Question

1) Which of the following is NOT a determinant of the price elasticity of demand?

A) the availability of potential substitutes
B) the share of the budget spent on the item
C) the time the consumer has to adjust to the price change

D) the cost to produce the product

2) Which of the following will cause a rightward shift of the demand curve?                                  

A) a decrease in the cost of production
B) a decrease in the price of the good
C) an increase in the expected future price of the good                                                                   

D) all of the above

3) In the above figure, an increase in income is best demonstrated by a                                           

A) shift of D1 to D2 in Graph A, if good A is a normal good.
B) shift of D2 to D1 in Graph A, if good A is a normal good.
C) movement along D0 from P1 to P2 in Graph B.                                                                             

D) movement along D0 from P2 to P1 in Graph B.

4) In the above figure, the demand curve for Good A shifts from D1 to D2 in Graph A when the price of Good B changes from P1 to P2 in Graph B. We can conclude that                                   A) Good A and Good B are substitutes.                                                                                          

B) Good A and Good B are complements.
C) Good A is a normal good but Good B is an inferior good.                                                           

D) Good A and Good B are unrelated.

5) If the price of hamburger meat increases by 20 percent and the quantity supplied by meat packing companies increases by 30 percent, what is the price elasticity of supply?
A) 1.65
B) 1.20                                                                                                                                              

C) 0.67                                                                                                                                                 

D) 1.50

6) Refer to the above table. What is the marginal utility for the 10th unit for Mary and for John?
A) Mary: -10; John: 10
B) Mary: 10; John 10                                                                                                                             

C) Mary: 220; John 450                                                                                                                            

D) Mary: 0; John: 0

Answer 1

ANS-) Option D is not a determinant of price elasticity of demand.

The option given- Availability of Substitute Goods, Budget Decision and Time these factors affect the price elasticity of demand.

Substitute:- More substitutes, greater the price elasticity of the demand.

Income Spend decision- Greater the proportion of income spent by the consumers, more the price elasticity of demand curve will be.

Time- There is more elasticity in the longer period of duration.