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ECS1500 ASSESSMENT 2 SEM 1 0F 2024 EXPECTED QUESTIONS AND SOLUTIONS
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ECS1500 ASSESSMENT 2 SEM 1 0F 2024 EXPECTED QUESTIONS AND SOLUTIONS . CORRECT USE OF THIS PACK WILL HELP YOU SCORE ABOVE 75%
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Started on Wednesday, 16 August 2023, 11:59 AMState Finished
Completed on Wednesday, 16 August 2023, 12:34 PM
Time taken 34 mins 45 secs
Marks 34.00/40.00
Grade 85.00 out of 100.00
Feedback Well done! You seem to understand Learning Units 3, 4 and 5 of ECS1500!
Question 1
Correct
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If a 10 percent reduction in the price of a certain coffee brand causes a 5 percent increase in the quantity of that coffee brand that
people buy, then in this region of the demand curve, price elasticity of demand for this coffee brand is elastic.
Select one:
True
False
Your answer is correct.
This statement is false. We can calculate the elasticity as follows:
Note that we ignore the direction of the changes, as we know that price elasticity of demand is always negative. When the price
increases, the quantity demanded of a product will increase.
Since the size of elasticity is between 0 and 1, price elasticity of demand for this coffee brand is inelastic.
The correct answer is 'False'.
,Question 2
Incorrect
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Assume a change of season from summer to winter. If there a decrease in the demand for summer dresses and a simultaneous increase
in supply thereof, what will happen to the quantity?
Select one:
a. The market quantity will decrease
b. The market quantity is indeterminate (direction of change cannot be predicted with certainty)
c. The market quantity will remain the same
d. The market quantity will increase
Your answer is incorrect.
When there is a decrease in the demand for summer dresses and a simultaneous increase in the supply of summer dresses, the result is a
decrease in the price of dresses but the direction of the change in the quantity of the dresses cannot be predicted. The change in quantity
will depend on the relative sizes of the increases in supply and demand.
The correct answer is: The market quantity is indeterminate (direction of change cannot be predicted with certainty)
Question 3
Correct
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The relationship between the quantity demanded and the price can be represented by means of a ...................
Select one:
a. equilibrium market
b. supply curve
c. quantity supplied curve
d. demand curve
e. quantity demanded curve
Your answer is correct.
The demand curve shows the quantities demanded in the market at each different price level.
The correct answer is: demand curve
,Question 4
Correct
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Assume that desktops and laptops are substitutes. Which of the following will lead to a decrease in the demand for desktops?
Select one:
a. an increase in immigration
b. union action that arises in the laptop-producing industry and a simultaneous increase in consumer incomes
c. an increase in the price of desktops
d. an increase in the number of sellers of laptops
Your answer is correct.
An increase in the number of sellers of laptops will increase supply of laptops and thus result in a rightward shift of the supply curve of
laptops. This will result in a decrease in the price of laptops. As laptops and desktops are substitutes, and laptops are now relatively
cheaper, this will result in a decrease in the demand for desktops, i.e. a leftward shift of the demand curve for desktops.
An increase in immigration can be expected to increase the size of the population, and therefore the demand for most products can be
expected to increase. The demand for desktops will most likely also increase.
An increase in the price of desktops will result in a decrease in the quantity demanded of desktops, i.e. an upward movement along the
demand curve for desktops. It will, however, not affect the position of the demand curve for desktops.
Union action that arises in the laptop-producing industry will most likely result in a decrease in supply in the laptop industry. This will
increase the price of laptops and therefore the quantity demanded of laptops will decrease. As laptops and desktops are substitutes, the
demand for desktops will increase. An increase in consumer income will result in an increase in demand for all normal products,
therefore most likely also an increase in demand for desktops. The combined effect of these two events will therefore be an increase in
the demand for desktops.
The correct answer is: an increase in the number of sellers of laptops
Question 5
Correct
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Suppose good A has a cross-price elasticity of demand = -3 with good B; this infers that when the price of good B rises by 1%, the
quantity demanded of good A rises by 3% because the goods are complements.
Select one:
True
False
The statement is false. The interpretation of the cross-price elasticity is incorrect, as the relationship between complementary goods is
negative; thus, the price increase will bring about a fall in the quantity demanded of good A. This is indicated by the fact that the value
of the cross elasticity is negative. This tells us that the quantity demanded of good A changes in the opposite direction of the change in
the price of good B.
The correct answer is 'False'.
, Question 6
Correct
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It is necessary to decrease the use of water in a certain municipal area by 10%. The price elasticity of the demand for water in this
area is 0,5. The price of water has to ________
Select one:
a. increase by 20%
b. decrease by 10%
c. decrease by 20%
d. increase by 10%
e. increase by 5%
Your answer is correct.
Price elasticity of demand is calculated as follows:
Therefore, the percentage change in price that is required to bring about a certain percentage change in demand can be calculated as
follows:
To decrease the use of water the price has to increase.
The correct answer is: increase by 20%
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