Question

For questions (1) through (5) write the number of each question and TRUE (if the statement is true) or FALSE (if the statement is false) by each number.

                    

(1) If there is excess DEMAND, the price will rise in a free market.

(2) A change in INCOME will SHIFT the consumer's demand curve.

(3) If price is BELOW the equilibrium price there will be excess SUPPLY.

(4) The SUBSTITUTION effect is caused by a change in price.

(5) If there are NOT many substitutes demand will be inelastic.

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Write the number of each question (6)-(8) and RAINY or SUNNY after each;

(6) In which weather is the demand for taxi cabs likely to be LARGER?

    

(7)In which weather is the demand for taxi cabs likely to be MORE ELASTIC?

(8) In which type of weather would the taxi driver like to charge a HIGHER

    PRICE ?

Answer 1

Ans) 1) True. More demand means that the demand curve will shift to the right. And both price and quantity will increase.

atao Qe Q

2) True. Change in income, change in price of related goods, change in taste and preference of consumer, change in number of buyers etc change the demand of the product.

3) False. At a price below equilibrium price, there will be shortage i.e quantity demanded will exceed quantity supplied.

* Eam shortage

4) True. Substitution effect is triggered by change in price given that the price of substitute does not change.

5) True. When less or no substitutes are available then the demand for the good is inelastic because no matter what the price is, people will buy that product.

6) Demand for taxi will be more in rainy day because people can take a short walk on sunny day but not on rainy day.

7) Sunny. As people may take walk.

8) Rainy day. It is because demand will be higher at that time. (That's why you see peak in uber prices on rush hours)