Economics Basics — Answer Key
Part A: Multiple Choice
Circle the best answer for each question.
1. A lemonade stand runs out of cups on a hot day. Many customers are still waiting. What will most likely happen?
A) The price of lemonade will drop.
B) The stand will give lemonade away free.
C) The stand owner may raise the price.
D) Customers will stop being thirsty.
When demand is high but supply is low, sellers can charge more because customers are eager to pay. That's why the owner would likely raise the price.
2. Emma walks dogs after school and earns ten dollars each week. What is this ten dollars called?
A) spending
B) income
C) supply
D) opportunity cost
Income is the money someone receives for doing work. Since Emma earns her ten dollars by walking dogs, that money is her income.
3. Which example best shows a trade-off?
A) Buying both a hat and a scarf.
B) Finding a dollar on the ground.
C) Choosing to buy a game instead of a book because you only have enough money for one.
D) Getting a gift from a friend.
A trade-off happens when picking one thing means giving up another. Choosing the game forces you to give up the book, which is exactly what a trade-off looks like.
4. A shoe factory makes sneakers and ships them to stores. In this example, the factory is a ___?
A) consumer
B) service provider
C) saver
D) producer
The factory takes raw materials and builds them into sneakers to sell. Any business that creates goods for others is a producer.
Part B: Fill in the Blank
Write the correct answer on each line.
1. A bus driver who takes people to work each day provides a service.
The bus driver doesn't hand riders a physical object — they do the work of transporting them safely. That helpful action is a service.
2. When lots of stores sell the same toy, the supply of that toy is high.
Supply is the total amount of a product available to buy. When many stores all stock the same toy, the overall supply is large.
3. If you save three dollars each week for four weeks, you will have twelve dollars.
Multiply the weekly amount by the number of weeks: 3 x 4 = 12. Saving three dollars every week for four weeks adds up to twelve dollars.
4. A parent who buys school supplies for the family is acting as a consumer.
The parent is spending money to get goods for the family to use. People who purchase goods or services play the role of consumer.
5. An ice cream cone on a hot day is a want because you can survive without it.
Ice cream is a delicious treat, but no one truly needs it to stay alive. Enjoyable extras that aren't required for survival are wants.