True/False

1.Scarcity means that it is impossible to satisfy every desire.

2.Microeconomics only looks at the behaviour of one consumer or one firm in a market, while macroeconomics looks at the behaviour of an entire industry or group of consumers.

3.Macroeconomics is concerned with the issue of how government policy can slow down inflation.

4.Economists most often disagree over positive rather than normative economic issues.

5.The statement: 'A tax hike for the rich is the fairest way to raise tax collection', is an example of positive economic analysis.

6.If goods X and Y are complements, then a reduction in the price of good X decreases the demand for good Y.

7.If X is a normal good, an increase in consumers' income will result in an increase in the demand for good X.

8.Suppose A and B are complementary goods. Other things being equal, the demand curve for A will shift to the right when the price of B goes up.

9.The law of supply indicates that a decrease in price will cause a decrease in supply, which is reflected graphically as a leftward shift of the supply curve.

10.A shortage is a market condition existing at any price where the quantity demanded is less than the quantity supplied.

11.A surplus means that the quantity supplied is greater than the quantity demanded at the prevailing price.

12.Assuming all other things remain constant, a fall in the price of Coca-Cola will increase the quantity of Coca-Cola produced.

13.An increase in supply is reflected as a rightward (outward) shift of the supply curve and is caused by an increase in price.

14.If the managers of a bus system find that revenues increase when fares are raised, they would conclude that price elasticity demand for a subway service is inelastic.

15.If a 10% price increase causes the quantity demanded for a good to decrease by 5%, demand is elastic.

16.Assuming all other things remain constant, if there are few close substitutes for a good, demand is more elastic for it.

17.Inelastic demand is a change of less than 10% in quantity demanded in response to a 1% change in price.

18.If demand for a good is price elastic, it must also be income elastic.

19.When the price of bread increases by 10 per cent, the quantity demanded of butter decreases by 20 per cent. The cross-price elasticity of demand between butter and bread is 2.

20.When the price of a good is $10, quantity supplied is 20 and when the price is $6, quantity supplied is 12. The price elasticity of supply (measured by midpoint method) is 0.5.