2. The war in Iraq comes to an end. Iran and Afghanistan lay pipes to generate m

Question

2. The war in Iraq comes to an end. Iran and Afghanistan lay pipes to generate more oil. The United States and Venezuela enter into an era of friendship. Which of the following correctly captures the effect of this change on the market for gasoline?
A. Both equilibrium quantity and price will increase.
B. Both equilibrium quantity and price will decrease.
C. Equilibrium quantity will increase, but equilibrium price will decrease.
D. Equilibrium quantity will decrease, but equilibrium price will increase

6. Edt = 5. This means that if
A. Pt increases by 5 percent, then Qdt will decrease by 1 percent.
B. Qdt increases by 5 percent, Pt will decrease by 1 percent.
C. Pt increases by 1 percent, Qdt will decrease by 5 percent.
D. Pt decreases by $1, Qdt will decrease by 5 units.

8. Let Edt = 2. This implies that the demand for movie tickets is
A. inelastic, because a 1 percent change in Pt changes Qdt by 2 units.
B. inelastic, because a 1 percent change in Pt changes Qdt by 1 percent.
C. elastic, because a 1 percent change in Pt changes Qdt by 1 percent.
D. elastic, because a 1 percent change in Pt changes Qdt by 2 percent.

Explanation / Answer

Answer:

2) Option C. Equilibrium quantity will increase, but equilibrium price will decrease.

Explanation: Here the production of oil increases as a result of which there will be an increase in the supply of oil. When supply increases this will lead to a decline in the price of oil.

6) Option b. Qdt increases by 5%, pt will decrease by 1 percent.

Explanation: Elasticity of demand is defined as the “ responsiveness of quantity demanded to a change in price.” Here when price decreases by 1 percent , the quantity demanded increases by 5 percent.

8) Option d. Elastic, because 1 percent change in Pt changes Qdt by 2%.

Explanation: A demand for movie tickets is said to be elastic when one percent change in price of movie ticket leads to a more than one percent change in the demand for movie tickets

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