ECS1500 EXAM PACK REVISION QUESTION AND ANSWER.

ECS1500 EXAM PACK REVISION QUESTION AND ANSWER. We have observed that both the price and the quantity sold of golf balls are raising over time. This is due to ….. 1. Continual improvements in the technology used to produce golf balls. 2. Increases in the price of golf clubs over time. 3. Decreases in membership fees for country clubs with golf facilities. 4. An increase in the number of country clubs with golf facilities. 2. The price of good A goes up. As a result, the demand for good Q shifts to the left. From this, we can infer that … 1. good A is a normal good 2. good Q IS an inferior good 3. goods A and Q are substitutes 4. goods A and Q are complements 3. You decide to take a vacation and the trip costs you R3 500. While you are on vacation, you do not report to work where you could have earned R2 750. The opportunity cost of the vacation is ….. 1. R6 250 2 2. R2 750 3 3. R3 500 4. R 750 4. In the market for fitness balls, which of the following variables would decrease demand, ceteris paribus? 1. An increase in the price of fitness balls 2. A decrease m the price of fitness balls 3. A fall in the income of consumers 4. A decrease in the price of hand pumps, a complement 5. Pete is considering attending a concert where the price of a ticket is R350 He estimates that the cost of driving to the concert and parking there will amount to an additional R20. To be able to attend the concert Pete will have to take time off from his part-time job. He estimates that he will lose five hours at work, at a wage of R60 per hour Pete’s opportunity cost of attending the concert equals …. 1. R350 2. R370 3. R300 4. R670 4 Downloaded by Rufaro Chikovore () lOMoARcPSD| ECS1500 – Exam Pack (Revision / Q & A) Email: 6. Which of the following is most likely to have a high-income elasticity of demand? 1. Meals at classy restaurants 2. Lunches at fast food restaurants 3. Packed lunches from home 4. Apples 7. If the price elasticity of demand is 0,5 then a 20% price hike will lead to a 1. 5% decrease in quantity demanded 2. 10% decrease in quantity demanded 3. 20% decrease in quantity demanded 4. 40% decrease in quantity demanded 8. If a 10% price hike leads to a 30% increase in quantity supplied, then the 1. price elasticity of demand to 0,33 2. price elasticity of supply to 0,33 3. price elasticity of demand is 3,0 4. price elasticity of supply is 3,0 9. Which of the following would not cause the demand curve for Varsity Cup (rugby) tickets to shift? 1. An increase in the price of professional rugby tickets 2. A decrease in the price of university hockey tickets 3. An increase in the price of Varsity Cup tickets 4. A drop in student incomes 10. Suppose that the market for baked beans is in equilibrium, and both the supply and the demand curves for baked beans shift to the left. As a result, the equilibrium price equilibrium quantity will 1. will fall, fall 2. will fall, rise 3. will rise, fall 4. cannot be determined, fall 11. Which one of the following statements is CORRECT? 1. The price elasticity of demand is always positive. 2. Elastic demand means that the quantity supplied is sensitive to the price. 3. Inelastic demand means that the quantity demanded is highly sensitive to the price. 4. Elastic supply means that the quantity supplied is sensitive to the price. 5 Downloaded by Rufaro Chikovore () lOMoARcPSD| ECS1500 – Exam Pack (Revision / Q & A) Email: 12. Which one of the following statements is INCORRECT? 1. Normal goods are classified as either luxury or essential goods. 2. Goods with a positive income elasticity of demand are called inferior goods. 3. If the income elasticity of demand is positive but less than 1, the good is called an essential good. 4. The cross elasticity of demand measures the responsiveness of the quantity of a particular good to changes in the price of a related good. Use the information below to answer questions 13 and 14. Microwaves and ovens are substitutes Cars and tyres are complements. 13. Which one of the following statements is CORRECT? 1. An increase in the price of a microwave will lead to a decrease in the quantity of ovens demanded 2. A decrease in the price of cars will lead to a decrease in the quantity of tyres demanded 3. A decrease in the price of ovens will lead to an increase in the quantity of microwaves demanded 4. An increase in the price of tyres will lead to a decrease in the quantity of cars demanded 14. Given that a 10% increase in the quantity demanded of microwaves results from a 5% increase in the price of ovens, which one of the following statements is INCORRECT? 1. The cross price elasticity of demand for microwaves and ovens is 2. 2. Microwaves and ovens are actually complements and not substitutes 3. The cross price elasticity of demand for microwaves and ovens is positive 4. It will be impossible to calculate the income elasticity of demand for microwaves with the given information 15. Which one of the following statements is CORRECT? 1. Price elasticity is measured by comparing the percentage change in price and the percentage change in quantity. 2. A vertical demand curve is perfectly price elastic. 3. A horizontal demand curve implies that the quantity demanded cannot change without any change in the price level. 4. A perfectly inelastic demand curve means that a change in price level has a great impact on the quantity demanded. 6 Downloaded by Rufaro Chikovore () lOMoARcPSD| ECS1500 – Exam Pack (Revision / Q & A) Email: Study the figure below and answer question 16 The figure represents 16. This Figure Represents 1. A demand curve with an elasticity that is greater than 0. 2. An elastic supply curve. 3. A perfectly inelastic demand curve. 4. A perfectly elastic demand curve. Study the Information below and answer question 17: The price elasticity of demand for hamburgers is 0,5 The income elasticity of demand for a bar of soap is -0,1 The cross price elasticity of demand for textbooks is -0,8. 17. Which one of the following statements is CORRECT? 1. The demand for hamburgers is price elastic and soap is an inferior good. 2. Textbooks are a complement to another good while hamburger have a unitary elasticity. 3. A bar of soap is an inferior good while textbooks are a complement to another good. 4. Textbooks are a substitute for another good and the price elasticity of demand for hamburgers is inelastic. 7 Downloaded by Rufaro Chikovore () lOMoARcPSD| ECS1500 – Exam Pack (Revision / Q & A) Email: 18. Which one of the following statements is INCORRECT? 1. The emphasis in microeconomics is mainly on the prices of goods and services, known as the price theory. 2. Microeconomics and macroeconomics are rarely viewed as separate branches of economics. 3. Some knowledge of microeconomics is important in order to understand macroeconomics. 4. The forces of demand and supply in an individual market are dealt with in microeconomics. 19. Which one of the following statements is INCORRECT? 1. The full employment macroeconomic policy objective of South Africa is seen as most important because of the high levels of unemployment in the country. 2. The field of macroeconomics is strongly involved with economic policy. 3. Keeping within the inflation target of the country relates to the macroeconomic policy objective of price stability of the country. 4. Micro economists are mainly concerned with the policy objectives of fiscal and monetary policy.