Assignment 1 True/False ccording to the law of demand, a price decrease leads to
ID: 1164408 • Letter: A
Question
Assignment 1 True/False ccording to the law of demand, a price decrease leads to an increase in demand. 2.Achange in income will induce a shift in the demand curve. 3. 1. A ? An excess supply occurs when the market price exceeds the equilibrium price. 4. Price is determined by production costs. Suppy 5. If two goods are substitutes, an increase in the price of one leads to an increased demand for the other. F- 6. Slope and elasticity are the same thing. ? 7. The price elasticity of demand will frequently vary from point to point on the demand curve. 8. The larger the time period over which consumers can adjust, the more elastic the demand 9. If the value associated with cross-price elasticity of demand is negative, it indicates the two goods are substitute ultiple Choice/Short Answer estions 1 to 5 refer to Figure 2-4Explanation / Answer
In the true and false section. Q6 is wrong. Elasticity and slope are the same. the more horizontal slope the more elastic it is more vertical = more inelastic.
2) It is called a fall in the quantity demanded. As the decrease is on the same demand curve the demand itself will not change but only the quantity. The answer is "A".
6) An increase in demand shifts the aggregate demand curve to the right i.e. at a higher quantity and higher price. The answer is "C".
7) The price will increase with the increase in the demand but the quantity supplied will remain the same because a vertical supply curve means an inelastic supply which doesn't chage with the price.