1) Ivan’s house rent has been increased by 10 percent. Ivan, therefore, decides
ID: 1218899 • Letter: 1
Question
1) Ivan’s house rent has been increased by 10 percent. Ivan, therefore, decides to shift to another house which is smaller than his current house because he cannot afford the higher rent. The rent of the new house is the same that Ivan used to pay earlier. This is an example of:
diminishing marginal utility.
increasing opportunity cost.
income effect.
substitution effect.
2) Which of the following pairs of products share a complementary relationship?
Tea and coffee
Bread and butter
Petroleum and solar cells
Chicken burgers and chicken wings
3) The price elasticity of demand for a product is high if:
the price of its complements is low.
the proportion of total expenditure spent on it is small.
the good is a necessity.
it has a large number of substitutes.
4) The demand for salt in a particular region can significantly increase if:
the price of sugar increases.
the number of residents increases.
the gross income level of the people living in that region decreases.
the price of the salt increases.
5) Which of the following values of price elasticity of demand represents the demand for a price-elastic good?
0.5
-0.6
-0.9
-1.4
6) The quantity demanded for a commodity rises from 100 units to 120 units when the price declines from $12 to $9. Again when the income rises by 5 percent, the units consumed of the commodity increase from 100 to 110.
What is the income elasticity of demand for the good?
2.0
0.5
1.0
0.1
7) The quantity demanded for a commodity rises from 100 units to 120 units when the price declines from $12 to $9. Again when the income rises by 5 percent, the units consumed of the commodity increase from 100 to 110. Let’s consider that the price of its substitute decreases from $10 to $7, and its quantity demanded also declines from 100 units to 90 units. Then what is its cross-price elasticity?
0.23
0.26
0.33
0.29
8) An auction very closely resembles:
second-degree price discrimination.
price discrimination through early-bird discounts
third-degree price discrimination.
first-degree price discrimination.
Explanation / Answer
1)This is an example of substitution effect
2) bread and butter is complementary goods.
3)the price elasticity of demand is high if there is large no of substitutes.
4) the demand for salt increases in a particular region if number of resident of that region increases.
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