Exercise

2. Answers:
An increase in the quantity of tea demanded occurs whenever
1
Microeconomic
A
The population of tea drinkers grows
s (Lecture 2
Demand &
Supply)
B

The price of coffee (its substitutes) rise

Tea drinkers receive an increase in their incomes

The price of lemons (its complement) falls

The price of the tea falls

Population

Market Size

Demand
Price of substitute (coffee)

Quantity demanded (of coffee)

Demand (of tea)

Income

Demand
(if tea is a normal good)
inferior good)

Demand
(if tea is an

Price of complement (lemon)

Quantity demanded (of lemon)

Demand (of tea)

Price of tea

Quantity demanded

2.
2
A

Which of the following would result in a decrease in the supply of computers?

An improvement in the technology of producing computers

An increase in consumers preference in internet surfing

Taste

Demand

An increase in consumers incomes

Income

Demand

An increase in the number of producer of computers

An increase in the wage of workers in the computer industry

Wage

Cost of production

Supply
Technology (improves)

Supply

No. of sellers

Supply

2.
3
A

Which of the following will NOT cause a shift in the demand curve for rice?

A decrease in the price of vegetables (a complement to rice)

Price of complement (vegetables)

Quantity demand (of vegetables)

Demand

Demand Curve SHIFTS (leftward)

An increase in the price of rice

Price

Quantity demanded

Movement along Demand Curve

A decrease in the price of noodle (a substitute to rice)

Consumers have a stronger preference in consuming rice

Taste (improves)

Demand

Demand Curve SHIFT (rightward)

Price of substitute (noodle)

Quantity demanded (of noodle)

Demand

Demand Curve SHIFT (leftward)

E

An increase in consumers incomes

2.
4
(1
)

What happens to the demand curve of bread when:

(2
)

There is a decrease in the price of biscuits, its main substitutes?

Price of substitute (biscuits)

Quantity demanded (of biscuits)

Demand (of bread)

Demand Curve SHIFT (leftward)

(3
)

The price of flour (the raw materials in making bread) increases?

Price of flour

Cost of production

Supply

Demand Curve remains unchanged

The consumers income increases?

Income

Demand

Demand Curve SHIFT (rightward)

Income

Demand

Demand Curve SHIFT (rightward)

2.
5
(1
)

What happen to the supply curve of car when:

(2
)

Many producers leave the industry due to poor prospects?

(3
)

There is an increase in the price of petrol?

The workers in the car industry successfully demanded a higher

wage?

Wage

Cost of production

Supply

Supply Curve SHIFT (rightward)

No. of sellers

Supply

Supply Curve SHIFT (leftward)

Price of petrol

Price of complement

Quantity demanded (of petrol)


Demand (of car)

Demand Curve SHIFT (leftward)

Supply Curve remains unchanged