Question

1. if consumer income rises for a normal good, demand will: a) decrease b) increase c) stay the same d) shift left then right
2. a fall in input costs will cause the supply curve to: a) shift right b) shift left c) stay the same d) move up along the curve
3. price elasticity of demand measures: a) responsiveness of demand to income changes b) responsiveness of demand to price changes c) responsiveness of supply to technology d) responsiveness of supply to input prices
4. demand is elastic when: a) ed < 1 b) ed = 1 c) ed > 1 d) ed = 0
5. if demand is inelastic, a rise in price will: a) increase total revenue b) decrease total revenue c) keep total revenue unchanged d) eliminate total revenue
6. when demand is perfectly inelastic, the demand curve is: a) horizontal b) vertical c) upward sloping d) downward sloping
7. which of these makes demand more elastic? a) fewer substitutes b) short time horizon c) necessity d) many substitutes
8. which of these makes demand less elastic? a) luxury goods b) short time horizon c) many substitutes d) large share of income
9. if the price of gasoline rises and people reduce driving over time, this shows: a) short - run inelasticity, long - run elasticity b) short - run elasticity, long - run inelasticity c) perfect elasticity d) perfect inelasticity
10. cross - price elasticity between substitutes is usually: a) negative b) positive c) zero d) undefined
11. cross - price elasticity between complements is usually: a) negative b) positive c) zero d) undefined
12. income elasticity of demand for an inferior good is: a) positive b) negative c) zero d) infinite
13. a shift of demand can result from: a) change in consumer tastes b) change in input prices c) change in technology d) change in producer number
14. a shift of supply can result from: a) change in consumer income b) change in tastes c) change in technology d) change in substitutes
15. which of these events increases both equilibrium price and quantity? a) demand rises, supply falls b) demand rises, supply rises c) demand falls, supply falls d) demand falls, supply rises
16. which of these events decreases equilibrium price but increases equilibrium quantity? a) supply increases b) supply decreases c) demand increases d) demand decreases
17. which type of good sees demand fall when income rises? a) normal good b) luxury good c) inferior good d) complementary good
18. which of these could cause a leftward shift of the supply curve for wheat? a) technological improvement b) higher fertilizer prices c) better weather d) government subsidies
19. which of these could cause a rightward shift of the demand curve for smartphones? a) falling consumer incomes b) rising prices of substitutes c) increase in input costs d) new regulations limiting sales
20. which of these is an example of a shortage? a) stores quickly sell out of new sneakers at current price b) shelves stay full of unsold goods c) producers cut back on output d) government sets a price

Explanation:

1. For a normal good, an increase in consumer income leads to an increase in demand.
2. A fall in input costs reduces production costs, allowing producers to supply more at each price - shifting the supply curve right.
3. Price elasticity of demand measures the responsiveness of demand to price changes.
4. Demand is elastic when the price - elasticity of demand (Ed) is greater than 1.
5. When demand is inelastic, a rise in price increases total revenue as the percentage change in quantity demanded is less than the percentage change in price.
6. A perfectly inelastic demand curve is vertical as quantity demanded does not change with price.
7. Many substitutes make demand more elastic as consumers can easily switch to other goods.
8. Luxury goods have more elastic demand, while short - time horizon makes demand less elastic as consumers have less time to adjust.
9. In the short - run, the demand for gasoline is inelastic, but in the long - run, consumers can adjust their behavior (e.g., buy more fuel - efficient cars), making it elastic.
10. Cross - price elasticity between substitutes is positive as an increase in the price of one good leads to an increase in the demand for the substitute.
11. Cross - price elasticity between complements is negative as an increase in the price of one good leads to a decrease in the demand for the complement.
12. Income elasticity of demand for an inferior good is negative as demand falls when income rises.
13. A change in consumer tastes can shift the demand curve.
14. A change in technology can shift the supply curve as it affects production costs and efficiency.
15. When demand rises and supply rises, both equilibrium price and quantity can increase depending on the magnitudes of the shifts.
16. An increase in supply decreases equilibrium price and increases equilibrium quantity.
17. For an inferior good, demand falls when income rises.
18. Higher fertilizer prices increase production costs for wheat, shifting the supply curve leftward.
19. Rising prices of substitutes increase the demand for smartphones, shifting the demand curve rightward.
20. A shortage occurs when quantity demanded exceeds quantity supplied, such as stores quickly selling out of new sneakers at the current price.

Answer:

1. B. Increase
2. A. Shift right
3. B. Responsiveness of demand to price changes
4. C. Ed > 1
5. A. Increase total revenue
6. B. Vertical
7. D. Many substitutes
8. B. Short time horizon
9. A. Short - run inelasticity, long - run elasticity
10. B. Positive
11. A. Negative
12. B. Negative
13. A. Change in consumer tastes
14. C. Change in technology
15. B. Demand rises, supply rises
16. A. Supply increases
17. C. Inferior good
18. B. Higher fertilizer prices
19. B. Rising prices of substitutes
20. A. Stores quickly sell out of new sneakers at current price