Question

1. What criteria do consumers apply when deciding whether or not to consume

a. The consumer would consume only if the price is lower than his highest willingness to pay

b. The consumer would only consume if his surplus is greater than zero

c. The consumer would only consume if the price is higher than his highest willingness to pay

d. Both A&B

2. A demand curves describes

a. the amount of units a consumer will purchase at a given price

b. the amount of units a producer will sell at a given price

c. both the amount of units that a consumer will buy and a producer will produce at a given price

d. the amount of units supplied given a change in prices

3. The price elasticity of demand tells us about

a. The sensitivity of price to quantity

b. The sensitivity of quantity to price

c. The sensitivity of income to price .

d. The sensitivity of income to quantity

4. If the quantity sold of two-liter Coke bottles increases by 10% when price falls by 2%, what is the total change in revenue?

a. Revenue increases by 12%

b. Revenue increases by 8%

c. Revenue falls by 8%

d. Revenue falls by 12%

5. If cars are normal goods, a fall in income will

a. Increase the demand for cars

b. Decrease the demand for cars

c. Have no effect on the demand for cars

d. None of the above

6. Its lunch time, you are hungry and would like to have some pizza. By the law of diminishing marginal value,

a. you would pay more for your first slice of pizza than your second

b. you would pay more for your second slice of pizza than your first

c. you would pay an equal amount of money for both the slices since they are identical

d. none of the above

Answer 1

1. What criteria do consumers apply when deciding whether or not to consume

Answer – d. Both A&B

a. The consumer would consume only if the price is lower than his highest willingness to pay

The consumer consumes only if the marginal utility is more than the price. In other words the willingness to pay should be more than the price.

b. The consumer would only consume if his surplus is greater than zero

The consumption ends where the marginal utility equals to zero. So there must be positive consumers surplus.

2. A demand curves describes

a. the amount of units a consumer will purchase at a given price

The demand curve establishes the relationship between the price of a commodity and the amount of it that consumers are willing and able to purchase at any given price.

3. The price elasticity of demand tells us about

b. The sensitivity of quantity to price

It measures the degree of sensitivity of quantity demanded to a change in the price.

4. If the quantity sold of two-liter Coke bottles increases by 10% when price falls by 2%, what is the total change in revenue?

b. Revenue increases by 8%

5. If cars are normal goods, a fall in income will

b. Decrease the demand for cars

Income and demand positively related for normal goods.

6. Its lunch time, you are hungry and would like to have some pizza. By the law of diminishing marginal value,

c. you would pay an equal amount of money for both the slices since they are identical

The law of diminishing marginal utility assumes that the price of all the units must be same.