MICROECONOMICS----- MID TERM EVALUATION I
Name:………………………………………………………………………………………………………………………….Total Marks:15
University No:………………………………………………………………………………………………………………Total Time: 1 hour
Section A: Multiple choice questions. Total marks-5 (each question carries 1 mark)
1. For a horizontal demand curve, the elasticity of demand is
a. Inelastic
b. Elastic
c. Infinitely elastic…………………….correct
d. Relatively elastic
2. For a vertical demand curve, the elasticity of demand is
a. Infinitely elastic
b. Relatively elastic
c. Completely inelastic…………………….correct
d. Relatively inelastic
3. When quantity supplied exceeds the quantity demanded it is
a. Surplus………………………correct
b. Shortage
c. Arbitrage
d. Elasticity
4. The formula for price elasticity of demand is
a. (P/Q) * (ΔP/ΔQ)
b. (P/Q) * (ΔQ/ΔP)……………………correct
c. (Q/P) * (ΔP/ΔQ)
d. (Q/P) * (ΔQ/ΔP)
4. The formula for cross price elasticity of demand is
a. (Px/Qy) * (ΔQx/ΔPy)
b. (Px/Qx) * (ΔQy/ΔPy)
c. (Px/Qy) * (ΔPx/ΔQy)
d. (Px/Qy) * (ΔQy/ΔPx)…………………..correct
College of Business Administration, Al Kharj
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MICROECONOMICS----- MID TERM EVALUATION I
Section B: True/False questions. Total marks-5 (each question carries 1 mark)
1. In short run an increase in price has only a small effect on the quantity of gasoline demanded.
(T/F)…………true
2. Demand for automobiles is less elastic in the long run than in short run. (T/F)…………..true
3. The short run income elasticity for a durable is much larger than the long run elasticity. (T/F)…………..true
4. When the demand curve shifts due to change in price it is called change in quantity demanded.
(T/F)………false
5. When the quantity supplied changes because of price it is called as shift in supply. (T/F)…………..false
Section C: Answer in brief. Total marks-2 (each question carries 1 mark)
Define arc elasticity of demand
Price elasticity calculated over a range of prices.
Define substitute goods
Two goods for which an increase in the price of one leads to an increase in the quantity demanded of the
other.
Section D: Numerical question. Total marks-3(each question carries 1.5 marks)
Using the supply function: Qs = 1800+240P and demand function Qd = 3550 -266P find
i. the equilibrium price
ii. the equilibrium quantity
(i)
At equilibrium Qs = Qd
1800+240P = 3550 -266P
506 P = 1750
P = 2.46
(ii)
Qs = 1800+240P
Q = 1800 + (240) (3.46)
Q = 2630
College of Business Administration, Al Kharj
Page 2