ABBE 1013 MICROECONOMICS TUTORIAL 2 Section A: Multiple Choice Questions 1.

A normal good is defined as a good for which demand increases_____________. a. as its own price decreases. b. as the price of a substitute increases c)). as the income of consumers increases d. as the number of consumers of the product increases. 2. The law of demand states that

a. ))price and quantity demanded are inversely related.

b. the larger the number of buyers in a market, the lower will be product price. c. price and quantity demanded are directly related. d. consumers will buy more of a product at high prices than at low prices. 3. An "increase in the quantity demanded" means that a. the demand curve has shifted to the right. b. the supply curve has shifted to the left. c. )))price has declined and consumers therefore want to purchase more of the good. d. given supply, the price of the good can be expected to rise. An "increase in demand" means that a. the demand curve has shifted to the left. b. price has declined and consumers want to purchase more of the good. c. )))the demand curve has shifted to the right. d. the price of the good can be expected to decline, assuming supply stays constant.

4.

5. Which of the following can cause a change in quantity demanded? a. )))Change in price. b. Change in taste. c. Change in income. d. Change in quantity supplied. 6. The horizontal summation of individual demand curves result in a. a vertical demand curve. b. a vertical supply curve. c. a market demand curve. d. the quantity demanded for each individual supply. 7. Which of the following pairs of goods would be most likely to be complements? a. butter and margarine. b. peanuts and peanut butter. c. )))DVD's and DVD players. d. hiking boots and tennis shoes.

8. If good A is a normal good, an decrease in income will a. )))shift the demand curve for good A leftward. b. shift the demand curve for good A rightward. c. not affect the demand for good A. d. result in a surplus of good A.

Section B: Essay Questions

1. Distinguish between normal and inferior goods. (4 marks) [August examination, 2011/12]

2. Briefly explain any FIVE (5) factors that shift the demand curve. (10 marks) [January examination, 2006/07] 3. Explain the difference between the law of demand and the law of supply (8 marks) [January examination 2011/12 and April examination, 2007/08] 4. With the aid of a diagram, briefly explain the differences between a movement along the demand curve and a shift in the demand curve. (8 marks) [Source: September examination, 2009/2010 ]