Question

Table 4-1

Price per lb.
of ice cream         Sven        Larry          Rest of Market        Market
       $8                  5             0                       7_______________
       $6                  8             5                       9_______________
       $5 11    9                      11______________
       $4 14           11                     14______________
       $3 17 14                     20______________

1.Refer to Table 4-1. At $4 the quantity demanded in the market would be:

	A.	12
	B.	22
	C.	31
	D.	39
	E.	51

2.According to the law of supply:

A.

there is an inverse relationship between price and quantity demanded.

B.

there is a direct relationship between price and quantity demanded.

C.

there is an inverse relationship between price and the quantity supplied.

D.

. there is a direct relationship between price and the quantity supplied.

E. there is a direct relationship between quantity demanded and quantity supplied.

3. Vodka and whiskey are considered by consumers to be substitutes. The likely economic impact of a decrease in the price of whiskey is a:

	A.	movement up along the demand curve for vodka.
	B.	movement down along the demand curve of vodka.
	C.	decrease in the supply of whiskey.
	D.	rightward shift of the demand curve for vodka.
		E. leftward shift of the demand curve for vodka.

Answer 1

1) Market demand at $4= 14+11+14=39. Therefore option D is correct.

2) According to the law of supply, when the price is increased, the quantity of supply is increased or vice versa. That is price and quantity supply are directly related. Therefore option D is correct.

3) Vodka and whiskey are substitutes mean people can get the same satisfaction from vodka and whiskey. Quantity demand of substitute goods is directly related to the price of other good. When the price of whiskey is increased, quantity demand of vodka will be decreased as people prefer to get whiskey at a cheaper rate. So the demand curve for vodka will be shifted to the left. Therefore option E is correct.