increases | |
| Complementary goods | Price of Y rises, Demand for X decreases | |
| Independent goods | Price of Y has no effect on Demand for X |
When you use it
Use this table to identify whether two goods are substitutes, complements, or independent based on the sign of cross-price elasticity.
Watch out
Do not take the absolute value for cross elasticity. The positive or negative sign determines the relationship between the goods.
Drafted from Grade 10 Economics, pages 17-48, then checked twice before it went up
| Elasticity Value | Classification | Meaning |
|---|---|---|
| Elastic | % change in Quantity demanded > % change in Price | |
| Unitary elastic | % change in Quantity demanded = % change in Price | |
| Inelastic | % change in Quantity demanded < % change in Price | |
| Perfectly inelastic | Quantity demanded does not change when Price changes | |
| Perfectly elastic | Infinite change in Quantity demanded at a given Price |
When you use it
Use this reference to classify and interpret calculated numerical values of price elasticity of demand.
Drafted from Grade 10 Economics, pages 17-48, then checked twice before it went up
When you use it
Use this condition to find the market clearing price and equilibrium quantity by equating demand and supply functions.
Watch out
If market price is above equilibrium price, excess supply (surplus) occurs. If below, excess demand (shortage) occurs.
Drafted from Grade 10 Economics, pages 17-48, then checked twice before it went up
10 multiple-choice questions written against this chapter, each with its answer and the reason. Try one before you open the answer.
Question 1
According to the textbook, demand for a commodity consists of which two essential components?
Answer: B Willingness to buy and ability to pay
Why
Demand is defined as the desire to acquire a commodity along with the willingness to buy it and the ability to pay for it (Demand = Willingness to buy + Ability to pay).
Question 2
What does the law of demand state about the relationship between the price of a good and its quantity demanded, ceteris paribus?
Answer: B Price and quantity demanded are inversely related.
Why
The law of demand states that, holding other factors constant, the quantity demanded increases when price decreases and decreases when price increases. This is an inverse relationship.
Question 3
A downward movement along a fixed demand curve caused by a decrease in the price of the product is called:
Answer: A an extension of demand
Why
Movement along the demand curve is caused by a change in own price. A downward movement is called an extension of demand, while an upward movement is called a contraction of demand.
Question 4
Market equilibrium is achieved in a market when:
Answer: C quantity demanded equals quantity supplied
Why
Market equilibrium occurs when the quantity demanded by buyers equals the quantity supplied by sellers at a specific market clearing price.
Question 5
In Ethiopia, when the price of coffee rises, consumers tend to buy more tea instead. In economics, coffee and tea are classified as:
Answer: B substitute goods
Why
Substitute goods are goods that can satisfy the same want in place of each other. When the price of one good rises, demand for its substitute increases.
Question 6
If a 10 percent increase in the price of a good leads to only a 2 percent decrease in quantity demanded, the demand for this product is:
Answer: B inelastic
Why
When the percentage change in quantity demanded is smaller than the percentage change in price, the price elasticity coefficient is less than 1 (0.02 / 0.10 = 0.2), which means demand is inelastic.
Question 7
If the market price of shirts is set above the equilibrium price, what will happen in the market?
Answer: B A surplus occurs, and sellers bid the price down.
Why
A price above equilibrium creates excess supply (a surplus) because sellers offer more than buyers want to purchase. Unsatisfied sellers then bid the price down toward equilibrium.
Question 8
If the cross-price elasticity of demand between good X and good Y is negative, this indicates that goods X and Y are:
Answer: B complementary goods
Why
A negative cross elasticity shows that an increase in the price of one good causes a fall in the quantity demanded of the other good. Therefore, the two goods are complementary (used together).
Question 9
Suppose an individual demand function in a market is QI = 50 - 5P. If there are 100 identical buyers in this market, what is the market demand function (Qm)?
Answer: C Qm = 5000 - 500P
Why
Market demand is obtained by horizontally summing all individual demands. Multiplying the individual demand equation by 100 identical buyers gives: Qm = 100 * (50 - 5P) = 5000 - 500P.
Question 10
The market demand and supply functions for wheat are given as Qd = 80 - 3P and Qs = 9P - 40, where price P is in Birr per kg. What are the equilibrium price and quantity?
Answer: A Price = 10 Birr/kg, Quantity = 50 kg
Why
Set Qd = Qs: 80 - 3P = 9P - 40, which simplifies to 120 = 12P, giving P* = 10 Birr/kg. Substitute P = 10 into Qd: Q* = 80 - 3(10) = 50 kg.
The app holds 12 questions on this unit, marked as you go. These are the first 10.
Unit 2 runs from page 17 to page 48 of the Ministry of Education edition.
Ministry of Education edition, English, 193 pages
Temari turns this chapter into timed practice and marks it as you go, with an AI tutor to explain anything that did not land.
Start free
Temari.et is also an Android app, free on Google Play.
