These are Exam questions and solutions as well as those that were found in assignments, study guides and practice questions. When you work through these together with explanations in your study guide, you will gain an excellent understanding of concepts, theories and graphs which will allow you to ...
[1] the slope of a demand curve.
[2] the inverse of the slope of a demand curve.
[3] the percentage change in one variable in response to a 1% increase in another variable.
[4] sensitivity of price to a change in quantity
(2) The price elasticity of demand for a demand curve that has a zero slope is
[1] zero.
[2] one.
[3] negative but approaches zero as consumption increases.
[4] infinite.
OCT/NOV 2014
(3) A vertical demand curve is:
[1] completely inelastic.
[2] infinitely elastic.
[3] highly (but not infinitely) elastic.
[4] highly (but not completely) inelastic.
(4) Along any downward-sloping straight-line demand curve:
[1] both the price elasticity and slope vary.
[2] the price elasticity varies, but the slope is constant.
[3] the slope varies, but the price elasticity is constant.
[4] both the price elasticity and slope are constant.
OCT/NOV 2013 EXAM
(5) If two goods are substitutes, the cross-price elasticity of demand must be:
,(6) When the government controls the price of a product, causing the market price to be below the
free market equilibrium price:
[1] some consumers gain from the price controls and other consumers lose.
[2] all producers gain from the price controls.
[3] both producers and consumers gain.
[4] all consumers are better off.
MAY/JUNE 2015 EXAM
MAY/JUNE 2014 EXAM
(7) What happens if price falls below the market clearing price?
[1] Demand shifts out.
[2] Supply shifts in.
[3] Quantity demanded decreases, quantity supplied increases, and price falls.
[4] Quantity demanded increases, quantity supplied decreases, and price rises.
(8) Other things being equal, the increase in rents that occurs after rent controls are abolished is
smaller when:
[1] the own price elasticity of demand for rental homes is price inelastic.
[2] the own price elasticity of demand for rental homes is price elastic.
[3] the own price elasticity of demand for rental homes has unitary price elasticity.
[4] rented homes and owned homes are complements.
[5] rented homes and owned homes are substitutes.
OCT/NOV 2014
Answers:
1=3
2=4
3=1
4=2
5=2
6=1
7=4
8=2
Chapter 3
(1) Which of the following is NOT an assumption regarding people's preferences in the theory of
consumer behaviour?
[1] Preferences are complete.
[2] Preferences are transitive.
[3] Consumers prefer more of a good to less.
[4] All of the above are basic assumptions about consumer preferences
,(2) The assumption of transitive preferences implies that indifference curves must:
[1] not cross one another.
[2] have a positive slope.
[3] be L-shaped.
[4] be convex to the origin.
[5] all of the above.
OCT/NOV 2014
(3) Suppose that a market basket of two goods is changed by adding more of one of the goods and
subtracting one unit of the other, the consumer will:
[1] rank the market basket more highly after the change.
[2] more likely prefer a different market basket.
[3] rank the market basket as being just as desirable as before.
[4] be unable to decide whether the first market basket is preferred to the second or vice versa. [5]
have indifference curves that cross.
MAY/JUNE 2013 EXAM
(4) A consumer prefers market basket A to market basket B, and prefers market basket B to market
basket C. Therefore, A is preferred to C. The assumption that leads to this conclusion is:
[1] transitivity.
[2] completeness.
[3] all goods are good.
[4] diminishing MRS.
[5] rationality.
OCT/NOV 2013 EXAM
(5) The slope of an indifference curve reveals:
[1] that preferences are complete.
[2] the marginal rate of substitution of one good for another good.
[3] the ratio of market prices.
[4] that preferences are transitive.
[5] none of the above..
MAY/JUNE 2014 EXAM
MAY/JUNE 2013 EXAM
, (6) A consumer has R100.00 per day to spend on product A, which has a unit price of R7.00, and
product B, which has a unit price of R15.00. What is the slope of the budget line if good A is on the
horizontal axis and good B is on the vertical axis?
[1] -7/15
[2] -7/100
[3] -15/7
[4] 7/15
MAY/JUNE 2015 EXAM – DIFFERENT NUMBERS
MAY/JUNE 2014 EXAM – DIFFERENT NUMBERS
(7) Suppose that the prices of good A and good B were to suddenly double. If good A is plotted along
the horizontal axis,
[1] the budget line will become steeper.
[2] the budget line will become flatter.
[3] the slope of the budget line will not change.
[4] the slope of the budget line will change, but in an indeterminate way.
OCT/NOV 2014
(8) Theodore's budget line has changed from A to B. (See fig SG3.1 above.) Which of the following
explains the change in Theodore's budget line?
[1] The price of food and the price of clothing increased.
[2] The price of food increased, and the price of clothing decreased.
[3] The price of food decreased, and the price of clothing increased.
[4] The price of food and the price of clothing decreased.
[5] None of the above
(9) If the quantity of good A (QA) is plotted along the horizontal axis, the quantity of good B (QB) is
plotted along the vertical axis, the price of good A is PA, the price of good B is PB and the consumer’s
income is I, then the slope of the consumer’s budget constraint is __________.
(10) The endpoints (horizontal and vertical intercepts) of the budget line:
[1] measure its slope.
[2] measure the rate at which one good can be substituted for another.
[3] measure the rate at which a consumer is willing to trade one good for another.
[4] represent the quantity of each good that could be purchased if all of the budget were allocated
to that good.
[5] indicate the highest level of satisfaction the consumer can achieve.
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