Question 1

Which of the following might shift the demand curve for butter to the right?

Accepted Answer

A)  A decrease in the price of butter 
B)  An increase in the price of bread (a complement) 
C)  An increase in income 
D)  A decrease in the price of margarine (a substitute) 
E)  A fall in the population 
A)  A decrease in the price of butter 
B)  An increase in the price of bread (a complement) 
C)  An increase in income 
D)  A decrease in the price of margarine (a substitute) 
E)  A fall in the population

Question 2

Which one of the following would shift the demand curve for a commodity to the right?

Accepted Answer

A)  The costs of production rise. 
B)  Consumer incomes fall. 
C)  The availability of complementary goods falls. 
D)  The price of a substitute good rises. 
E)  The price of the good falls. 
A)  The costs of production rise. 
B)  Consumer incomes fall. 
C)  The availability of complementary goods falls. 
D)  The price of a substitute good rises. 
E)  The price of the good falls.

Question 3

Consider the market for new flats. What will be effect on demand and supply if flat living becomes more fashionable?

Accepted Answer

A)  No shift in demand 
B)  A rightward shift in demand and a leftward shift in supply 
C)  A rightward shift in demand and no shift in supply 
D)  A rightward shift in demand and a rightward shift in supply 
A)  No shift in demand 
B)  A rightward shift in demand and a leftward shift in supply 
C)  A rightward shift in demand and no shift in supply 
D)  A rightward shift in demand and a rightward shift in supply

Question 4

A surplus in a market will normally cause price to rise.

Accepted Answer

A) True 
 B)False

Question 5

House prices have increased more quickly than consumer prices. This means that

Accepted Answer

A)  prices of other goods have fallen. 
B)  there has been an increase in the real price of housing. 
C)  there has been a decrease in the real price of housing. 
D)  the price of housing has decreased relative to the average price of a basket of consumer goods. 
A)  prices of other goods have fallen. 
B)  there has been an increase in the real price of housing. 
C)  there has been a decrease in the real price of housing. 
D)  the price of housing has decreased relative to the average price of a basket of consumer goods.

Question 6

Draw a demand and supply curve for a good of your choosing. Explain how a increase in household income would affect the equilibrium price and quantity.

Accepted Answer

If the good chosen is a normal good, the

Question 7

What are normal and inferior goods?

Accepted Answer

Normal goods are products whose demand c

Question 8

Expectations about price changes will affect

Accepted Answer

A)  the supply curve only. 
B)  both the demand and supply curves. 
C)  the demand curve only. 
D)  neither curve. 
A)  the supply curve only. 
B)  both the demand and supply curves. 
C)  the demand curve only. 
D)  neither curve.

Question 9

A change in the distribution of income will cause the demand curve to shift.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following might shift the demand curve for cinema tickets to the right?

Accepted Answer

A)  An increase in income 
B)  A fall in the population 
C)  A decrease in the price of DVDs (a substitute) 
D)  An increase in the cost of the cinema car park (a complement) 
A)  An increase in income 
B)  A fall in the population 
C)  A decrease in the price of DVDs (a substitute) 
D)  An increase in the cost of the cinema car park (a complement)

Question 11

How and why are shortages and surpluses eliminated and equilibrium restored in a market? Use an example to explain how the goods and factor markets are interdependent?

Accepted Answer

If the price is above the equilibrium pr

Question 12

What is meant by the income and substitution effects of a price change?

Accepted Answer

When the price of a good that customers

Question 13

The cost of pressing DVDs has fallen. This will cause

Accepted Answer

A)  an increase in market price. 
B)  a shift in the demand for DVDs. 
C)  a shift in the supply of DVDs. 
D)  none of the above 
A)  an increase in market price. 
B)  a shift in the demand for DVDs. 
C)  a shift in the supply of DVDs. 
D)  none of the above

Question 14

In a free market, if there is an increase in demand which cannot be met immediately, prices tend to rise. This allocates the goods to those who are willing and able to pay the most. Economists call this

Accepted Answer

A)  quantity allocation. 
B)  price rationing. 
C)  equity. 
D)  a black market. 
A)  quantity allocation. 
B)  price rationing. 
C)  equity. 
D)  a black market.

