Question

27) Suppose we observe a rise in the prics ot sold. Which one of the following is a likely explanation und an ncease n thr qantity of good A bought a 2 A) The demand for A increased. B) The supply of A increased C) The demand for A decreased. D) The supply of A decreased. E) The law of demand is violated. Tp 28) 28) Suppose we observe a fall in the price of gu and sold. Which one of ce of good A and a decrease in the quantity of good A bought exolanation following y explanation? A) The supply of A increased. B) The law of demand is violated. Q) The demand for A increased. D) The supply of A decreased. E) The demand for A decreased. 29) 29) If A is an inferior good and consumer inddt but the equlbium. decrease. quantity B) decreases and the equilibrium price and the equilibrium quanaty C) increases and the D) increases and the equilibrium price and the equilibrium quantity equilibrium price rises but the equilibrium quantity decreases and the equilibrium price rises; as a result, the equilibrium quantity decred 30) 30) If A and B are substitutes and the cost of a factor of production used in the production of A increases, then the price of A) B rises but the price of A falls. B) A and B rise. C) A and B fall. D) B falls but the price of A rises E) A falls, and the price of B will stay unchanged. 31) 31) If demand increases and supply decreases, then the A) effect on both equilibrium price and quantity is unknown. B) equilibrium quantity increases but the effect on the equilibrium price is unknown. C) equilibrium quantity decreases but the effect on the equilibrium price is unknown D) equilibrium price rises but the effect on the equilibrium quantity is unknown. E) equilibrium price falls but the effect on the equilibrium quantity is unknown. 32) If we observe a fall in the equilibrium price of good A, we know that either the demand for A has 32) A) decreased or the supply of A has decreased or both. B) increased or the supply of A has increased or both. C) increased or the supply of A has decreased or both. D) decreased or the supply of A has increased or both. E) none of the above. equilibrium price? 33) 33) Which of the following will definitely result in an increase in the A) a decrease in both demand and supply B) an increase in supply combined with a decrease in demand C) an increase in demand combined with a decrease in supply D) a decrease in demand combined with an increase in supply E) an increase in both demand and supply

Answer 1

27. This situation is possible only when the demand of commodity will increase.

A. The demand for good A increased.

28. This will happen when the demand of good A shifts to its left.

E. The demand of good A decreased.

29. With the increase in income the demand for inferior goods decreases therefore good A's demand will decrease with the increase in income.

Demand for A (inferior) good

B. Decreases, and the equilibrium price and equilibrium quantity decreases.

30. Since both are substitute to each other therefore the same factor of production will be used for both products hence the price of both A and B will increase.

B. A and B rise.

31. D. Equilibrium price rises but the effect on equilibrium quantity is unknown.

32. D. Decreased or supply of A has increased or both.

33. C. An increase in demand combined with a decrease in supply.

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