WHALES AS Economics: Price Mechanism

What is the definition of a normal good?

A one where the demand for the good is both price and income elastic

B one where the income elasticity of demand for the good is greater than zero

C one where the proportion of income a consumer spends on the good increases with a rise in income

D one where the quantity demanded increases when the price of the good falls

• A

• B

• C

• D

The table gives the short-run supply schedules of three firms X, Y and Z, which comprise an industry

• A

• B

• C

• D

The demand for a good falls at the same time as its costs of production decrease. What will be the combined effect of these changes on the price and on the quantity supplied of the good?

• A

• B

• C

• D

The diagrams show a change in demand from D1 to D2 and a change in supply from S1 to S2 for four different goods. Which diagram illustrates the good for which additional new uses have been found and which receives an increase in government subsidy?

• A

• B

• C

• D

The diagram shows the demand and supply curves for parking spaces in a hospital car park. The managers decide to rely on the price mechanism to allocate parking spaces at the hospital. What is required for this to work?

A Alternative means of transport must be provided for those unable to afford price OP.

B A survey will be needed to find out the amount users are willing to pay.

C The capacity of the car park will need to be expanded.

D The price charged for parking spaces must be OP.

• A

• B

• C

• D

What will happen to an industry’s supply curve if new firms enter the industry?

A It will shift to the left at any given price.

B It will shift to the right at any given price.

C There will be a downward movement along the supply curve.

D There will be an upward movement along the supply curve.

• A

• B

• C

• D

What does not cause the demand curve for a good to shift its position?

A advertising expenditure

B consumer tastes

C the price of substitute goods

D the price of the good

• A

• B

• C

• D

When will the demand curve for motorcycles shift to the left?

A when the price of cars falls

B when the price of motorcycles falls

C when the tax on motorcycles rises

D when the price of public transport rises

• A

• B

• C

• D

There are three firms, X, Y and Z, supplying a market. The table shows their supply at four different prices.

Which price change is required for market supply to halve?

A $90 to $70

B $90 to $80

C $100 to $70

D $100 to $90

• A

• B

• C

• D

The diagram shows the market for coffee. The initial equilibrium position is X. The price of tea, a substitute, falls and an indirect tax is imposed on coffee. What will be the new equilibrium position?

• A

• B

• C

• D