First, Multiple Choices

1. If the demand curve for a product is shifted to left 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 increase the demand for new cars:
a) Lower price of new cars.
b) Lower price of Gasoline.
c) High price of Gasoline.
d) High price of spear parts.
3. At any price above equilibrium price of a product is expected to create:
a) Excess demand
b) Excess supply
c) Shortage
d) None of the above
4. Supply 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. If the government decided to subsidize food for consumers in the market:
a) Government should impose a price ceiling.
b) Government should impose a price floor.
c) Government should make a minimum price for food.
d) All of the above.

Second: If the demand and supply curves are given in the following equations:
Qd = 20 – P, Qs = -2 + 2P

1. Measure equilibrium quantity and equilibrium price (draw your answer)

Answer: 14 units and $6 per unit
2. If the government decided to put a price floor of $4 per unit, measure the effect of
this policy on the market of this product. (Excess demand or excess supply)
Answer: Excess demand of 6 unit (16 – 10)

Third: given the table below

Pric Quantity Quantity
e Demanded Supplied
Per Per Month Per
unit 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
 a) Draw graphically the demand and supply curves for flashlights.
Make certain to label the equilibrium price and equilibrium quantity.
b) What is the equilibrium price and the equilibrium quantity?
Answer: Equilibrium price is $4 and equilibrium quantity is 8,000 units.
c) Measure the change in consumer surplus if the price changed from $4 to $2.
Answer: $20 = $16 + $ 4

Answer (a) draw graphically

P S

$5
$4

$2 D

Q
4 6 8 10 12