Question

The reduction in price of a related good A would most likely result in shifting the demand curve of an inferior good to the  (left or right).

The imposition of an excise tax on the supplier of good A would most likely result in shifting the supply curve of good A to the (left or right).

Price allocates scarcity in market outcomes.

True

False

A curve that goes through the cartesian coordinates of point A (5,50) and point B (10,25) would be a supply curve.

True

False

Answer 1

1) Right

Inferior goods are those goods which have negative income effect. Increase in income decreases its demand and vice-versa.

Decrease in price of related good decreases the demand of normal good and increases the demand of inferior good.

2) Left

Excise tax increases the cost of production and thus decreases supply which shifts supply curve leftwards.

3) True

Human wants are unlimited but resources are scarce so price solves this problem. Goods which are scarce marked with higher prices.

4) False

Supply curve is upward sloping curve which shows direct relationship between price and quantity supplied. Line through A(5,50) and B(10,25) is downward sloping.