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Unit 2 - Additional Tutorial Questions

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Unit 2 - Additional Tutorial Questions

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tashalee
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Introduction to Microeconomics (ECO1012)

Unit 2: Demand and Supply - Additional Tutorial Questions

1. What is meant by the term quantity demanded? How does quantity demanded differ
from demand?

2. Explain the income effect and substitution effect of a price increase.

3. What is meant by the term quantity supplied? How does quantity supplied differ from
supply?

4. List and explain five (5) factors that cause demand to change.

5. List and explain five (5) factors that cause supply to change.

6. What is the effect on the price of hotdogs and the quantity of hotdogs sold if
a. the price of hamburgers rise?
b. the price of hotdog rolls rise?
c. the supply of hotdog sausage increases?
d. consumers’ incomes decrease?

7. With the aid of a well labelled diagram, explain the effect of an increase in the number of
factories on the equilibrium price and equilibrium quantity of a good.

8. With the aid of a well labelled diagram, explain the effect of a decrease in the price of a
substitute on the equilibrium price and equilibrium quantity of a good.

9. The demand and supply equations for good A are written, respectively, as follows:

Qd = 8300 – 1.5PA + 2PB – 0.25Y


Qs = 800 + 2PA

where Qd is the quantity demanded of good A, Qs is the quantity supplied of good A, PA


is the price of good A in dollars, PB is the price of good B in dollars, and Y is the
consumer’s income in dollars.

a. If Y = $10,000 and PB = $15, what is the equilibrium price and equilibrium quantity of
good A?

b. As in (a) above, if Y = $10,000 and PB = $15, calculate the surplus/shortage when


PA = $40. With the aid of a diagram, explain how the market will correct itself.

c. Using the demand equation, state whether good A and good B are substitutes or
complements. Explain.

d. Using the demand equation, state whether good A is a normal good or an inferior
good. Explain.

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