Question

19. Suppose that the incomes of buyers in a particular market for an inferior good decline. At the same time, there is an increase in input prices. What would we expect to occur in this market?
A. Equilibrium price would decrease, but the impact on the amount sold in the market would be ambiguous.
B. Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.
C. Equilibrium price would increase, but the impact on the amount sold in the market would be ambiguous.
D. Both equilibrium price and equilibrium quantity would increase.
E. Either A or B
20. Equilibrium quantity will unambiguously decrease when
A. demand decreases and supply does not change, when demand does not change and supply decreases, and when demand increases and supply decreases.
B. demand decreases and supply does not change, when demand does not change and supply decreases, and when both demand and supply decrease.
C. demand decreases and supply does not change, when demand does not change and supply increases, and when both demand and supply decrease.
D. demand increases and supply does not change, when demand does not change and supply decreases, and when both demand and supply decrease.
E. demand increases and supply does not change, when demand does not change and supply increases, and when both demand and supply increase

Answer 1

19) option c is correct (Demand for inferior good would increase/shift right as incomes decline , Supply would decrease/shift left as input prices rise) - price would rise but impact on quantity sold would be ambiguous.

20) option b is correct (in each of the scenario , either demand/supply curve or both shift to the left , this decreases equilibrium quantity)