BEEB1013 Group:

EXERCISE 3: Demand, Supply and Market Equilibrium

Instruction: Please CIRCLE (O) your answer and give brief

explanation on the empty space surrounding the question how you get
the answer. (SUBMIT ON THE 9 October 2019)
1. The law of demand states that the quantity demanded of a good is inversely related to the price
of that good. Therefore, as the price of a good goes: 

A. up, the quantity demanded also goes up.

B. up, the quantity demanded goes down.
C. down, the quantity demanded goes down.
D. down, the quantity demanded stays the same.

2. The law of demand states that consumers buy more of a good when its price declines: 

A. because their income increases at the same time.

B. only if their income increases at the same time.
C. even if other demand determinants change at the same time.
D. provided all else remains constant.

3. Suppose that college tuition is higher this year than last year and that more students are
enrolled in college this year than last year. Based on this information, we can best conclude
that: 

A. the law of demand is invalid.

B. despite the increase in price, quantity demanded rose due to some other factor changing.
C. this situation has nothing to do with the law of demand.
D. the demand for a college education is positively sloped.

4. In 2004, BusinessWeek Online reported that car sales in China had slowed and some car prices
had dropped. The price cuts had had the unintended result of consumers waiting for deeper
discounts. What does this waiting suggest about supply and demand? 

A. The demand curve slopes the wrong way because price cuts have lead to smaller sales.
B. If buyers are buying less when price falls, the supply curve must have moved left.
C. If buyers are buying less when price falls, the supply curve must have moved right.
D. Price cuts have changed buyers' expectations, and the change in expectations has moved the
demand curve left.

5. If the price of steel rises, the law of supply predicts that, other things constant, the: 

A. supply of steel will increase.

B. supply of steel will decrease.
C. quantity supplied of steel will increase.
D. quantity supplied of steel will decrease.

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6. In June 2004, OPEC announced that it would increase production by 11 percent to 26 million
barrels per day. Using supply and demand analysis to predict the effect of increased production
on equilibrium price and quantity, the first step is to show the: 

A. demand curve shifting to the right.

B. demand curve shifting to the left.
C. supply curve shifting to the right.
D. supply curve shifting to the left.

7. Which of the following would be expected to cause the quantity of wool supplied to decrease? 

A. a decrease in the price of wool.

B. a decrease in the number of wool producers.
C. an increase in the cost of raising sheep.
D. an increase in wages paid to workers in the wool industry.

    
 8. Suppose that the table above shows the demand and supply schedules for tomato. There is
a shortage of 15,000 pounds at a price of: 

A. $0.25.
B. $0.50.
C. $0.75.
D. $0.95.

9. Since 2004 an approximate 600,000 Eastern European immigrants have moved to England to
join. This has led to fears by British citizens that Eastern Europeans will steal jobs from
Western Europeans. What best describes their fear? 

A. Wages in Britain will fall as the demand for immigrants increases.

B. Cost of living in Britain will increase as the demand for goods increases.
C. Wages in Britain will fall since the quantity of labor supplied is increasing.
D. Wages in Britain will fall since the supply of labor is increasing.

10. The demand for housing increased substantially between 1999 and 2004 because low interest
rates increased the number of people who could afford homes. The model of supply and
demand leads to the prediction that low interest rates cause: 

A. an increase in housing prices, especially in cities with plenty of room for expansion.
B. an increase in housing prices, especially in cities with limited land.
C. a decrease in housing prices, especially in cities with plenty of room for expansion.
D. a decrease in housing prices, especially in cities with limited land.