Question

28. If as the price of stesk increases, the demand for eggplant increases then steak and eggplant are

a. Complements

b. Substitute

c. inferior goods

d. Normal goods

29. A quota is

a. a tax on imports

b. a tax on exports

c. a prohibition on International trade

d. a limit on the amount of imports

30. the price of cotton had increased. which of the following will occur in the market for cotton shirts?

a.the demand will decrease

b.the price of cotton shirts will increase

c. the quantity supplied will increase

d. the supply will decrease

31. A recent study found that coffee has health benefits. which of the following is most likely to occur?

a. the supply of coffee will increase

b. the demand for coffee will increase

c. the supply of coffee will decrease

d. the price of coffee will decrease

32. Which of the following would have the most inelastic demand?

a. airline tickets

b. chicken thighs

c. table salt

d. dr. pepper

Answer 1

QUESTION 28 :

​​​Demand for a commodity refers to the quantities of a commodity which consumers are willing and able to purchase at various possible prices during a particular period of time.​​Substitute goods are those goods which satisfy the same type of need and hence can be used in place of one another to satisfy a given want. There is a direct relationship between the demand for a product and the price of it's Substitute. When the price of steak increases , the price of eggplant remaining the same , many consumers will shift from the consumption of steak to consumption of eggplant because eggplant is now relatively cheaper. Thus the demand for eggplant increases. Thus Steak and Eggplants are SUBSTITUTES.

Thus , the Correct answer is

OPTION B) SUBSTITUTE

QUESTION 29:

Quota can be defined as an upper limit fixed or restriction for monetary value or number (volume) of goods that a country can import (or export) during a particular period.

It is not a prohibition or tax , but simply a limit on the volume of goods that can be imported (or exported) Thus option a, b, c are incorrect , and the correct option is

OPTION D) A LIMIT ON THE AMOUNT OF IMPORTS.

QUESTION 30:

If the price of cotton increases , the producers of cotton shirts have to pay higher prices to secure the factors of production needed for producing the commodity , it's cost of production will be higher. Given the price of cotton shirts , a higher cost of production reduces the profit margin .  This will lead to a lower amount of output that firms will produce and offer for sale at a given level of output. In other words , the supply of cotton shirts decreases. And this will eventually increase the prices .

Thus the correct option is

OPTION D) THE SUPPLY WILL DECREASE.

QUESTION 31:

The level demand for a commodity is influenced by the taste and preferences of consumers . Even Demonstration effect plays an important role in affecting the demand for a commodity. Demonstration effect refers to the tendency of a person to emulate the consumption style of other persons such as his friends , neighbours ,etc. When people will come to know about the recent study that coffee has health benefits , they will want to consume coffee , even the ones who didn't consume coffee before . In other words the demand for coffee will increase due to change in taste and preferences of people in favour of coffee.

Thus the correct answer is

OPTION B) THE DEMAND FOR COFFEE WILL INCREASE.

QUESTION 32 :

Demand is INELASTIC when the percentage change in quantity demanded of a commodity is less than the percentage change in it's price. Generally the demand for necessities is relatively INELASTIC.

In the given options in this question , table salt is necessity good , so it's demand is relatively inelastic.

Thus the other options are incorrect and the correct answer is

OPTION C) TABLE SALT.