AS Final Exam, Fall 2018

The diagram shows the demand for air travel in Asia. If air travel is a normal good, what could have caused the shift in the demand curve from D₁ to D₂ ?

• a fall in employment in Asia

• a fall in the price of aviation fuel

• an increase in road congestion

• an increase in the price of train travel

What will not cause a shift in the market supply curve of a commodity?

• a change in technology
• a rise in the price of a factor input
• a rise in the price of the commodity
• the introduction of a specific tax on the commodity

A government imposes a tax on a good. The equilibrium price rises by the same amount as the tax. What can be concluded about the price elasticity of demand for the good?

• It is perfectly elastic.
• It is perfectly inelastic.
• It is unitary.
• Nothing can be determined about price elasticity of demand.

What can be concluded about a product which has an income elasticity of demand (YED) of –1.5 and a cross-elasticity of demand (XED) of +1.2 with another product?

• YED: The product is an inferior good. ; XED: The other product is a complement.
• YED: The product is an inferior good. ; XED: The other product is a substitute.
• YED: The product is an normal good. ; XED: The other product is a complement.
• YED: The product is an normal good. ; XED: The other product is a substitute.

A product has a low price elasticity of supply. What might explain this?

• The product has a low opportunity cost.
• The product has a perishable nature.
• The product is classed as an inferior good.
• The product is considered to be a necessity.

A firm is producing 100 units at price $10. The price elasticity of supply is 0.5, and price is raised to $12. What is the new level of output?

• 75
• 110
• 125
• 150

When demand for a good falls, its price falls. What is the function of the price fall?

• to eliminate shortages
• to reduce consumer surplus
• to send a signal to producers
• to stimulate a further fall in demand

The diagram shows the market for computers in Pakistan. What can be concluded about the value of consumer surplus?

• It is less than producer revenue.

• It is less than producer surplus.

• It is more than producer revenue.

• It is more than producer surplus.

The diagram shows the demand and supply curves of a good. The government sets a maximum price of OJ for the good. How will this affect the consumers and producers of the good?

• effect on consumers: All consumers will gain. ; effect on producers: Producers will lose.

• effect on consumers: All consumers will gain. ; effect on producers: Producers will gain.

• effect on consumers: Some consumers will gain and some will lose. ; effect on producers: Producers will gain.

• effect on consumers: Some consumers will gain and some will lose. ; effect on producers: Producers will lose.

A manufacturer progressively reduces the price of his product in an attempt to increase total revenue. The table shows the outcome of this policy. What is the price elasticity of demand for the product?

• perfectly inelastic

• relatively inelastic

• perfectly elastic

• unitary