Question 15

House prices, like all prices, are determined by demand and supply. Discuss what specific determinants caused house prices to rise rapidly in the 1980s, fall in the 1990s, rise rapidly again through to 2007 and then start falling again.

Accepted Answer

• Income: The second half of the 1980s a

Question 16

The price of blue staplers rises and yet it is observed that the sales of red staplers increase. Does this mean that the demand curve for red staplers is upward- sloping?

Accepted Answer

No, it does not mean that the demand cur

Question 17

A good harvest will cause

Accepted Answer

A)  a rightward shift in the supply curve of wheat. 
B)  a movement down along the supply curve of wheat. 
C)  a movement up along the supply curve of wheat. 
D)  a leftward shift in the supply curve of wheat. 
A)  a rightward shift in the supply curve of wheat. 
B)  a movement down along the supply curve of wheat. 
C)  a movement up along the supply curve of wheat. 
D)  a leftward shift in the supply curve of wheat.

Question 18

The following diagram shows the demand for and supply of apples. The supply and demand curves are initially given by S0 and D0. The market is in equilibrium at point x. There is then a rise in the price of pears and oranges and an increase in the costs of transporting fresh fruit. As a result either or both the demand and supply curves shift to one of the new positions shown in the diagram. What will be the equilibrium position on the diagram?

Accepted Answer

A)  Point l 
B)  Point r 
C)  Point j 
D)  Point n 
A)  Point l 
B)  Point r 
C)  Point j 
D)  Point n

Question 19

If a determinant of supply changes, other than price, then the supply curve will shift.

Accepted Answer

A) True 
 B)False

Question 20

If there is a shortage in a market, this will usually cause both demand and supply curves to shift upwards.

Accepted Answer

A) True 
 B)False

Exam 4: The Working of Competitive Markets

Which of the following might shift the demand curve for butter to the right?

Which one of the following would shift the demand curve for a commodity to the right?

Consider the market for new flats. What will be effect on demand and supply if flat living becomes more fashionable?

A surplus in a market will normally cause price to rise.

House prices have increased more quickly than consumer prices. This means that

Draw a demand and supply curve for a good of your choosing. Explain how a increase in household income would affect the equilibrium price and quantity.

What are normal and inferior goods?

Expectations about price changes will affect

A change in the distribution of income will cause the demand curve to shift.

Which of the following might shift the demand curve for cinema tickets to the right?

How and why are shortages and surpluses eliminated and equilibrium restored in a market? Use an example to explain how the goods and factor markets are interdependent?

What is meant by the income and substitution effects of a price change?

The cost of pressing DVDs has fallen. This will cause

In a free market, if there is an increase in demand which cannot be met immediately, prices tend to rise. This allocates the goods to those who are willing and able to pay the most. Economists call this

House prices, like all prices, are determined by demand and supply. Discuss what specific determinants caused house prices to rise rapidly in the 1980s, fall in the 1990s, rise rapidly again through to 2007 and then start falling again.

The price of blue staplers rises and yet it is observed that the sales of red staplers increase. Does this mean that the demand curve for red staplers is upward- sloping?

A good harvest will cause

If a determinant of supply changes, other than price, then the supply curve will shift.

If there is a shortage in a market, this will usually cause both demand and supply curves to shift upwards.

The Business Environment and Business Economics

Economics and the World of Business

Business Organisations

Business in a Market Environment

Demand and the Consumer

Demand and the Firm

Products, Marketing and Advertising

Costs of Production

Revenue and Profit

Profit Maximisation Under Perfect Competition and Monopoly

Profit Maximisation Under Imperfect Competition

An Introduction to Business Strategy

Alternative Theories of the Firm

Growth Strategy

The Small-Firm Sector

Pricing Strategy

Labour Markets, Wages and Industrial Relations

Investment and the Employment of Capital

Reasons for Government Intervention in the Market

Government and the Firm

Government and the Market

Globalisation and Multinational Business

International Trade

Trading Blocs

The Macroeconomic Environment of Business

The Balance of Payments and Exchange Rates

Banking, Money and Interest Rates

Business Activity, Employment and Inflation

Demand-Side Policy

Supply-Side Policy

International Economic Policy

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