Question

There is a positive relationship between two variables if

  

they move in the same direction.

  

they move in opposite directions.

  

neither variable moves.

  

one variable changes and the other does not.

One of the most obvious clues to the relative scarcity of a product is

  

its current market price.

  

the variations in available sizes.

  

the quality of the product.

  

the limited selection of colors.

Recall the Application about the harmattan and how it affects the price of cocoa to answer the following question(s).

According to this Application, the longer than usual harmattan has impacted the supply curve for cocoa pods, shifting the supply curve to the ________ due to a(n) ________ in cocoa yields.

  

left; decrease

  

right; decrease

  

left; increase

  

right; increase

If the number of automobile manufacturers decreases,

  

the supply of automobiles increases.

  

the demand for automobiles decreases.

  

the supply of automobiles decreases.

  

the demand for automobiles increases.

If the price elasticity of demand is 2, this means that a ________ increase in price causes a ________ decrease in quantity demanded.

  

15%; 100%

  

20%; 40%

  

15%; 10%

  

30%; 20%

Claudia spends her income on two goods, DVD rentals and chewing gum. She considers both goods to be normal goods. If Claudia's income increases and the prices of the two goods remain constant, she will:

  

rent fewer DVDs and purchase less chewing gum.

  

rent more DVDs and purchase less chewing gum.

  

rent fewer DVDs and purchase more chewing gum.

  

rent more DVDs and purchase more chewing gum.

Recall the Application about finding estimates of elasticities of demand to answer the following question(s).

According to the Application, the regular price elasticities of demand found at www.ers.usda.gov are reported as

  

positive numbers.

  

negative numbers.

  

dollars per unit of foreign currency.

  

foreign currency units per dollar.

Answer 1

Q1. There is a positive relationship between two variables if

Answer: They move in the same direction.

Reason: The two variables can both move either in the positive direction or the negative direction, but together!

Q2. One of the most obvious clues to the relative scarcity of a product is

Answer: Its current market price.

Reason: Market price is higher if the product is not available in large quantity in the market.

Q3. The longer than usual harmattan has impacted the supply curve for cocoa pods, shifting the supply curve to the ________ due to a(n) ________ in cocoa yields.

Answer: Left; decrease

Reason: Any natural calamity/ poor weather conditions reduces supply, leading to supply curve shifting towards left

Q4. If the number of automobile manufacturers decreases,

Answer: The supply of automobiles decreases.

Reason: Supply of normal goods is directly proportional to number of sellers in the market

Q5. If the price elasticity of demand is 2, this means that a ________ increase in price causes a ________ decrease in quantity demanded.

Answer: 20%; 40%

Reason: Formula: change in quantity/ change in price* P/Q

Q6. Claudia spends her income on two goods, DVD rentals and chewing gum. She considers both goods to be normal goods. If Claudia's income increases and the prices of the two goods remain constant, she will:

Answer: Rent more DVDs and purchase more chewing gum.

Reason: The demand of normal goods increases with increase in income

Q7. The regular price elasticities of demand found at www.ers.usda.gov are reported as

Answer: Foreign currency units per dollar.