Activity No. 5: University of Northern Philippines

Republic of the Philippines
UNIVERSITY OF NORTHERN PHILIPPINES

Tamag, Vigan City
2700 Ilocos Sur
College of Business Administration and Accountancy

Website: www.unp.edu.ph Mail: [email protected]
Telefax #: (077) 722-2810
AE 112: MANAGERIAL ECONOMICS

Activity No. 5
VILLALOBOS, JOICE ANNE B.

BSA 3A
Problems:
1. Changes in prices of a good causes:
a. Movement along the demand curve
b. Movement along the supply curve
c. No movement along either curve
d. Both A and B
2. If the market for a certain product experiences an increase in supply and a decrease in demand,
which of the following results is expected to occur?
a. Both the equilibrium price and the equilibrium quantity could rise or fall.
b. The equilibrium price would rise, and the equilibrium quantity could rise or fall.
c. The equilibrium price would fall, and equilibrium quantity could rise or fall.
d. The equilibrium price would fall. And equilibrium quantity would fall.
3. When demand for a product falls, which of the following events would you not necessarily expect
to occur?
a. A decrease in the quantity of the product supplied
b. A decrease in its price
c. A decrease in the supply of the product
d. A leftward shift of the demand curve
4. Suppose a recent and widely circulated medical article has reported new benefits of cycling for
exercise. Simultaneously, the price of the parts needed to make bikes falls. If the change in supply
is greater than the change in demand, the price will ______ and the quantity will _______.
a. Rise, rise
b. Rise, fall
c. Fall, rise
d. Fall, fall
5. Suppose there are nine sellers and nine buyers, each willing to buy or sell one unit of a good, with
values (P10, P9, P8, P7, P6, P5, P4, P3, P2). Assuming there are no transactions costs, what is the
equilibrium price in this market?
a. P5
b. P6
c. P7
d. P8
6. If the government imposes a price floor at P9 (price must be P9 or higher) in the above market,
how many goods will be traded?
a. Five
b. Four
c. Three
d. Two
7. Say the average price of a new home in Lampard City is P160,000. The local government has just
passed new licensing requirements for housing contractors. Based on possible shifts in demand or
supply and assuming that the licensing changes don’t affect the quality of new houses, which of
the following is a reasonable prediction for the average price of a new home in the future?
a. P140,000
b. P150,000
c. 160,000
d. 170,000
8. Suppose a new employer is also relocating to Lampard City and will be attracting many new people
who will want to buy new houses. Assume that the change in licensing requirements mentioned in
the previous problem occurs at the same time. What do you think will happen to the equilibrium
quantity of new homes bought and sold in Lampard City?
a. It will decrease substantially
b. It will decrease but not much
c. It will increase
d. Not enough information
9. The price of peanuts increases. At the same time, we see the price of jelly (which is often consumed
with peanut butter) rise. How does this affect the market for peanut butter?
a. The demand curve will shift to the left; the supply curve will shift to the left.
b. The demand curve will shift to the left; the supply curve will shift to the right.
c. The demand curve will shift to the right; the supply curve will shift to the left.
d. The demand curve will shift to the right the supply curve will shift to the right.
10. Holding other factors constant, a decrease in the tax for producing coffee causes.
a. The supply curve to shift to the left causing the prices of coffee to rise.
b. The supply curve to shift to the right causing the prices of coffee to rise.
c. The supply curve to shift to the left causing the prices of coffee to fall
d. The supply curve to shift to the right, causing the prices of coffee to fall.
11. The widget market is competitive and includes no transaction costs. Five suppliers are willing to
sell one midget at the following prices P30, P29, P20, P16, P12. Five buyers are willing to buy one
widget at the following prices: P10, P12, P20, P24 and P29. What is the equilibrium price and
quantity in a competitive market?
Price Demand Supply

P 30 - 5
P 29 1 4
P 24 2 -
P 20 3 3
P 16 - 2
P 12 4 1
P 10 5 -
 Based on the table above, the equilibrium price is P 20 and the quantity is 3 units.
The quantity demanded is smaller than the quantity supplied at a price of P 29, which means
that 4 sellers are trying to sell to only one buyer. By offering to sell at lower prices, the vendors
will compete with one another. Furthermore, the quantity demanded (4) at a price of at a price
of P 12 is greater than the quantity supplied (1); four buyers are looking for one seller. But at
the price of P 20, the number of buyers and seller units is equal to 3 units, no market pressure to
adjust and no unconsummated wealth-creating transactions. Only buyers with values of P 20
and above buy at the equilibrium price, and only sellers with values of P 20 and below sell.

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Republic of the Philippines

UNIVERSITY OF NORTHERN PHILIPPINES

College of Business Administration and Accountancy

AE 112: MANAGERIAL ECONOMICS

VILLALOBOS, JOICE ANNE B.

Price Demand Supply

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