Principles of Microeconomics Tutorial 2

Principles of Microeconomics Tutorial 2 Question 1 multiple choice Questions Figure 1 1. Refer to Figure 1. The movement from point A to point B on the graph shows a. a decrease in demand. b. an increase in demand. c. a decrease in quantity demanded. d. an increase in quantity demanded. 2. Refer to Figure 1. The movement from point A to point B on the graph is caused by a. an increase in price. a decrease in price. b. c. a decrease in the price of a substitute good. d. an increase in income. 3. Refer to Figure 1. It is apparent from the figure that the a. good is inferior. b. demand for the good decreases as income increases. c. demand for the good confirms to the law of demand. d. good is a normal good. 4. Which of the following changes would not shift the demand curve for a good or service? a. A change in income. b. A change in the price of the good or service. c. A change in expectations about the future price of the good or service. d. A change in the price of a related good or service. Figure 2 5. Refer to Figure 2 above. Equilibrium price and quantity are, respectively, a. $30 and 500 units. b. $20 and 300 units. c. $25 and 400 units. d. $15 and 200 units. 6. Refer to Figure 2. At a price of $15, there would be a a. surplus of 400 units. b. surplus of 200 units. c. shortage of 400 units. d. shortage of 200 units. 7. Refer to Figure 2. At what price would there be an excess supply of 400 units of the good? a. $40 b. $30 c. $35 d. $25 Figure 3 8. Refer to Figure 3 above. Which of the following movements would illustrate the effect of an increase in the price of beach towels on the market for bathing suits? a. Point C to Point D b. Point A to Point D c. Point A to Point B d. Point C to Point B 9. Refer to Figure 3. Which of the following movements would illustrate the effect of an increase in the incomes of parents with school-aged children on the market for soccer lessons? a. Point C to Point D b. Point A to Point D c. Point A to Point B d. Point C to Point B 10. Refer to Figure 3. Which of the following movements would illustrate the effect of an increase in the price of Kevlar, a material used to make bullet-proof vests, on the market for bullet-proof vests? a. Point C to Point D b. Point A to Point D c. Point A to Point B d. Point C to Point B 11. Refer to Figure 3. Which of the following movements would illustrate the effect of an improved high-speed mixer that allows bakers to produce cakes in less time on the market for cakes? a. Point C to Point D b. Point A to Point D c. Point A to Point B d. Point C to Point B Question 2: Graphical Analysis Question Figure 4 i. Refer to Figure 4 above. Using the points on the figure, describe the change that would occur if consumer incomes increase and this is an inferior good. ii. Refer to Figure 4. Using the points on the figure, describe the change that would occur if the price of a substitute for this good becomes more expensive. iii. Refer to Figure 4. Using the points on the figure, describe the change that would occur if the price of this good increases. iv. Refer to Figure 4-. Using the points on the figure, describe the change that would occur if a news report stated that the price of this good was expected to increase next week. Question 3 Scenario based Question Suppose the demand schedule in a market can be represented by the equation QD = 500 - 10P, where QD is the quantity demanded and P is the price. Also, suppose the supply schedule can be represented by the equation QS = 200 + 10P, where QS is the quantity supplied. i. Refer to above Scenario. What is the equilibrium price in this market? ii. Refer to above Scenario. What is the equilibrium quantity in this market? iii. Refer to above Scenario. Suppose the price is currently equal to 10 in this market. Is there a shortage or surplus in this market, and how large is the shortage/surplus? iv. Refer to above Scenario. Suppose the price is currently equal to 18 in this market. Is there a shortage or surplus in this market, and how large is the shortage/surplus? v. Refer to above Scenario. Suppose the supply curve shifts to QS = 300 + 10P. What is the new equilibrium price and quantity in this market? Question 4 Supply and Demand Analysis i. Given the table below, graph the demand and supply curves for flashlights. Make certain to label the equilibrium price and equilibrium quantity. Price $5 $4 $3 $2 $1 Quantity Demanded Per Month 6,000 8,000 10,000 12,000 14,000 Quantity Supplied Per Month 10,000 8,000 6,000 4,000 2,000 ii. What is the equilibrium price and the equilibrium quantity? iii. Suppose the price is currently $5. What problem would exist in the market? What would you expect to happen to price? Show this on your graph. iv. Suppose the price is currently $2. What problem would exist in the market? What would you expect to happen to price? Show this on your graph.