Question

Which of the following statements is (are) correct?
(x) When the price of a good decreases, sellers produce less of the good.
(y) When the price of a good is high, selling the good is profitable, and so the quantity supplied is large.
(z) The cause of a supply curve shift to the right could be a decrease in the price of an input or a technological improvement in the production of the good but not an increase in the price of the good.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (y) only

2. Which of the following would directly affect the demand for apple juice?
(x) an increase in the cost of processing apples into apple juice.
(y) unfavorable news reports about apple juice consumption changes tastes and preferences of households.
(z) the price of orange juice, a substitute for apple juice, decreases.
A. (x), (y) and (z) B. (x) and (y), only
C. (x) and (z), only D. (y) and (z), only
E. (x) only

Which of the following would be a determinant of demand?
(x) number of buyers in the market
(y) seller’s expectations about demand
(z) the price of the good
A. (x), (y) and (z) B. (x) and (y), only
C. (x) and (z), only D. (y) and (z), only
E. (x) only

Answer 1

Answer : 1) The answer is option A.

When price fall then sellers decrease their production level. Because by selling more at lower price level the sellers face loss. Therefore, the statement x is correct

When price rise then sellers increase the production level. Because selling more at price level is profitable. Therefore, the statement y is correct.

When input price decrease or technology improve then the production level increase. As a result, the supply curve shift to rightward and the price of good fall. Therefore, statement z is correct.

As statements x, y and z are correct, hence option A is the correct answer.

2) The answer is option D.

When the cost of processing apple into apple juice increase then the price of apple juice increase. As a result, the quantity demanded of apple juice increase. Therefore, here the demand of apple juice is indirectly affected. So, the statement x is incorrect.

When household tastes and preferences change then it change the demand directly. Therefore, the statement y is correct.

When the price of substitute good fall then consumers purchase the substitute good. As a result, the demand of the good decrease but the demand of substitute good increase. Therefore, here the demand changes directly. So, the statement z is correct.

As statements y and z are correct, hence  option D is the correct answer.

3) The answer is option C.

The demand determinants are : number of existing buyers in the market, the price level of good, consumers expectations etc. Seller's expectations is a supply determinant; it is not a demand determinant. Therefore, statements x and z are correct. Hence option C is the correct answer.