Question

1.Potatoes are available in the United States and in Mexico. Income has risen by 10 percent in each country. The demand for potatoes has increased by 2 percent in the United States and by 17 percent in Mexico. What can be concluded?

A. Potatoes are normal goods in both countrie

B. Potatoes are normal goods in the United States but inferior goods in Mexico.

C. Potatoes are inferior goods in the United States but normal goods in Mexico.

D. Potatoes are inferior goods in both countries.

2.Beer and pretzels are complements. There is a decrease in the supply of beer. What would we expect to see?

A. An increase in the price of beer and an increase in the demand for pretzels

B. An increase in the price of beer and a decrease in the demand for pretzels

C. A decrease in the price of beer and an increase in the demand for pretzels

D. A decrease in the price of beer and a decrease in the demand for pretzels

3.Which of the following is true of the movement along a demand curve?

A. Changes in price on quantity demanded do not take the form of a movement along the demand curve

B. The effect of a change in price on quantity demanded takes the form of a movement along the demand curve.

C. The shift of any “other” variables does not constitute movement along a demand curve.

D. Changes in income do not take the form of a movement along the demand curve

Answer 1

Question 1

A good is a normal good if demand for it increases as the income increases and vice versa.

A good is an inferior good if demand for it decreases as the income increases and vice-versa.

As income is increasing in the both United States and Mexico, demand for potatoes has also increased in the both countries.

So,

Potatoes are normal good in both countries.

Hence, the correct answer is the option (A).

Question 2

Given the demand for beer, a decrease in the supply of beer would lead to rise in price of beer.

Beer and pretzels are complements. So, rise in price of beer will lead to decrease in demand for pretzels.

Thus,

There will be an increase in the price of beer and a decrease in demand for pretzels.

Hence, the correct answer is the option (B).

Question 3

Movement along the demand curve happens when there is change in price.

So,

It can be stated that the effect of a change in price on quantity demanded takes the form of a movement along the demand curve.

Hence, the correct answer is the option (B).