HKDSE Economics in Life – Microeconomics 1 (2nd Edition)

Chapter 1 Basic Economic Concepts

Suggested Answers

Chapter 1 Basic Economic Concepts

Brainstorm 1.1
1. free response

Exercise 1.1
(a) False
(b) True
(c) False

Brainstorm 1.2
1. free response
2. No. This is because there is not enough time/money.
(OR any reasonable answer)

Exercise 1.2
(a) No. People, whether rich or poor, face the problem of scarcity, as long as the
resources available are not enough to satisfy all their wants.
(b) No. Even when the supply of a resource is fixed, it is not scarce if the quantity
available is enough to satisfy all people’s wants.
(c) Yes. If scarcity does not exist, all people’s wants can be satisfied and people do not
have to make choices.

Brainstorm 1.3
1. No. This is because the quantity of discounted products available were not enough
to satisfy all people’s wants. Otherwise, people would not queue for them.
2. ‘First-come, first-served’

Exercise 1.3
Yes. When there is no scarcity, the resources available are enough to satisfy all
people’s wants. No one needs to compete against each other for the resources.

Exercise 1.4.1
1. the value of the highest-valued option forgone
2. (a) He will choose practising magic tricks.
(b) The opportunity cost of practising magic tricks is the value of reading comics
online.

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HKDSE Economics in Life – Microeconomics 1 (2nd Edition)
Chapter 1 Basic Economic Concepts
Suggested Answers

Brainstorm 1.4.2
No. The above case only decreased the value of watching the movie without affecting
the value of the highest-valued option forgone.

Exercise 1.4.2
(a) Without the magic trick props, Ayden cannot practise magic tricks at home.
Reading comics online becomes the highest-valued option forgone. The opportunity
cost will change from the value of practising magic tricks to the value of reading
comics online.
(b) As the value of the highest-valued option forgone (i.e. practising magic tricks)
does not change, the opportunity cost of going jogging will remain unchanged.

Brainstorm 1.4.3
tuition fee/attending interest classes/doing revision for exams/playing video games at
home/helping to do housework
(OR any reasonable answer)

Exercise 1.4.3
(a) No. The full cost of getting the coffee is $45 (= $0 + $45), which is higher than the
price of the coffee. Samuel would choose to work part-time.
(b) Yes. As Samuel can play the online game on his phone while queuing, playing the
online game is no longer a time cost of queuing up for the coffee. The full cost of
getting the coffee is $0 and Samuel will choose to queue up for the coffee.

Brainstorm 1.4.4
No. This is because the bus fare is not refundable whether I get off the bus or not.
(OR any reasonable answer)

Exercise 1.4.4
(a) John’s opportunity cost of using the phone himself is the resale price of the phone
($5,000).
(b) As the choice of returning the phone to the shop and get a full refund is no longer
available, John’s opportunity cost of using the phone himself is the resale price of the
phone ($3,000).

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HKDSE Economics in Life – Microeconomics 1 (2nd Edition)
Chapter 1 Basic Economic Concepts
Suggested Answers

Revision Corner 1.2

1. D
Approaching the question
monetary/money
increase
increase
on foot
increase

2. C
Approaching the question
not affect
value
decreased
not affect

3. No. (1)
As the residents may have different alternative uses of time, their time costs may not
be the same. (2)

Brainstorm 1.5
Yes. The pen is the compensation received for deferring consumption of the textbook.
(OR any reasonable answer)

Exercise 1.5
(a) True
(b) False
(c) True

Brainstorm 1.6
1. Yes. The quantity of food available is not enough to satisfy my wants.
(OR any reasonable answer)
No. There is enough air for me to breathe in.
(OR anyreasonable answer)
2. free newspapers distributed on the streets/free TV programmes/free mobile
applications
(OR any reasonable answer)

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HKDSE Economics in Life – Microeconomics 1 (2nd Edition)
Chapter 1 Basic Economic Concepts
Suggested Answers

Exercise 1.6
(a) free goods
(b) economic goods
(c) economic goods
(d) economic goods

Revision Corner 1.4

1. B
Approaching the question
more; is not
can be
is not; is
is not
is not

2. No, because the email service is produced from scarce resources, which have
alternative uses. (2)

Exercise 1.7
money
real
factors of production
household’s consumption expenditure

Brainstorm 1.8
free response

Exercise 1.8
(a) positive
(b) normative
(c) normative
(d) positive

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HKDSE Economics in Life – Microeconomics 1 (2nd Edition)
Chapter 1 Basic Economic Concepts
Suggested Answers

Revision Corner 1.5

1. B
Approaching the question
describe what it is, with no value judgement.; They are refutable by facts
(1) and (3)
(2) and (4)

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HKDSE Economics in Life – Microeconomics 1 (2nd Edition)
Chapter 1 Basic Economic Concepts
Suggested Answers

Revision Exercise
Multiple Choice Questions
1. D
2. C
3. D
4. A
5. C
6. A
7. C
8. C
9. D
10. C
11. B
12. D
13. D
14. A
15. B
16. D
17. B
18. B
19. A
20. D

Short Questions
1. No. (1)
Even when more goods are produced, as long as the goods available are not enough to
satisfy all people’s wants, scarcity still exists. (2)

