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HW sample CHAPTER #2 Assume that: The demand for books is: Qd = 120 P and that the supply of books

s is: Qs = 5P 1. What is the equilibrium price of books? a. b. c. d. e. 5 10 15 20 none of the above

2.What is the equilibrium quantity of books sold? a. b. c. d. e. 25 50 75 100 none of the above

3. If P=$15, which of the following is true? a. b. c. d. Quantity supplied is greater than quantity demanded. Quantity supplied is less than quantity demanded. Quantity supplied equals quantity demanded. There is a surplus.

4. If P=$25, which of the following is true? a. b. c. d. Quantity supplied is greater than quantity demanded. Quantity supplied is less than quantity demanded. Quantity supplied equals quantity demanded. There is a shortage.

5. Suppose the demand curve for a product is given by Q = 10 2P + PS, where P is the price of the product and PS is the price of a substitute good. The price of the substitute good is $2.00. a. Suppose P = $1.00. What is the price elasticity of demand? What is the cross-price elasticity of demand? Quantity demanded when P = $1.00 and PS = $2.00 is: Q = 10 2(1) + 2 = 10. Price elasticity of demand = =

P Q 1 2 (2) 0.2 . Cross-price elasticity of demand Q P 10 10

PS Q 2 (1) 0.2 . Q PS 10

b. Suppose the price of the good, P, goes to $2.00. Now what is the price elasticity of demand? What is the cross-price elasticity of demand? When P = $2.00. Q = 10 2(2) + 2 = 8. Price elasticity of demand is:

P Q 2 4 (2) 0.5 . And the Cross-price elasticity of demand is: Q P 8 8 PS Q 2 (1) 0.25 . Q PS 8

6. Refer to the Figure. At point A, demand is: a. universally elastic. b. inelastic, but not completely inelastic. c. unit elastic. d. elastic, but not infinitely elastic. e. infinitely elastic. 7. Refer to the Figure. At point B, demand is: a. small. b. inelastic, but not completely inelastic. c. unit elastic. d. elastic, but not infinitely elastic. e. infinitely elastic. 8. Refer to the Figure. At point C, demand is: a. completely inelastic. b. inelastic, but not completely inelastic. c. unit elastic. d. elastic, but not infinitely elastic. e. infinitely elastic. 9. Refer to the Figure. At point D, demand is: a. completely inelastic. b. inelastic, but not completely inelastic. c. unit elastic. d. elastic, but not infinitely elastic. e. infinitely elastic. 10. Refer to the Figure. At point E, demand is: a. b. c. d. e. completely inelastic. inelastic, but not completely inelastic. unit elastic. elastic, but not infinitely elastic. infinitely elastic.

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