Demand and Supply Analysis: Introduction

9 questions

1. 1. You are the sales manager for a burger company and have been informed that the price elasticity of demand for your most popular burger is greater than 1. To increase the total revenue, you should:
   Increase the price of burgerDecrease the prize of burgerNot make any change in the price of burger
2. 2. At a price of $5.00 per ToyCar, most stores cannot keep the ToyCar in stock because consumers buy them all as soon as shipments arrive. This implies that there:
   is an excess supply of ToyCar, and the price must fall for equilibrium to be reachedwill be an upward shift in the supply curve for ToyCar is an excess
3. 3. Consider the following figure:

   

   As per the above figure, which of the following statements is true?

   at a price of $50.00, there is an excess supply of 11 million unitsat a price of $50.00, there is an excess demand of 11 million unitsat a price of $50.00, there is an excess supply of 15 million units
4. 4. Consider the following figure:

   

   As per the above figure, if the price of the good is currently $50.00, the price will:

   fall, causing the quantity demanded to fall fall, causing the quantity supplied to fall rise, causing the demand curve to shift to the right
5. 5. Mary was selling her house. The asking price was $220,000, and Mary decided she would take no less than $200,000. After some negotiation, John purchased the house for $205,000. Mary’s producer surplus is:
   $5,000$15,000$20,000
6. 6. A deadweight loss occurs when:
   producer surplus is greater than consumer surplusthe maximum level of total welfare is not achievedconsumer surplus is reduced
7. 7. A deadweight loss occurs as a result of which set of scenarios?
   excise tax, quota, subsidy, monopolyexcise tax, quota, subsidy, increase in demandexcise tax, subsidy, decrease in supply, price
8. 8. Consider the market for plasma televisions. The supply and demand equations are given by the following two equations

   • Supply function: P = 60QS + 200

   • Demand function: P = 2700 - 40QD

   We can calculate that the equilibrium values are P* = $1700 and Q* = 25

   Calculate the consumer surplus, producer surplus and total surplus.

   13500, 18250, 325011500, 14750, 2125012500, 18750, 31250
9. 9. The cross price elasticity of demand between two goods will be positive if:
   The two goods are complementsThe two goods are substitutesThe two goods are luxuries