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For a commodity to be considered an economic good it must be scarce, transferable and provide the consumer with utility - Leaving Cert Economics - Question 2 - 2006
Question 2
For a commodity to be considered an economic good it must be scarce, transferable and provide the consumer with utility. (i) Explain each of the underlined terms. ... show full transcript
Worked Solution & Example Answer:For a commodity to be considered an economic good it must be scarce, transferable and provide the consumer with utility - Leaving Cert Economics - Question 2 - 2006
Step 1
Explain each of the underlined terms.
Answer
Scarcity: For a good to be classified as scarce, it must exist in limited quantities compared to its demand. If there is an abundance of a good, people are less likely to pay for it. For example, while air is essential, it is not scarce, so people do not pay for it.
Transferable: This means that ownership of the good can change hands. A good must be capable of being given from one person to another. An example of a non-transferable good would be someone's state of health.
Utility: This refers to the satisfaction or benefit a consumer derives from using a good. If a good fails to provide satisfaction, it will not be demanded. For example, if a good is defective or undesirable, it will not fulfill its utility.
Step 2
Explain the meaning of this statement.
Answer
The statement 'Good health is desirable but it is not considered an economic good' indicates that while good health is valuable and sought after by individuals, it does not meet the criteria of an economic good. Specifically, good health is not transferable—one person's good health cannot directly be sold or transferred to another person, which is essential for a commodity to be classified as economic.
Step 3
Step 4
State and explain TWO reasons why the demand for mobile phones has increased as shown in the diagram.
Answer
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Increase in consumer's incomes: As incomes rise, consumers can afford to purchase mobile phones, leading to an increase in demand.
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Newer models / Improved technology: The introduction of innovative models with enhanced features attracts consumers, increasing the overall demand for mobile phones.
Step 5
Suggest a substitute good for a mobile phone and explain your answer.
Answer
A suitable substitute for a mobile phone could be 'Landlines' or 'Tablets.' These alternatives still offer communication and internet services, appealing to consumers seeking similar functionalities at potentially lower costs.
Step 6
State and explain TWO reasons for this development.
Answer
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Age structure of population: A growing portion of Ireland's population is in the age bracket capable of purchasing property, enhancing the demand for houses.
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Low interest rates: Persistently low interest rates have encouraged more individuals to seek mortgages, thus increasing the demand for housing.
Step 7
Explain briefly how each of the following have been affected by this development: - The Building / Construction Industry; - The Government; - The Banks' Shareholders.
Answer
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The Building / Construction Industry: Experienced increased profits due to rising demand for new homes, together with challenges such as labor shortages affecting project timelines and pushing costs upwards.
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The Government: Witnessed greater tax revenues from property transactions, enabling further funding for social housing initiatives in response to increased demand.
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The Banks' Shareholders: Benefited from higher profits as banks gained from increased mortgage lending, raising their share prices accordingly.