1. At the current price there is a shortage of a product. We would expect price
ID: 1127820 • Letter: 1
Question
1. At the current price there is a shortage of a product. We would expect price to: (a) increase, quantity demanded to increase, and quantity supplied to decrease (b) increase, quantity demanded to decrease, and quantity supplied to increase (c) increase, quantity demanded to increase, and quantity supplied to increase (d) decrease, quantity demanded to increase and quantity supplied to decrease 2, which of the following statements is incorrect? (e) If demand increases and supply decreases, equilibrium price will rise. (b) If supply increases and demand decreases, equilibrium price will fall. (c) If demand decreases and supply increases, equilibrium price will rise. (d) If supply declines and demand remains constant, equilibrium price will rise. The price elasticity of demand coefficient (number) indicates: · (a) buyer responsiveness to price changes. (b) the extent to which a demand curve shifts as incomes change. (c) the slope of the demand curve. (d) how far business executives can stretch their fixed costs. 4. Which of the following is not characteristic of the demand for a commodity which is elastic? (a) The relative change in quantity demanded is greater than the relative change in price. (b) Buyers are relatively sensitive to price changes (c) Total revenue declines if price is increased (d) The elasticity coefficient is less than one. 5. A perfectly inelastic demand schedule: (a) rises upward and to the right, but has a constant slope. (b) can be represented by a line parallel to the vertical axis. (c) cannot be shown on a two-dimensional graph. (d) can be represented by a line parallel to the horizontal axisExplanation / Answer
1. B, Price will increase, due to which there is decrease in quantity demanded, due to less demand again the supply will increase.
2. C, if the demand of any product decreases then increase in supply will lead the prices to fall below the equilibrium.
3. A, buyers responsiveness to price changes. (fact)
4. D, the elasticity coefficient is greater than 1.
5. B, can be represented by a line parallel to the vertical axis.
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