Question

21. Which of the following would cause an increase in the demand for good X (an inferior good)?

an increase in the price of good Y which is a complement to good X a decrease in the number of consumers an expectation of a lower price for good X a decrease in income a decrease in the price of good Z which is a substitute for good X

22. In response the Covid-19 pandemic, many people want to purchase hand sanitizer. Simultaneously, firms producing hand sanitizer have found ways to improve productivity.

Based only on this information, which of the following statements is correct?

The selling price of hand sanitizer will decrease.

Less hand sanitizer will be bought/sold.

More hand sanitizer will be bought/sold.

The selling price of hand sanitizer will increase.

23.Which of the following results can be predicted if there is an increase in demand?

The equilibrium price will decrease, and the equilibrium quantity will decrease. The equilibrium price will increase, and the equilibrium quantity will increase.

The equilibrium price will increase, and the equilibrium quantity will decrease. The equilibrium price will decrease, and the equilibrium quantity will increase.

24. Which of the following results can be predicted if there is a decrease in supply?

The equilibrium price will decrease, and the equilibrium quantity will increase.

The equilibrium price will decrease, and the equilibrium quantity will decrease.

The equilibrium price will increase, and the equilibrium quantity will increase.

The equilibrium price will increase, and the equilibrium quantity will decrease.

25. Which of the following provides the best description of total utility?

It is the total amount the consumer actually paid for a good or service that was purchased.

It is the total amount the consumer was willing to pay for the total amount of a good or service that was purchased.

It is the total amount the consumer actually paid for the last unit of a good or service that was purchased.

It is the total amount the consumer was willing to pay for one more unit of a good or service.

Answer 1

​​​​​​In the first question, the correct answer is : a decrease in income because of inverse relationship between income and demand of an inferior good i.e. when the income decreases, the demand for an inferior good increases (in this case, good X) and vice versa .

Other options are not valid since,

In first option, price of good Y (complement to good X) is increasing but it should decrease in order to increase demand for good X because complementary goods are brought together and therefore price of one good has an inverse effect on demand of other good.

In second option, decrease in number of consumers means decrease in demand, so when the demand would decrease, there wouldn't be increase in price.

In third option, if there is expectation of lower price of good X, people wouldn't buy it because it is an inferior good. People will then switch their demand to normal good because with the same price (as it is now) , they would be able to buy the normal good.

In fifth option, price of good Z (substitute of good X ) is decreasing. But to increase the demand for good X , its price (good Z ) should rather increase so that good X becomes cheaper and people can buy it more.

Second question :

Correct answer : more hand sanitizer will be bought /sold because there is demand for it and the producer has found a way to improve its productivity.

Reasons for non validation of other options :

On the first option , the selling price of sanitizer is decreasing but in real , no peoducer would sell a commodity at low price because the main motive of the producer is to earn profit.

In the second option, less hand sanitizer are sold. This wouldn't be true because it is already given in the question that people want to purchase it and that means there is increased demand for it.

In the fourth option , the selling price of hand sanitizer will increase. But in real, this would'nt happen because at high price, people wouldn't buy it and the producer has already found a productive way to produce sanitizer, so he would maintain a reasonable price and earn profits also.

Third question: