Economics 5 MCQ C6 - Preparation for examination Economics 1 (University of Fort Hare)

Multiple Choice Questions - Testbank - Chapter 6

Examination Preparation Notes

This guide is structured to assist students preparing for the Economics 1 examination using the multiple-choice questions from Chapter 6. The focus is on elasticities of demand and supply, definitions of economic terms, and their practical implications.

Question 1

• Scenario: 10,000 tickets at Centre Court for Wimbledon Tennis Championships.
• Fixed Price: Organizers fix the ticket price.
• Supply of Seats:
    - Options:
      - A. Completely elastic
      - B. Elastic
      - C. Unitarily elastic
      - D. Inelastic
      - E. Completely inelastic

Question 2

• Situation: Price of tickets is fixed below equilibrium price.
• Outcome:
    - A. Excess demand for seats.
    - B. Excess supply of seats.
    - C. No black market development.
    - D. No need to ration tickets.
    - E. A lot of empty seats.

Question 3

• Situation: Price of tickets is fixed above equilibrium price.
• Outcome:
    - A. Excess demand for seats.
    - B. Excess supply of seats.
    - C. Black market development.
    - D. Need to ration tickets.
    - E. No empty seats.

Question 4

• Commodities: Price elasticity of demand comparison.
• Lowest Elasticity:
    - A. Castle Lite beer
    - B. Light beer
    - C. Beer
    - D. Alcoholic drink including beer

Question 5

• Scenario: Price of commodity A cut by 10%. Spending falls by 10%.
• Elasticity:
    - A. Perfectly elastic demand.
    - B. Elastic demand.
    - C. Unitary elasticity of demand.
    - D. Inelastic demand.
    - E. Perfectly inelastic demand.

Question 6

• Scenario: Price of commodity B rises by 10%. Revenue rises by 5%.
• Elasticity:
    - A. Perfectly elastic demand.
    - B. Elastic demand.
    - C. Unitary elasticity of demand.
    - D. Inelastic demand.
    - E. Perfectly inelastic demand.

Question 7

• Scenario: Price of commodity C rises by 10%. Quantity demanded falls by 18%.
• Elasticity:
    - A. Perfectly elastic demand.
    - B. Elastic demand.
    - C. Unitary elasticity of demand.
    - D. Inelastic demand.
    - E. Perfectly inelastic demand.

Question 8

• Situation: Overproduction of maize. Farmers' incomes fall.
• Elasticity:
    - A. Perfectly elastic demand.
    - B. Elastic demand.
    - C. Unitary elasticity of demand.
    - D. Inelastic demand.
    - E. Perfectly inelastic demand.

Question 9

• Scenario: Cut in train fares equals unchanged total revenue.
• Elasticity:
    - A. Perfectly elastic demand.
    - B. Elastic demand.
    - C. Unitary elasticity of demand.
    - D. Inelastic demand.
    - E. Perfectly inelastic demand.

Question 10

• Situation: University fee increase does not affect enrolment.
• Elasticity:
    - A. Perfectly elastic demand.
    - B. Elastic demand.
    - C. Unitary elasticity of demand.
    - D. Inelastic demand.
    - E. Perfectly inelastic demand.

Question 11

• Data: Price of café lattes rises from R15 to R20. Quantity demanded decreases from 2000 to 1200.
• Elasticity Calculation (Arc Formula):
    - A. (+) 1
    - B. (–) 1.75
    - C. (–) 0.5
    - D. (+) 0.29
    - E. (–) 1.25

Question 12

• Classify demand for café lattes using above calculation:
    - A. Price inelastic
    - B. Unitarily price elastic
    - C. Price elastic
    - D. Perfectly price elastic
    - E. Perfectly price inelastic

Question 13

• Data: Price of chicken falls by 50%, quantity demanded rises by 100%.
• Demand for chicken:
    - A. Price elastic.
    - B. Unitarily price elastic.
    - C. Price inelastic.
    - D. Income elastic.
    - E. Income inelastic.

Question 14

• Situation: Total revenue from biltong increases:**
    - A. Income decreases, biltong normal good.
    - B. Price rises, demand unitary price elastic.
    - C. Income increases, biltong inferior good.
    - D. Price falls, demand price elastic.
    - E. Price rises, demand price elastic.

Question 15

• Cross elasticity of demand between tablets and smartphones is 3.0. Classification of goods:
    - A. Luxuries.
    - B. Complements.
    - C. Necessities.
    - D. Substitutes.
    - E. Inferior goods.

Question 16

• Income elasticity of demand for brown bread is +0.5. Classification:
    - A. Inferior good.
    - B. Luxury good.
    - C. Durable good.
    - D. Capital good.
    - E. Necessity.

Question 17

• Situation: A 10% income increase causes a 20% quantity demanded decrease for gas. Conclusion:
    - A. Price elastic.
    - B. Necessity.
    - C. Luxury good.
    - D. Inferior good.
    - E. Price inelastic.

Question 18

• Income elasticity of demand is –0.5. Conclusion:
    - A. Necessity.
    - B. Luxury.
    - C. Inferior good.
    - D. Substitute.
    - E. Complement.

Question 19

• Data: Price of beef decreases by 50%, quantity demanded rises by 100%. Conclusion:
    - A. Price elastic.
    - B. Unitarily price elastic.
    - C. Price inelastic.
    - D. Income elastic.
    - E. Income inelastic.

Question 20

• Situation: Price of brandy rises from R10 to R15. Quantity demanded falls from 1000 to 800.
• Elasticity Calculation (arc formula):
    - A. (-) 5/9.
    - B. (-) 4/9.
    - C. (+) 9/5.
    - D. (-) 9/5.
    - E. (-) 1.

Question 21

• Cross elasticity of demand between bread rolls and cheese is -3.0. Conclusion:
    - A. Luxuries.
    - B. Complements.
    - C. Necessities.
    - D. Substitutes.
    - E. Income inferior goods.

Question 22

• Cross elasticity of demand for goods A and B is +5.0. Conclusion:
    - A. Luxuries.
    - B. Complements.
    - C. Necessities.
    - D. Substitutes.
    - E. Income inferior goods.

Question 23

• Situation: 50% increase in porridge traded as milk price falls by 25%. Implication:
    - A. Demand for milk is price inelastic.
    - B. Demand for porridge is price elastic.
    - C. Porridge and milk are complements.
    - D. Porridge and milk are substitutes.
    - E. Porridge is a luxury.

Question 24

• Scenario: Neville’s 10% income rise leads to a 5% bus ticket demand decrease.
• Conclusion:
    - A. Normal goods.
    - B. Necessities.
    - C. Inferior goods.
    - D. Luxuries.
    - E. Substitutes for car travel.

Question 25

• Demand for luxury good upon 10% income increase:
    - A. Increases by more than 10%.
    - B. Decreases by more than 10%.
    - C. Unchanged.
    - D. Increases, but less than 10%.
    - E. Cannot be predicted without more info.

Question 26

• Price of coffee milkshakes rises from R6 to R10, quantity supplied from 6000 to 12000.
• Arc price elasticity for coffee milkshakes:
    - A. +1.33.
    - B. +0.75.
    - C. +1.
    - D. +0.5.
    - E. +0.75.

Question 27

• Classification and outcomes: detailed implications of price and elasticities discussed in previous questions about goods, services, and income effects/elasticities.