Quiz 1

BBA/BSC-I
Intro to Micro Economics
15 January, 2016
Q 1 Price, income, cross elasticity of demand What each means, how they
are calculated, what factors affect them. Assume that there are two
unrelated products, Product A and Product B are currently prised at $100 and
demand for them is 1000 units per month. Consider what might happen to
the demand for A and B if the price rises to $105. The quantity demanded of
Product A only falls from 1000 to 990, whereas the quantity demanded of
product B falls from 1000 to 900. Calculate the price elasticity of demand?
Q 2 a) Differentiate between movements along and shifts of demand and
supply curves.
b) What is meant by price mechanism and how it works?
c) What are the factors that influence supply in a market?

Instructor: Yousaf Dar (0321-4193887)

True or False: Circle the correct one.

1. The core of any market is trade. True/ False
2. Equilibrium in a market depends upon both demand and supply
influences, both of which can change over time. True/ False
3. Demand refers to the quantity of a product that purchasers are willing
and able to buy at various prices per period of time, all other things
being equal. True/ False
4. Demand that is supported by the ability to pay is known as effective
demand. True/ False
5. A market should have a physical presence as a typical town or street
market. True/ False
6. Substitutes are alternative goods and can satisfy the same want or
need. True/ False
7. Goods and services that are characterised by relationship that if ability
to pay falls then less is demanded are called normal goods. True/ False
8. Complement goods have a joint demand. True/ False
9. A good for someone on a high income can be an inferior good whilst for
someone on a low income; it can be a normal good. True/ False
10.Demand for any product said to have perfectly elastic if a change in
price has no effect on the quantity demanded. True/ False
11.Supply refers to the quantity of a product that producers are willing
and able to sell at different prices. True/ False
12.A change in the price of a product is shown by the movement along the
supply curve. True/ False
13.Elasticity can be defined as a numerical measure of responsiveness of
one variable following a change in another variable, ceteris paribus.
True/ False
14.A situation known as disequilibrium where supply and demand are not
equal. True/False
15.PED and the slope of a demand curve may appear to be the same.
True/ False

Instructor: Yousaf Dar (0321-4193887)

Instructor: Yousaf Dar (0321-4193887)