Economics 151 - Microeconomics (topic 3)

The market for a product has an equilibrium price of $250 and an equilibrium quantity traded of 100 units. The demand curve is given by the equation P = 300 - 0.5Q and the supply curve is given by the equation P = 50 + 2Q. If the government places a price ceiling of $200 in the market, what will be the price that prevails in the market?

a)$250

b)$100

c)$300

d)$200

e)$50

d)$200

If the price of one good goes up by 40%, and the quantity demanded of a related good goes down by 10%, then:

a)The own price elasticity of demand is 4 and the two goods are substitutes.

b)The cross price elasticity of demand is -0.25 and the two goods are complements.

c)The own price elasticity of demand is -0.25 and the two goods are complements.

d)The cross price elasticity of demand is 4 and the two goods are substitutes.

e)The cross price elasticity of demand is -4 and the two goods are complements.

b)The cross price elasticity of demand is -0.25 and the two goods are complements.

If the price elasticity of demand for a good is -5, then (c.p.), and we raised the price of the good by 4%, by what percentage would quantity demanded fall (just give the number, not the percentage sign)?

a)5

b)4

c)1

d)10

e)20

e)20

A binding price floor ________ in the market, and a binding price ceiling _______ in the market.

a)Creates a surplus; creates a shortage.

b)Has no effect; creates a shortage.

c)Creates a shortage; has no effect.

d)Creates a shortage; creates a surplus.

e)Creates a surplus; has no effect.

a)Creates a surplus; creates a shortage.

If the supply curve of a product is relatively inelastic and the price of a substitute product rises, equilibrium quantity will _____ and equilibrium price will _____, but equilibrium _____ will change proportionately more.

a)Decrease; increase; price

b)Decrease; increase; quantity

c)Increase; increase; quantity

d)Increase; increase; price

e)Decrease; decrease; quantity

d)Increase; increase; price