First, Multiple Choices

1. If the demand curve for a product is shifted to right as a result of a decrease in income,
then this product is considered as:
a) An inferior good.
b) A normal good.
c) An abnormal good.
d) All of the above.
2. Which of the following could decrease the demand for new cars:
a) Higher price of new cars.
b) Lower price of Gasoline.
c) High price of spear parts.
d) All of the above
3. At any price below equilibrium price of a product is expected to create:
a) Excess demand
b) Excess supply
c) Shortage
d) None of the above
4. Demand curve of T-shirts shows a:
a) Negative relationship between the quantity demanded of T-shirts and its price
b) Positive relationship between the quantity demanded of T-shirts and its price
c) Positive relationship between the quantity supplied of T-shirts and its price
d) Negative relationship between the quantity supplied of T-shirts and its price
5. Which of the following could not decrees the supply of Steel:
a) Lower price of Steel.
b) Higher price of raw material.
c) Higher cost of Electricity.
d) All of the above.

Second: given the table below

Price Quantity Quantity
Per Demanded Supplied
unit Per Month Per
Month
$5 6,000 10,000
$4 8,000 8,000
$3 10,000 6,000
$2 12,000 4,000
$1 14,000 2,000

1
P S

$5
$4

$2
D

Q
4 6 8 10 12

A) Which price would create excess in supply? Measure the excess supply at
that price.
Answer:
The price of $5 and excess supply at $5 is 10 – 6 = 4

B) Measure the change in producer surplus and consumer surplus as the price
increases from $4 to $5.
Answer:
Change in consumer surplus is 6 + 1 = $7
Change in producer surplus is 8 + 1 = $9