ECS2601 – Intermediate Microeconomics
Practice Exam Answers + Rationales
1 — Demand & Supply
1. Which of the following will cause a rightward shift in the
demand curve?
A. An increase in consumer income for a normal good
Rationale: A rise in income increases demand for normal goods
at every price, shifting demand right.
2. If price increases from $10 to $12 and quantity demanded
decreases, this is a movement along the demand curve caused
by:
B. A change in price
Rationale: Movements along the curve are due to price
changes; shifts are due to non-price factors.
3. An increase in the price of an input will:
C. Decrease supply
Rationale: Higher production costs reduce quantity supplied at
every price, shifting supply left.
4. At equilibrium:
D. Quantity demanded = Quantity supplied
Rationale: Equilibrium is defined where demand and supply
intersect.
5. A price ceiling set below equilibrium typically leads to:
A. A shortage
Rationale: Consumers want more at the lower price than
producers supply.
, 2 — Elasticity
6. Price elasticity of demand measures:
A. Responsiveness of quantity demanded to price changes
Rationale: It shows how much quantity demanded changes
when price changes.
7. If elasticity of demand is greater than 1, demand is:
D. Elastic
Rationale: Buyers are highly responsive to price changes.
8. Goods with close substitutes tend to have:
B. High elasticity
Rationale: Availability of substitutes makes demand more
sensitive to price.
9. Cross-price elasticity > 0 implies goods are:
C. Substitutes
Rationale: When price of one rises and demand for the other
rises, they are substitutes.
10. Income elasticity < 0 indicates the good is:
B. Inferior
Rationale: Demand falls as income rises.
3 — Consumer Theory
11. The budget constraint shows:
A. All consumption bundles a consumer can afford
Rationale: It represents income and prices constraints.
12. An indifference curve:
B. Shows combinations of goods with equal satisfaction
Rationale: Consumer preferences are constant along the curve.
13. Marginal rate of substitution is:
C. The rate at which a consumer trades one good for another
Practice Exam Answers + Rationales
1 — Demand & Supply
1. Which of the following will cause a rightward shift in the
demand curve?
A. An increase in consumer income for a normal good
Rationale: A rise in income increases demand for normal goods
at every price, shifting demand right.
2. If price increases from $10 to $12 and quantity demanded
decreases, this is a movement along the demand curve caused
by:
B. A change in price
Rationale: Movements along the curve are due to price
changes; shifts are due to non-price factors.
3. An increase in the price of an input will:
C. Decrease supply
Rationale: Higher production costs reduce quantity supplied at
every price, shifting supply left.
4. At equilibrium:
D. Quantity demanded = Quantity supplied
Rationale: Equilibrium is defined where demand and supply
intersect.
5. A price ceiling set below equilibrium typically leads to:
A. A shortage
Rationale: Consumers want more at the lower price than
producers supply.
, 2 — Elasticity
6. Price elasticity of demand measures:
A. Responsiveness of quantity demanded to price changes
Rationale: It shows how much quantity demanded changes
when price changes.
7. If elasticity of demand is greater than 1, demand is:
D. Elastic
Rationale: Buyers are highly responsive to price changes.
8. Goods with close substitutes tend to have:
B. High elasticity
Rationale: Availability of substitutes makes demand more
sensitive to price.
9. Cross-price elasticity > 0 implies goods are:
C. Substitutes
Rationale: When price of one rises and demand for the other
rises, they are substitutes.
10. Income elasticity < 0 indicates the good is:
B. Inferior
Rationale: Demand falls as income rises.
3 — Consumer Theory
11. The budget constraint shows:
A. All consumption bundles a consumer can afford
Rationale: It represents income and prices constraints.
12. An indifference curve:
B. Shows combinations of goods with equal satisfaction
Rationale: Consumer preferences are constant along the curve.
13. Marginal rate of substitution is:
C. The rate at which a consumer trades one good for another
