Question 1

A fall in income of the consumer, other things being equal, causes:
A)Increase in demand
B)Decrease in demand
C)Increase in quantity demanded
D)Decease in quantity demanded

Accepted Answer

A

Question 2

Which of the following causes an increase in supply:
A)Fall in price of inputs
B)Increase in number of producers
C)Decrease in the price of production substitutes
D)All of the above

Accepted Answer

All the options listed contribute to an increase in supply. A fall in the price of inputs makes production cheaper, encouraging producers to supply more. An increase in the number of producers in the market typically leads to more supply. Lastly, a decrease in the price of production substitutes makes the original product more attractive to produce, thus increasing its supply.

Question 3

A movement down the given demand curve shows:
A)Increase in demand
B)Decrease in demand
C)Extension in demand
D)Contraction in demand

Accepted Answer

A movement down the demand curve represents an extension in demand, which occurs when the quantity demanded increases due to a decrease in price, while other factors remain constant.

Question 4

Which of the following results in an increase in an increase in demand:
A)Fall in prices of substitutes
B)Increase in price of complementary goods
C)Fall in consumer's income
D)None of the above

Accepted Answer

None of the options listed would result in an increase in demand. A fall in the price of substitutes would decrease demand for the original good, an increase in the price of complementary goods would decrease demand, and a fall in consumer's income would generally decrease demand for normal goods.

Question 5

An increase in supply means:
A)Movement down given supply curve
B)Movement upward given supply curve
C)Leftward shift in supply curve
D)Rightward shift in supply curve

Accepted Answer

An increase in supply means that at the same price, more of the good or service is available, which is represented by a rightward shift in the supply curve.

Question 6

An increase in market supply, demand remaining the same causes:
A)Increase in equilibrium price
B)Decrease in equilibrium quantity
C)Decrease in equilibrium price and increase in equilibrium quantity
D)Both equilibrium price and quantity rises

Accepted Answer

An increase in market supply, with demand remaining constant, leads to a decrease in equilibrium price due to the surplus of goods. At the same time, the equilibrium quantity increases because the lower price encourages more consumers to buy the product.

Question 7

Which one of the following elasticities takes the average of prices and quantities:
A)Point elasticity of demand
B)Arc elasticity of demand
C)Income elasticity of demand
D)Cross elasticity of demand

Accepted Answer

Arc elasticity of demand calculates elasticity over a range of prices and quantities by taking the average of the starting and ending prices and quantities, making it distinct from point elasticity which measures elasticity at a specific point.

Question 8

When demand curve is rectangular hyperbola, the value of price elasticity of demand will be:
A)Zero
B)One
C)Greater than one
D)Infinity

Accepted Answer

When the demand curve is a rectangular hyperbola, it implies that the price elasticity of demand is constant and equal to one at all points along the curve. This means that a given percentage change in price leads to an equal percentage change in quantity demanded, indicating unit elasticity.

Quiz 7: Supply and Demand Elasticity

A fall in income of the consumer, other things being equal, causes:

Which of the following causes an increase in supply:

A movement down the given demand curve shows:

Which of the following results in an increase in an increase in demand:

An increase in supply means:

An increase in market supply, demand remaining the same causes:

Which one of the following elasticities takes the average of prices and quantities:

When demand curve is rectangular hyperbola, the value of price elasticity of demand will be: