ECONOMICS

Demand, Supply, and Market Equilibrium

1.If both the supply and the demand for a good

increase, the market price will

a. Rise only in the case of an inelastic supply

function.

b. Fall only in the case of an inelastic supply

function.

c. Not be predictable with only these facts.

d. Rise only in the case of an inelastic demand

function.

2.A supply curve illustrates the relationship

between

a. Price and quantity supplied.

b. Price and consumer tastes.

c. Price and quantity demanded.

d. Supply and demand.

3. As a business owner you have determined that

the demand for your product is inelastic. Based

upon this assessment you understand that

a. Increasing the price of your product will

increase total revenue.

b. Decreasing the price of your product will

increase total revenue.

c. Increasing the price of your product will have

no effect on total revenue.

d. Increasing the price of your product will

increase competition.

Items 4 and 5are based on the following

information:

Assume that demand for a particular product

changed as shown below from D1 to D2.

4. Which of the following could cause the change

shown in the graph

a. A decrease in the price of the product.

b. An increase in supply of the product.

c. A change in consumer tastes.

d. A decrease in the price of a substitute for the

product.

5. What will be the result on the equilibrium price

for the product

a. Increase.

b. Decrease.

c. Remain the same.

d. Cannot be determined.

6.Which one of the following has an inverse

relationship with demand for money

a. Aggregate income.

b. Price levels.

c. Interest rates.

d. Flow of funds.

7.An improvement in technology that in turn

leads to improved worker productivity would most

likely result in

a. A shift to the right in the supply curve and a

lowering of the price of the output.

b. A shift to the left in the supply curve and a

lowering of the price of the output.

c. An increase in the price of the output if demand

is unchanged.

d. Wage increases.

8. Which of the following market features is likely

to cause a surplus of a particular product

a. A monopoly.

b. A price floor.

c. A price ceiling.

d. A perfect market.

9.A decrease in the price of a complementary

good will

a. Shift the demand curve of the joint commodity

to the left.

b. Increase the price paid for a substitute good.

c. Shift the supply curve of the joint commodity to

the left.

d. Shift the demand curve of the joint commodity

to the right.

10.Demand for a product tends to be price

inelastic if

a. The product is considered a luxury item.

b. Few good complements for the product are

available.

c. The population in the market area is large.

d. People spend a large share of their income on

the product.

11. Which of the following has the highest price

elasticity coefficient

a. Milk.

b. Macaroni and cheese.

c. Bread.

d. Ski boats.

12.The local video store's business increased by

12% after the movie theater raised its prices from

P6.50 to P7.00. Thus, relative to movie theater

admissions, videos are

a. Substitute goods.

b. Superior goods.

c. Complementary goods.

d. Public goods.

13.An individual receives an income of P3,000 per

month, and spends P2,500. An increase in income

of P500 per month occurs, and the individual

spends P2,800. The individual's marginal

propensity to save is

a. 0.2

b. 0.4

c. 0.6

d. 0.8

14.In any competitive market, an equal increase

in both demand and supply can be expected to

always

a. Increase both price and market-clearing

quantity.

Since 19772

b. Decrease both price and market-clearing

quantity.

c. Increase market-clearing quantity.

d. Increase price.

15.Given the following data, what is the marginal

Prospensity to consume

Level of

Disposable income Consumption

P40,000 P38,000

48,000 44,000

a. 1.33

b. 1.16

c. 0.95

d. 0.75

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