2. (a) Yes. Their costs of buying the concert tickets are the same because their
monetary costs of buying the concert tickets ($380) and their time costs ($0) are the
same. (2)
(b) No. As they may have different alternative uses of the time spent watching the
concert (3 hours), their time costs may not be the same. (3)

3. (a) No. The failure of Country C’s TV station to pay the salary of Alfred will only
lower the value of Alfred’s chosen option, without affecting the value of the
highest-valued option forgone. (2)

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HKDSE Economics in Life – Microeconomics 1 (2nd Edition)
Chapter 1 Basic Economic Concepts
Suggested Answers

(b) No. The pay rise offered by TV station A will raise the value of the third option. If
its value does not exceed the value of the second option, the order of preference will
not change. Then the opportunity cost of filming a TV drama series in Country C will
remain unchanged in
this case. (3)

4. The full cost of buying the sports shoes includes the price of the sports shoes
(monetary cost) plus the time cost of queuing. The resale value of the sports shoes is
not a forgone option. Thus, the opportunity cost of queuing to buy the sports shoes
does not change. (3)
OR
The full cost of buying the sports shoes includes the price of the sports shoes
(monetary cost) plus the time cost of queuing. The increase in resale value will
increase the speculators’ demand for the sports shoes and the excess demand will
increase. More people will queue for the sports shoes and the queuing time will be
longer. The time cost of queuing will increase, so the opportunity cost of queuing to
buy the sports shoes will increase. (3)

5. (a) No. (1)

Interest is the cost of earlier availability of resources. Without money, this cost still
exists. Interest can exist in the form of goods. (2)
(b) Yes. (1)
To Joanne, the magazine was the premium/compensation she received for deferring
consumption. (2)
To Benny, the magazine was the cost/price he paid for earlier availability of the
headphones. (2)

6. Yes. (1)
Interest is the cost of earlier availability of resources. When people are willing to pay
for the earlier availability of resources, it implies that the resources available are not
enough to satisfy all people’s want, so there is scarcity. (2)
7. No. (1)
The good may be produced from scarce resources which have alternative uses. / More
of the good may still be preferred. (2)
8. No. (1)
The television programmes are produced from scarce resources which have
alternative uses. (1)

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HKDSE Economics in Life – Microeconomics 1 (2nd Edition)
Chapter 1 Basic Economic Concepts
Suggested Answers

Long Questions
1. (a) (i) Yes. (1)
It will change if there are alternative uses of the property during the extended opening
hours. (1)
OR
No. (1)
It will not change if there is no alternative use of the property during the extended
opening hours. (1)
(ii) Yes. (1)
With a higher market rent, the cost of using the property as a bookshop increases. (1)
(iii) No. (1)
The value of the highest-valued option forgone of using the property as a bookshop
does not change. (1)
(b) An economic good. (1)
The service is produced from scarce resources which have alternative uses. / More of
the service may still be preferred. (2)
(c) (i) Positive statement. (1)
It describes what is, with no value judgement. It is refutable by facts. (1)
(ii) Normative statement. (1)
It describes what ought to be and involves value judgement on what is desirable or the
best. It is not refutable by facts. (1)

2. (a) No. (1)

The poor property management of the estate will only affect the value of buying the
flat, but not the value of the highest-valued option forgone (i.e. buying shares). (2)
(b) Mr. Lai’s cost of living in the flat can be the return from leasing out the flat. If the
rental income increases, for example, Mr. Lai’s cost of living in the flat will increase.
(3)
(c) (i) Yes. (1)
A time cost is involved because Mr. Lai may have alternative uses of the time spent
queuing up for booking the leisure facilities. Therefore, opportunity cost is involved.
(1)
(ii) No. (1)
The free leisure facilities are produced from scarce resources which have alternative
uses./ More of the free leisure facilities are preferred. (2)

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HKDSE Economics in Life – Microeconomics 1 (2nd Edition)
Chapter 1 Basic Economic Concepts
Suggested Answers

DRQ Level-up
(a) Forms of competition:
- On a ‘first-come, first-served’ basis: those who have lower time cost are favoured
- By public ballot/drawing lots: those who are luckier are favoured
- By applicant’s ability: those who run faster/were more able to raise funds are
favoured
(Mark the FIRST TWO points only, 2 marks each)

(b) It took a longer time to go to the city by bus when there was a road accident and
the Hong Kong Marathon took place, so the time cost of taking the bus would be
higher. The opportunity cost of taking the bus would increase. (3)

(c) (i) No. (1)

The time spent signing up for the race might be different. (1)
(ii) No. (1)
The time required for them to finish the race might have been different. They might
have had different alternative use of time and their time cost might not have been the
same. (2)

(d) Normative statement. (1)

It describes what ought to be and involves value judgement on what is desirable or the
best. It is not refutable by facts. (1)

(e) Advantage:
- The organiser could earn a higher income by accepting more participants.
- The cost for wheelchair racers to sign up would be lower if there were more quotas.
- More overseas racers might participate in the race, leading to an increase in Hong
Kong’s GDP.
- any reasonable answer
(Mark the FIRST point only, 2 marks)
Disadvantage:
- It might take a longer time to finish the whole events, so the roads would be closed
for a longer time, increasing the time cost for road users.
- any reasonable answer
(Mark the FIRST point only, 2 marks)

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