Test your Knowledge

If a price is above equilibrium price, it creates a...

• Shortage

• Surplus

• More Demand

• Less Supply

What causes a shift from D1 to D2 in the market of red roses?

• Increase in price of roses

• Decrease in price of tulips

• Increase in the number of consumers

• Increase in the quantity supplied

If the demand for apple is price elastic, an increase in its price will increase total revenue in that market.

• True

• False

Cold weather in Florida has damaged orange crop. Farmers have limited amount of oranges to sell. What will happen

• The prices will go up

• The prices will go down

A product is likely to have a price elasticity of demand that exceeds 1 when:

• Its price falls

• It is a necessity

• It has close substitutes

• Consumers are not very responsive to changes in price

If the supply curve on this graph represents iPhones, what would cause the change from S to S1?

• An increase in computer chips

• An increase in the cost of producing an iPhone

• Employees figure out a way to work more efficiently

• The price of iPhones increases

Good X and Y are substitutes. If the price of good X increases, then

• The market price of good X will decrease.

• The demand for good Y will decrease.

• The demand for good X will not change.

• The demand for good Y will increase.

If the price elasticity of demand for a good is zero, this means that the good _______________.

• will still be in demand when there is an increase in price.

• will not be in demand when there is an increase in price.

• will be purchased in smaller quantities when there is an increase price.

• will be purchased in the same quantity at any price level.

Price elasticity of supply for goods in the ratio between _________________.

• percentage change in quantity supplied to percentage change in price

• change in quantity supply and changes in price.

• change in price and changes in supply quantity.

• change in price and changes in percentage in supply quantity.

The price of teddy rises from Rs. 200 to Rs. 300, the quantity demanded falls from 180 units to 100 units. Find the PED.

• 1

• 0.22

• 2.5

• 1.6