Choose the correct answer for each question.

1. Chicken and fish are substitutes. If the price of chicken increases, the demand for chicken will

   1.   ?    Not change but there will be a movement along the demand curve for fish.
   2.   ?    Decrease and the demand curve for fish will shift leftward.
   3.   ?    contact and the demand for fish will shift outwards
   4.   ?    Increase or decrease but the demand curve for fish will not change.

2. In the market for fertilizer, an

   1.   ?    Increase in the cost of equipment will increase the supply of fertilizer.
   2.   ?    Advance in technology will increase the supply of fertilizer.
   3.   ?    Increase in the wage rate will increase the demand for fertilizer.
   4.   ?    Increase in the wage rate will increase the supply of fertilizer

3. An increase in the wage rate paid to workers in the popcorn industry will ________ popcorn and the equilibrium quantity of popcorn will __________
   
   

   1.   ?    Increase the demand for, increase
   2.   ?    Decrease the demand for, decrease.
   3.   ?    Decrease the supply of, decrease
   4.   ?    Decrease the supply of, increase.

4. A car rental firm rents its cars on weekdays to business users and to holidaymakers at weekends. An increase in demand for rentals on weekdays leads the firm to increase the size of its car fleet.
   
   Which of the following will be the most probable effect on the price of car rentals?
   

   1.   ?    Weekday rentals will decrease, weekend rentals will be unchanged
   2.   ?    Weekday rentals will decrease, weekend rentals will decrease
   3.   ?    Weekday rentals will increase, weekend rentals will be unchanged
   4.   ?    Weekday rentals will increase, weekend rentals will decrease

5. Under what circumstances would an increase in the price of product X result in a fall in the demand for product Y?

   1.   ?    The demand for Y is price elastic
   2.   ?    Y is an inferior good
   3.   ?    X and Y are substitute goods
   4.   ?    X and Y are complementary goods

6. Which one of the following would cause the market supply curve for new wool suits to shift to the right?

   1.   ?    A reduction in a tariff on imported wool used in suit manufacture
   2.   ?    An increase in the prices of jeans and shirts
   3.   ?    An increase in the selling price of new wool suits
   4.   ?    An increase in the real incomes of consumers

7. An increase in the market demand for computers and an increase in the number producers of computers will

   1.   ?    Decrease the price but increase the number of computers bought.
   2.   ?    Increase the price of a computer.
   3.   ?    Increase the price and the number of computers bought.
   4.   ?    Increase the number of computers bought.

8. 
   If the government introduces a minimum price into diagram above, the effect will be
   
   
   

   1.   ?    The market equilibrium quantity would be achieved at quantity B
   2.   ?    There would be a shortage equal to quantity AC
   3.   ?    There would be surplus equal to quantity AC
   4.   ?    Only quantity 0A would be supplied by producers in the market

9. Which one of the following would be the most probable consequence of a fall in the supply of coffee, the supply curve of tea remaining unchanged?
   
   

   1.   ?    A decrease in the price of coffee and an increase in the price of tea
   2.   ?    An increase in the price of coffee and an increase in the price of tea
   3.   ?    An inward shift in the demand for coffee and an inward shift in the demand for tea
   4.   ?    An inward shift in the demand for coffee and an outward shift in the demand for tea

10. 
    
    The change in supply of the product shown in the diagram above could have been due to

    1.   ?    An improvement in production technology
    2.   ?    A fall in the exchange rate causing a rise in the cost of imported components
    3.   ?    A government subsidy to producers
    4.   ?    An increase in the real incomes of consumers

11. Which one of the following is likely to result from an increase in government subsidies paid to local bus companies

    1.   ?    An increase in traffic congestion
    2.   ?    An increase in the standard of living of city dweller who use public transport
    3.   ?    A reduction in distances travelled to work
    4.   ?    A fall in the number of bus operators

12. The imposition of a specific duty on producers of mobile phones will cause
    
    

    1.   ?    An inward shift in market demand
       
       
    2.   ?    An inward shift in market supply
    3.   ?    An expansion along the market supply curve
    4.   ?    An expansion along the market demand curve
       
       

13. The benefit of an increase in a government subsidy to milk producers will go mainly to consumers in the form of a lower price when

    1.   ?    Demand for milk is price elastic
    2.   ?    Supply of milk is perfectly inelastic
    3.   ?    Demand for milk is price inelastic
    4.   ?    Demand for milk is income elastic

14. Given that the household demand for water is price inelastic, a change from flat-rate charges to the metering of supplies (i.e. a charge for each litre used) is likely to

    1.   ?    Encourage water companies to build more reservoirs
    2.   ?    Be more likely to cause water shortages
    3.   ?    Discourage consumers from conserving water
    4.   ?    Reduce the total amount of water demanded by consumers

15. An increase in the rate of indirect tax applied to a product will have no effect on its market price if the

    1.   ?    Demand for the product is completely price inelastic
    2.   ?    Demand for the product is perfectly price elastic
    3.   ?    Income elasticity of demand for product is zero
    4.   ?    Good is an absolute necessity