Economics Basics — Answer Key
Part A: Multiple Choice
Circle the best answer for each question.
1. A toy store has only five dolls left and twenty children want one. What will most likely happen to the price?
A) The price will go down.
B) The price will stay the same.
C) The price will go up.
D) The store will give them away.
When only five dolls are left but twenty children want one, demand is much higher than supply. Stores usually raise the price when many people are competing for just a few items.
2. Maria wants to buy a book and a puzzle but only has enough money for one. The item she does not pick is her ___?
A) supply
B) demand
C) opportunity cost
D) service
The choice Maria gives up is the thing she could have had instead, and that idea is called opportunity cost. Picking the book means the puzzle is what she traded away.
3. Which of the following is the best example of a service?
A) A loaf of bread from a bakery.
B) A librarian helping you find a book.
C) A pair of sneakers from a shoe store.
D) A bicycle from a toy shop.
Helping someone find a book is work done for another person, with no object handed over to keep. That helpful work is a service, while bread, sneakers, and bicycles are goods.
4. A farmer grows tomatoes and sells them at a stand. In this example the farmer is a ___?
A) consumer
B) buyer
C) producer
D) saver
Growing tomatoes and selling them means creating a good for others to buy. Anyone who makes or grows things to sell is a producer.
Part B: Fill in the Blank
Write the correct answer on each line.
1. When supply is low and demand is high, the price usually goes up.
Low supply means there is not much to go around, and high demand means many people want it. When that happens, the price usually rises because shoppers are willing to pay more.
2. A person who earns money by working at a job is earning an income.
Money you receive from a job is called income, and the act of getting it is earning. People earn an income by doing work for others.
3. Clothing is a need because people must wear it to stay safe and warm.
Clothing protects people from cold, sun, and other dangers, so it is something everyone must have. Things people must have to stay safe and healthy are called needs.
4. A lemonade stand owner who makes and sells drinks is a producer.
The owner of a lemonade stand makes drinks and sells them to customers, which is the work of a producer. Producers create goods or prepare them for others to buy.
5. Choosing to save your money now so you can buy a bike later shows good planning.
Setting money aside today so you can afford something bigger later takes thinking ahead, and that thinking is called planning. Good planning helps people reach goals like buying a bike.