0710 Eco (CFA520) - Question Paper Economics(CFA520 October...

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Question Paper Economics (CFA520): October 2007 Answer all questions. Marks are indicated against each question. 1. The demand for most products varies directly with the change in consumer income. Such products are known as (1 mark) (a) Normal goods (b) Prestigious goods (c) Complementary goods (d) Inferior goods (e) Substitute goods. < Answer > 2. The situation of market equilibrium occurs when (1 mark) (a) Demand for the goods is greater than supply of the goods (b) Quantity demanded for the goods equals quantity supplied of the goods (c) The price, sellers ask for the goods is less than the price consumers pay of those goods (d) There exist a shortage of the supply of the goods (e) Demand for the goods is less than supply of the goods. < Answer > 3. Essexx Design Inc. produces very costly and attractive sports watches. Now Sofex Inc. introduced a stylish sports watch in the market. The watches of Essexx Design Inc. and Sofex Inc. are considered to be perfect substitutes. The cross elasticity of demand between these watches is (1 mark) (a) Infinity (b) Positive, less than infinity (c) Zero (d) Less than zero (e) One. < Answer > 4. Which of the following does not cause a shift in the demand curve? (1 mark) (a) Change in the price of the good (b) Change in the income of the buyers (c) Change in the personal preferences (d) Change in the price of the related goods (e) Change in the consumer patterns. < Answer > 5. The demand and supply functions of a commodity are estimated as Q d = 100 – P Q s = –20 + 3P The equilibrium price and quantity of the good are (1 mark) (a) Rs.60 and 40 units respectively (b) Rs.40 and 60 units respectively (c) Rs.50 and 50 units respectively (d) Rs.30 and 70 units respectively (e) Rs.70 and 30 units respectively. < Answer > 6. Current demand for apples in a city is 1,000 boxes per week. In the city, price elasticity of demand for apples is –1.25 and income elasticity of demand is 2.00. For the next period, if per capita income is < Answer >
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expected to increase by 7% and price of apples is expected to increase by 10%, demand for apples is expected to be (2 marks) (a) 875 boxes per week (b) 1,000 boxes per week (c) 1,250 boxes per week (d) 1,140 boxes per week (e) 1,015 boxes per week. 7. The falling part of a total utility curve indicates (1 mark) (a) Increasing marginal utility (b) Decreasing marginal utility (c) Zero marginal utility (d) Negative marginal utility (e) Indeterminate marginal utility. < Answer > 8. The difference between the price an individual is willing to pay and the price he or she actually pays is (1 mark) (a) Producer cost (b) Monopolist profit (c) Economic profit (d) Producer surplus (e) Consumer surplus. < Answer > 9. Marginal utilities of goods A and B are 500 utils and 1,000 utils respectively. The price of good B is Rs.200. If the consumer is in equilibrium, the price of good A is (1 mark) (a) Rs. 60 (b) Rs. 70 (c) Rs. 80 (d) Rs. 90 (e) Rs.100.
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0710 Eco (CFA520) - Question Paper Economics(CFA520 October...

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