FPEC1014 Tutorial 2 price system

Which one of the following is not held constant when the demand curve is drawn?

• consumers’ taste and preference

• household income

• price of the good itself

• cost of production

The table below shows the demand for three individuals A, B and C.

Which price-quantity pair lies on the market demand curve?

• RM10 and 25 units

• RM11 and 22 units

• RM12 and 10 units

• RM13 and 4 units

In diagrammatic terms, other things remaining the same, a fall in the price of a commodity will ?.

• cause a movement along the demand curve

• shift the demand curve to the right

• shift the demand curve to the left

• not have any implication on demand

The law of demand states that ?.

• there is an inverse relationship between price and the quantity demanded of a good

• there is a direct relationship between price and the quantity demanded of a good

• there is an inverse relationship between price and the quantity supplied of a good

• there is a direct relationship between price and the quantity supplied of a good

The diagram below shows the market equilibrium for apples. Which one of the following changes could cause a leftward shift in the supply curve from S1 to S2?

• an advancement in technology in producing apples

• a reduction in demand for a

• a removal of tax on apples

• a removal of a subsidy paid to the producers of apples

The price elasticity of demand for shoes is 1.5. We can conclude that shoes

?.

• have a steep demand curve

• have a horizontal demand curve

• have a vertical demand curve

• have a relatively flat demand curve

To determine whether two goods are substitutes or complements, an economist would estimate the ?.

• price elasticity of demand

• income elasticity of demand

• cross elasticity of demand

• price elasticity of supply

The price elasticity of demand for a horizontal demand curve is ? .

• unitary elasticity of demand

• perfectly elastic

• perfectly inelastic

• inelastic

Define price elasticity of demand.

• degree of responsiveness of demand for a good due to a change in price of the good, ceteris paribus

• degree of responsiveness of supply for a good due to a change in price of the good, ceteris paribus

• degree of responsiveness of demand for a good due to a change in price of another good, ceteris paribus

• degree of responsiveness of demand for a good due to a change in income, ceteris paribus

The table below indicates the quantity demanded of good B, good C and good D at different price levels of good A.

Based on the table above, calculate the value of cross elasticity of demand between good A and B. [ no decimal point]