ECONOMICS 1A / MICRO ECONOMICS 1
TUTORIAL QUESTIONS FOR CHAPTER 4
1. A local spaza shop orders 400 cases of Cola each week and sells them at a price of
R6.00 per case. At the end of the first week, they have only sold 320 cases. What
economic situation is the spaza shop facing, and what will have to happen to price in
order for equilibrium to be attained? A. surplus; price will rise.
B. shortage; price will rise.
C. surplus; price will fall.
D. shortage; price will fall.
E. nothing since the market is in equilibrium.
2. An increase in the price of electricity will: A.
increase the demand for light bulbs.
B. increase the demand for solar heaters.
C. increase the demand for stereos.
D. increase the demand for TVs.
3. Which of the following events will cause an increase in the market demand for Savanna
(a brand of beer)?
A. An increase in the price of Heineken (another brand of beer).
B. A decrease in the price of Savanna.
C. An increase in the price of Planters peanuts (a complementary good).
D. An increase in income, if Savanna is an inferior good.
E. None of the above will cause an increase in demand.
4. A decrease in quantity demanded is, graphically, represented by: A.
A leftward shift in the demand curve.
B. A rightward shift in the demand curve.
C. A movement up and to the left along a demand curve.
D. A movement down and to the right along a demand curve.
5. Suppose goods X and Y are substitutes. Which of the following is TRUE?
A. An increase in the price of X will result in a decrease in the equilibrium price of Y.
B. An decrease in the price of X will result in an increase in the equilibrium quantity of Y.
C. An increase in the price of X will result in an increase in the equilibrium quantity of Y.
D. More than one of the above is true.
6. A decrease in demand is, graphically, represented by: A.
A leftward shift in the demand curve.
B. A rightward shift in the demand curve.
C. A movement up and to the left along a demand curve.
D. A movement down and to the right along a demand curve.
7. Which of the following will NOT shift the market supply curve of good X? A.
A change in the cost of inputs used to produce good X.
B. A change in the technology used to produce X.
C. A change in the price of good X
D. A change number of sellers of good X.
Use the following information to answer the questions below:
8. The demand and supply curves are represented by the following equations: Qd = 100
– P and Qs = 50 + P
Question (a)
The equilibrium price is:
A.
150
B.
75
C.
50
D.
25
E.
10
Question (b)
The equilibrium quantity is:
A.
150
B.
75
C.
50
D.
25
E.
10
Use the following information to answer questions 9a and 9b.
9. The demand and supply curves are represented by the following equations:
Qd = 30 – 2P and Qs = 10 + 2P
Question (a)
The equilibrium price is:
A.
5
B.
10
C.
15
D.
20
E.
25
Question (b)
The equilibrium quantity is:
A.
5
B.
10
C.
20
D.
30
E.
40
10 Demand is the quantity of goods:
A.
desired by consumers.
B.
ordered by consumers in a particular period.
C.
consumers are willing and able to buy at particular prices in a certain period.
D.
that consumers require in order to survive.
11. Which one of the following statements is false? A. Motor vehicles
and petrol are complements.
B. Credit cards and cash are substitutes.
C. Honey and jam are complements.
D. A house and furniture are complements.
E. Butter and margarine are substitutes.
12. Consumer surplus indicates that:
A.
more will be demanded at lower than at higher prices.
B.
it is impossible to increase consumer wellbeing by changing the way in
which income is spent.
C.
consumers often get more value from a good than is represented by the
price.
D.
the allocation of resources is decided by the interaction of buyers and
sellers.
E.
market equilibrium can always be attained.
SHORT QUESTION
1. What do you think is the difference in the meanings/definitions of: Quantity
demanded and Demand?
ANSWER
Demand vs. Quantity Demanded
✓ Quantity Demanded = the quantity of product consumers are willing and
able to buy at a specific price
✓ Demand = every combination of prices and quantities consumers are
willing and able to buy (I.E. THE DEMAND CURVE)
Changes to Quantity Demanded
The ONLY thing that causes changes to Quantity demanded is PRICE
2. What are the causes of changes to DEMAND? Or, what causes the Demand Curve
to shift?
ANSWER
Changes in Tastes/preferences,
Changes in Price of related goods,
Changes in Consumer’s income, Changes
in expected future prices.
Changes in population
Changes in distribution of income
3. What do you think is the difference in the meanings/definitions of: Quantity
Supplied And Supply
ANSWER
Supply vs. Quantity Supplied
✓ Quantity Supplied = the quantity of product suppliers are willing and able
to sell at a specific price
✓ Supply = every combination of prices and quantities suppliers are willing
and able to sell (I.E. THE SUPPLY CURVE)
✓ Changes to Quantity Supplied
✓ The ONLY thing that causes changes to Quantity Supplied is PRICE
4. What are the causes of changes to SUPPLY? Or, what causes the Supply Curve
to shift?
ANSWER
Technology
Price of alternative output
Price of factors of production and other input
Expected future prices of the product
5. What happens to the market equilibrium price and/or quantity if there is a change
in the demand or supply curve?
ANSWER
When there are changes to either the demand curve or supply curve or both
Changes in the market equilibrium price can occur
Changes in the market equilibrium quantity can occur
Changes to BOTH market equilibrium price AND quantity can occur
END