Question

1. If an increase in the price of product A causes an increase in the demand for product B, we can conclude that

A. they are inferior goods.

B. the price elasticity of demand for product B will rise.

C. they are complements.

D. they are substitutes.

2. If there is a surplus of a product, we can conclude that

A. the product's price is above equilibrium.

B. the product's price is too low for equilibrium.

C. the product's price will rise.

D. consumers want to buy more than is being made available by producers.

3. For a given shift in demand, the less elastic is supply, the

A. greater is the shift in demand.

B. greater is the change in equilibrium quantity.

C. greater is the change in price.

D. smaller is the change in price

Answer 1

When there is increase in prices of Good A and which will further leads to increase in quantity of Good B then this means that both goods are perfect substitute to each other.

Hence, OPTION D is correct

2) when there is surplus in the economy this means that there exists more supply than demand and hence the product's price are above the equilibrium price.

Hence, option A is correct.

3) Now, when supply is less elastic and hence any change in price can't change the quantity supplied by the producers.

Hence, any shift in the demand will lead to greater change in price because quantity supplied can't be changed.

Hence, option c is correct