Review questions

Part I: Distinguish between the following: 1. Normal goods and inferior goods 2. Complementary goods and substitute goods 3. Market demand and individual demand 4. Individual supply and market supply 5. Excess demand and excess supply

Part II: Short answer and workout 1. Why does the quantity of salt demanded tend to be unresponsive to changes in its price?

2. Why is the quantity of education demanded in private universities much more responsive than salt is to changes in price?

3. To get the market demand curve for a product, why do we add individual demand curves horizontally rather than vertically?

4. The market for lemon has 10 potential consumers, each having an individual demand curve P = 101 - 10Qi, where P is price in dollars per cup and Qi is the number of cups demanded per week by the ith consumer. Find the market demand curve using algebra. Draw an individual demand curve and the market demand curve. What is the quantity demanded by each consumer and in the market as a whole when lemon is priced at P = $1/cup?

5. The demand for tickets to an Ethiopian Camparada film is given by D(p)= 200,00010,000p, where p is the price of tickets.If the price of tickets is 12 birr, calculate price elasticity of demand for tickets and draw the demand curve

6. Given market demand Qd = 50 - P, and market supply P = Qs + 5 A) Find the market equilibrium price and quantity? B) What would be the state of the market if market price was fixed at Birr 25 per unit? C) Calculate and interpret price elasticity of demand at the equilibrium point.