1. Circle the best correct answer in the following 5 M A. Shift in demand curve
ID: 1138853 • Letter: 1
Question
1. Circle the best correct answer in the following 5 M A. Shift in demand curve of a given product may occu r when a) Consumer's income changes b. Consumer's expectations change c. Consumer's desire and need for this product chang d. All of the above e. None of the above B. The total revenue of a seller will a. Increase as a result of price cut when price elasticity (E) 1 e as a result of price cut when price elasticity (E) 1 c Decrease a result of price cut when price elasticity (E) 1 d. Increase a result of price cut when price elasticity (E)-1 e. (a) & (d) Aggregate supply curve and the market supply curve are a Both of downward sloper b. Both horizontal lines c. Both vertical lines d. Both of upward slopes e. None of the above C. D. Price Floor describes the case where lower limits are imposed on the price of goods or services. This measure will a. Create market surplus b. Increase quantity demanded c. Increase quantity supplied d. (a) & (b) (a) & (e) In order for any production process to continue, the following elements have to be made available a. Men, machines, money, material, merchandise, methods, and market b. Men, machines, money, material, management, methods, and market c. Men, machines, money, material, measurements, methods, and market d. Men, machines, money, material, management, methods, and stock market e. Men, machines, money, material, management, methods, and resources E.Explanation / Answer
Answer : 1) A)The correct option is d.
Demand curve shift when quantity demanded change for a product. If consumer income increase or decrease then quantity demanded will increase or decrease for a product respectively. This means that changes in consumer income changes the quantity demanded which shifts the demand curve. Again, if consumers expect that price will rise or fall in near future then present quantity demanded will increase or decrease respectively for a product. This also means that changes in consumer expectation changes the quantity demanded which shifts the demand curve. Again, if needs and desires for a product increase or decrease then quantity demanded also increase or decrease respectively. This means that needs and desires of consumers changes the quantity demanded which shifts the demand curve. Therefore, as given options a, b and c are correct, hence option d is the answer.
B) The correct option is c.
E < 1 means demand is inelastic. For inelastic demand if price fall then total revenue decrease for seller.
For example, let initial price is $5 and quantity level is 5 units. Therefore, initial total revenue = price × quantity = 5 × 5 = $25. Now, let price level fall and becomes $4 but quantity remains same as before because of inelastic demand. New total revenue = 4 × 5 = $20. Therefore, here it is clear that for inelastic demand cutting price decreases the total revenue for seller.
C) The correct option is d.
We know that there exists a positive relationship between price and quantity supplied. For this reason the slope of both market supply curve and aggregate supply curve is upward.
D) The correct option is e.
Price floor is a situation where minimum price level is higher than the equilibrium price level. Because of higher price level quantity demanded decrease in the market. As a result, market quantity supply increase or you can say it as market surplus. Therefore, as given options a and c are correct, hence option e is the answer.
E) The correct option is e.
Here, labour = men, capital = machines and money, land = resources and materials, entrepreneurship = management and methods. These all are essential parts of any production process. Hence, option e is the answer.
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