S, Number of huias hoopsQ per week Figure G 19. Refer to Figure G. The supply cu

Question

S, Number of huias hoopsQ per week Figure G 19. Refer to Figure G. The supply curve for bula hoops shifts from S1 to So. This could be caused by A) a decrease in the price of hula hoops B) a decrease in the number of firms selling hula hoops C) a decrease in the demand for hula hoops. D) a decrease in the cost of producing hula hoops. Figure H 20. Refer to Figure H. The market for sunglasses is in equilibrium at a price ofand a quantity of sunglasses. A) S30; 300 B) S30; 600 C) $60; 450 D) $90: 300 21. Refer to Figure H. At a price of $30, there is an excess A) demand of 450 sunglasses. B) demand of 750 sunglasses C) demand of 300 sunglasses. D) supply of 300 sunglasses.

Explanation / Answer

Question 19

Supply curve for hula hoops shifts from S1 to S0. This implies that supply curve is shifting downward which indicates the decrease in supply.

Decrease in supply is caused by following factors -

1. Increase in the cost of inputs used in the production of good.

2. Decrease in the cost of other goods.

3. Decrease in the number of firms in the market.

4. Increase in taxes.

5. Degradation of technology used in production.

Thus,

It can be stated that downward shift of supply curve from S1 to S0 could be caused by a decrease in the number of firms selling hula hoops.

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

Question 20

Equilibrium is attained at intersection point of demand and supply curves. Price and quantity corresponding to such intersection point are referred to as equilibrium price and equilibrium quantity respectively.

In Figure H, demand and supply curves are intersecting each other corresponding to the price of $60 per sunglasses and quantity of 450 sunglasses.

Thus,

The market for sunglasses is in equilibrium at a price of $60 and a quantity of 450 sunglasses.

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

Question 21

At price of $30 per sunglass, quantity supplied is 300 sunglasses while the quantity demanded is 750 sunglasses.

Quantity demanded exceeds the quantity supplied.

So,

There is excess demand of (750 - 300) 450 sunglasses.

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

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