## 2018年1月8日 星期一

### 多項選題詳解

2017 MC13 Option D

Queenie's DSE Econ websites: www.queeniewu.com   www.dseecon.com

2017 DSE ECON  MC13
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Which of the following is INCONSISTENT with the law of demand (LOD)?

Important concepts: testing: relative price change after adding (or deducting) per unit tax vs ad valorem tax

Option A: The abolishment of per unit import tariff on garment results in a rise in the quality of imported garments.
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Queenie's explanation on 2017 Econ MC 13:

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Let:
Ph be the price of high quality garment
Pl be the price of low quality garment
T be the per unit import tariff

Attention: the question wants us to REMOVE the per unit tax, then find the statement which is INCONSISTENT with LOD.

[Still remember the story of seat belt law (the story of speeding)  I explained in class?  How about the story of why HK women tend to have low birth rate in recent years? ]

(Ph + T) / (Pl + T)  => Ph / Pl

Result:
Relative price of high quality garments will increase after the tax removal

Prediction:
According to the law of demand: P and Qd are negatively related.  Thus, we can conclude that people will import less high quality garments after the tax removal.  i.e. results in a decrease in the quality of imported garments.

Option A is INCONSISTENT with the law of demand

Option D:
Developers tend to build higher quality housing units on a piece of land with a good view.

Students may ask, "As there is no tax mentioned, how can we use the above relative price formula?"  We have to think it in an indirect logic flow as following:

We can apply the same logic.  Let's try to consider the expensive land price as a per unit tax.  How will the relative price of high quality housing units change after adding a per unit land price?

Ph / Pl => (Ph + T) / (Pl + T)

Result:
Relative price of high quality housing units will decrease after adding per unit tax! Thus, developers tend to build higher quality housing units on a piece of land with a good view.

Option D is CONSISTENT with the law of demand

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Queenie's remind:  This is an important question on the topic of application of law of demand. Students have to practise more regarding the change of relative price of a product under the case of per unit tax as well as ad valorem.

Queenie's question for students to think: How will the relative price of high quality garments change if the government add a ad valorem of the imported garments?

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Welcome to ask me any question.

Queenie Wu DSE Econ Exam Skill Hunting Tips Class
Date: mid Jan - March
Venue & time: every Saturday 11:00 in Calvinsun Education, Price Edward classroom

Wanna to capture star in DSE Econ? Follow my step-by-step full marks logic flow.
Looking forward to seeing you in my classroom.

Queenie Wu DSE Econ Tips Mock:  March

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