ECO401 QUIZ # 1

Question # 1 of 15 () Total Marks: 1
When government sets the price of a good and that price is above the equilibrium price, the result will be:
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A surplus of the good

A shortage of the good

An increase in the demand for the good

A decrease in the supply of the good

Question # 2 of 15 () Total Marks: 1
The effect of a change in the price of a good or service on the quantities consumed when the consumer remains indifferent between the original and new combination of goods consumed is the:
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Substitution effect

Real income effect

Income effect

Price effect

Question # 3 of 15 ( ) Total Marks: 1
We know that the demand for a product is elastic if:
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When price rises, revenue rises

When price rises, revenue falls

When price rises, quantity demanded rises

When price falls, quantity demanded rises

A normative economic statement:
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Is a statement of fact.

Is a hypothesis used to test economic theory.

Is a statement of what ought to be, not what is.

Is a statement of what will occur if certain assumptions are true.

The effect of a change in income on the quantity of the good consumed is called the:
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Income effect

Budget effect

Substitution effect

Real income effect

If consumer incomes increase, the demand for product Y:
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Will necessarily remain unchanged

Will shift to the right if Y is a complementary good

Will shift to the right if Y is a normal good

Will shift to the right if Y is an inferior good

It measures the percentage change in demand given a percentage change in consumer's income.
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Price elasticity of demand

Income elasticity of demand

Supply price elasticity

Cross price elasticity

The cross elasticity of demand of complements goods is:
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Less than 0.

Equal to 0.

Greater than 0.

Between 0 and 1.

If the income elasticity of demand is 1/2, the good is:
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A luxury.

A normal good (but not a luxury).

An inferior good.

A Giffen good.

Other things equal, expected income can be used as a direct measure of well-being:
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No matter what a person's preference to risk.

If and only if individuals are not risk-loving.

If and only if individuals are risk averse.

If and only if individuals are risk neutral.

It is expected that the sign of cross elasticity between two complementary goods would be:
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Positive

Negative

Zero

None of the given options.

The law of diminishing returns assumes:
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There are no fixed factors of production.

There are no variable factors of production.

Utility is maximised when marginal product falls.

Some factors of production are fixed.

If two goods were perfect complements, their indifference curves would be:
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Straight lines

L-shaped

Rectangular hyperbolas

Parabolic

Indifference curves that are convex to the origin reflect:
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An increasing marginal rate of substitution.

A decreasing marginal rate of substitution.

A constant marginal rate of substitution.

A marginal rate of substitution that first decreases, then increases.

A market is said to be in equilibrium when:
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Supply equals demand

There is downward pressure on price

The amount consumers wish to buy at the current price equals the amount producers wish to sell at that price.

All buyers are able to find sellers willing to sell to them at the current price.