Question

Answer True/False

1. A change in the price of a good will cause a shift in its demand curve. (2 marks)

2. An increase in consumers’ incomes will cause an expansion in the demand of all goods. (2 marks)

3. The price charged for a good is the equilibrium price. (2 marks)

4. An inferior good is one that has been badly produced. (2 marks)

5. Mad cow disease led to an increase in the price of pork. (2 marks)

Choose the right answer:

1. In drawing an individual’s demand curve for a commodity, all but which one of the following are kept constant?

 The individual’s money income,

 The prices of other commodities,

 The price of the commodity under consideration,

 The tastes of the individuals.

2. A fall in the price of a commodity, holding everything else constant, results in and is referred to as:

 an increase in demand,

 a decrease in demand,

 an increase in the quantity demanded,

 a decrease in the quantity demanded.

3. When an individual’s income rises, while everything else remains the same), that person’s demand for a normal good:

 rises,

 falls,

 remains the same,

 any of the above.

4. When an individual’s income falls, while everything else remains the same, that person’s demand for an inferior good:

 increases,

 decreases,

 remains unchanged, or

 we cannot say without additional information.

Answer 1

Ans. True and False:

1. False

A change in the price of a good will cause a movement along the demand curve.

2. False

An increase in income of the consumer will cause a decrease in the demand for inferior goods.

3. True

This is usually the case in perfectly competitive market, if not then they are not able to sell their output.

4. False

An inferior good is a good whose demand decreases when the income of the individual increases.

5. True

Mad cow disease caused an increase in the price of the pork since pork is considered as a substitute good. Since the demand for pork will increase, this will cause the price of pork to increase.

Choose the right answer:

1. The price of the commodity under consideration.

2. An increase in quantity demanded.

3. Rises

4. Increases