TUTORIAL 2 ECO 162

CHAPTER 2

1. The demand curve for good H is downward sloping, so an increase in its price will cause
A. an upward movement along the demand curve.
B. a downward movement along the demand curve.
C. a rightward shift of the demand curve.
D. the demand curve to remain unchanged.

2. A point on the demand curve indicates

A. the ratio of the selling price to the buying price.
B. a particular price and the corresponding quantity demanded by consumers.
C. a combination of two commodities which buyers will choose at given prices.
D. a situation where the buying and selling decisions of consumers and producers are consistent.

3. If service stations raise the price of petrol and experience a decrease in demand for automobile
tyres, then petrol and tyres are
A. substitutes
B. unrelated goods.
C. inferior goods.
D. complements.

4. If the price of a good decreases, we would expect

A. quantity demanded to increase.
B. quantity supplied to increase.
C. supply to increase.
D. demand to increase.

5. If the price of good A decreases, the demand curve for its close substitutes will
A. shift to the left.
B. shift to the right.
C. remain unchanged.
D. cannot be determined.

6. A rightward shift of the supply curve could be caused by

A. a fall in the price of the good.
B. an increase in the number of suppliers of the good.
C. an increase in the cost of production of the good.
D. an increase in the price of the good.

7. Which of the following factors cause the supply for mangosteen to shift to the right?
I. Introduction of a new type of mangosteen will increase the yield per plant by 25%.
II. An increase in the total population consuming mangosteen.
III. Medical research found that eating mangosteen will reduce the symptom of migraine.

A. I,II and III correct.

B. I and II only correct.
C. I only correct.
D. III only correct.

8. The following factors can decrease the supply of palm oil except
A. government reduces tax on inputs in palm oil industry.
B. government decides to send back foreign workers in the agriculture sector.
C. more oil palm estates have been converted to other estates.
D. harvesting of oil palm during monsoon season.

9. Below are some of the factors that can reduce the supply of palm oil except
A. harvesting palm oil during monsoon season
B. government reduces tax on inputs in palm oil industry
C. government decides to send back foreign workers in the agricultural sector
D. more palm oil estates have been converted to other estates

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TUTORIAL 2 ECO 162

10. Which of the followings is NOT a general determinant of supply for most products?
A. Income
B. Taxes
C. Technology
D. Level of input prices

CHAPTER 3

11. The larger the proportion of income spent on a good

A. the less elastic is the good’s demand curve.
B. the more elastic is the good’s demand curve.
C. the more inelastic is the good’s demand curve.
D. no effect on the good’s demand curve

12. A family with an income of RM20,000 per annum purchases 100 units of a good per month. The
family’s income rises to RM 25,000 per annum and income elasticity of demand is -2 for this good. What
is the new quantity purchasing each month?
A. 50.
B. 75.
C. 125.
D. 200.

13. Estimates of income elasticity of demand of health care indicates that it is 1. These estimates
suggest that spending on health care should
A. increase proportionately with income.
B. increase faster than income.
C. increase less than income.
D. remain unchanged.

14. A state government wants to increase tax on cigarettes to increase revenue. This tax would only be
effective in raising new tax revenues if the price elasticity of demand is
A. unity.
B. elastic.
C. inelastic.
D. perfectly elastic.

15. If the cross-price elasticity of demand between fish and chicken is 2, then a 2 % increase in the
price of wish will result in
A. a 1% increase in quantity of chicken demanded.
B. a 20% increase in quantity of chicken demanded.
C. a 10% increase in quantity of chicken demanded.
D. a 4% increase in quantity of chicken demanded.

16. If the price elasticity of demand is perfectly elastic, any increase in the price of a good may causes
the quantity demanded to be
A. negative.
B. increase.
C. zero.
D. infinite.

17. A steel mill raises the price of steel by 5 percent, which results in a 4 percent reduction in the quantity
of steel demanded. The demand curve facing this firm is
A. elastic.
B. inelastic.
C. equal to one.
D. perfectly elastic.

18.The value of elasticity of demand for a good will __________________ as the availability of
substitutes ___________________.

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TUTORIAL 2 ECO 162

A. increase; decrease.
B. increase; increases.
C. remain positive; decreases.
D. decrease; increases.

19. When income changes, the quantity demanded for a commodity remains the same. Therefore the
income elasticity of demand for the good is
A. infinity.
B. zero.
C. one.
D. negative one.

20. The demand curve for good M is unitary elastic. At price of RM6, quantity demanded is 2,000 units.
At what price will the quantity demanded increase to 10,000 units?
A. RM30.00
B. RM10.00
C. RM1.00
D. RM1.20

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