Acca paper F1 fia diploma in Accounting and Business Accountant in Business (AB/fab) exam kit

P AP E R F 1 ( F A B ) :
AC COU N TAN T IN B US INES S
 
18
KA P LA N P UBL I SH IN G 
76 
Products A and B are substitutes. A 5% change in the price of A has resulted in a 4% 
change in the demand for B. What is the cross elasticity of demand (XED) between A and 
B? 
A +0.8 
B –0.8 
C +1.25 
D –1.25 
(2 marks) 
77 
A shift in the demand curve for a product is caused by changes in the conditions of demand, 
rather than a change in the price of the product. 
Is this statement TRUE or FALSE? 
A True 
B False 
(1 mark) 
78 
G Co increases the selling price of its only product, the GF1000 by 5%. This causes a 
reduction in the number of units it sells by 8%. Is the GF1000’s price elasticity of demand 
likely to be: 
A 
Less than 1 
B Equal 
to 
1 
C Greater 
than 
1 
D Negative 
(2 marks) 
79 
H Co manufactures and sells a motor vehicle, the GHF300. Which of the following would 
cause an expansion in demand for this product in country M? 
A 
A reduction in the selling price of the GHF300 
B 
The GHF300 becoming more fashionable with the public 
C 
A reduction in direct taxes within country M 
D 
An increase in the population of country M 
(2 marks) 
80 
Which of the following is NOT a characteristic of a perfect market? 
A 
Large numbers of customers and suppliers 
B 
All suppliers provide a wide range of products and services 
C 
There is perfect information for customers and suppliers 
D 
There are no entry or exit barriers to the market 
(2 marks) 
81