Choose the correct answer of the following: 1- The law of demand states that an
ID: 1222658 • Letter: C
Question
Choose the correct answer of the following:
1- The law of demand states that an increase in the price of a good
a. Decreases the demand for the good
b. Increases the supply of the good
c. Decreases the quantity demanded for that good
d. Increases the quantity supplied of that good
2. The price elasticity of demand is defined as
a. The percentage change in price of a good divided by the percentage change in the quantity demanded of that good
b. The percentage change in the quantity demanded of a good divided by the percentage change in the price of that good
c. The percentage change in income divided by the percentage change in the quantity demanded
d. The percentage change in the quantity demanded divided by the percentage change in income
3. The law of supply states that an increase in the price of a good
a. Increases the quantity supplied of the good
b. Decreases the demand for the good
c. Decreases the quantity demanded for that good
d. Increases the supply of the good
4. If an increase in consumer incomes leads to a decrease in the demand for camping equipment, then camping equipment is:
a. A complementary good
b. A substitute good
c. An inferior good
d. A normal good
5. All of the following shift the supply of watches to the right except
a. An increase in the price of watches
b. An advance in the technology used to manufacture watches
c. A decrease in the wage of workers employed to manufacture watches
d. Manufactures' expectations of lower watch prices in the future
6. If the price of a good is above the equilibrium price,
a.There is a surplus and the price will rise
b. There is a surplus and the price will fall
c. There is a shortage and the price will rise
d. There is a shortage and the price will fall
7. Perfectly competitive market has
a. Only one seller
b. Many buyers and sellers
c. At least a few sellers
d. Firms that set their own prices
8. If the price of a good is below the equilibrium price,
a. There is a shortage and the price will rise
b. There is a surplus and the price will rise
c. There is a surplus and the price will fall
d. There is a shortage and the price will fall
9.If the price of a good is equal to the equilibrium price,
a. There is a surplus and the price will rise
b. There is a surplus and the price will fall
c. There is a shortage and the price will rise
d. The quantity demanded is equal to the quantity supplied and the price remains unchanged
10. An increase (rightward shift) in the demand for a good will tend to cause
a. A decrease in the equilibrium price and quantity
b. An increase in the equilibrium price and quantity
c. An increase in the equilibrium price and a decrease in the equilibrium quantity
d. A decrease in the equilibrium price and an increase in the equilibrium quantity
Explanation / Answer
1. Option C is correct.
The difference between quantity demanded and demand is that the change in quantity demanded represents a movement along the demand curve which is only due to changes in price. However, when the factors cause the demand curve to shift, it is called as change in demand.
2. Option B is correct.
Elasticity of demand = % change in quantity demanded due to % change in price.
3. Option A is correct.
The same rule of quantity supplied and supply applies here too. A price change would only cause a movement along the supply curve and not a shift of curve.
4. Option C is correct.
As the consumer's income increases, he would ted to increase the demand for superior quality goods and thats why the demand for inferior quality goods falls.