Question

Q.1 Mark “T” for true and “F” for false.

1. Lower gasoline prices raise the demand for cars (ceteris paribus). (    )
2. Movement along the demand curve is also called change in demand. (    )
3. A reduction in the wage paid to autoworkers lowers production costs and increases
    supply.(   )
4. A movement along a given supply curve for a commodity is a result of a change in its
    price (    ).
5. If demand increases substantially and supply falls just a little, the equilibrium
    quantity also rises (   ).


Q.2 Do the following multiple choice questions.

1. When the price of substitute of commodity X falls, the demand for X
(a) falls    (b) rises   (c) remains unchanged

2. When an individual’s income falls (ceteris paribus), that person’s demand for an
     inferior good
      (a) increases    (b) decreases   (c) remains unchanged

3. A regulation making it illegal to charge a price ________ than a specified level is
    called price ceiling.
     (a) higher    (b) less   (c) neither higher nor less

4. A graph that plots the value of one economic variable against the value of another is
    called
     (a) scatter diagram       (b) time-series graph    (c) cross-section graph  

5. When both the price of substitute and price of complement of commodity X rise, the
    demand for X
     (a) rises or falls   (b) remains unchanged   (c) all options are possible  

Answer 1

sol:

1.1: Gasoline are complementary goods and they are jointly demanded. Complementary goods have inverse relatiomship between each other in terms of price and quantity demanded.

Fall in the price of one good will lead to rise in the demand of other good and vice versa.

That's why fall in the price of gasoline will lead to rise in demand of Car. (true)

1.2 when there is a change in qunatity demanded due to change in own price it will lead to movement along the demand curve. But change in demand will lead to change in whole demand curve that can be shown on dmenad curve.

1.3: Wgae paid to the labor act as an input cost of production and there is inverse relation between input cost and quantity supplied.

less wages paid to the labor will lead to increase the profit of producer so will lead to rise in quantity supplied.(true)

1.4: there is a difference between movement along the supply curve and shift in supply curve.

change in own price of the product lead to movement along the supply curve, keeping other factor constant.

(true).

2.1 Substitute goods are those goods that can be used in place of each other. for ex: Tea and Coffee.

These goods have direct relationship between change in price and change in quantity demanded. so, of the price of One good falls then the quantity demanded of other good will also get 'fall'.

As the good whose price fall will become less expansive and its demand will get increase, it will lead to swotch the consumer of substitute good to the good whose price decreased.

so when the price of substitute goodX fall, then the demand for goodX will also get fall. As GoodX will become expansive at that point

amswer is (a)

2.2: Inferior goods are those goods which are demanded because of low price. So high income consumer demand less such goods.

Demand of such goods shows negative relation with income of the consumer.

So, if the income of the consumer fall, than consumer increases the demand of such goods.

2.3: Price ceiling is a concept of setting up maximum prices. So that producer cannot charge more than that price. this regulation make it illegal to charge prices higher than specified prices.

so the answer is (a)

2.4: Showing the relation of One variable with other variable is done through Scatter diagram.

Scatter diagram is used to show the corelation between change in one variable with respect to change in other variable.

so the answer is Scatter diagram..