IVY SOFTWARE MBA PREPWORKS
A measure of the relationship between a percentage change in the
market price of a product and a consequential percentage change in the
quantity supplied of a product.
a. comparative-static analysis
b. price elasticity of supply
c. market supply
d. law of supply – ANSWER- b. price elasticity of supply
The coefficient of supply elasticity is:
a. positive
b. negative – ANSWER- a. positive;
confirms the law of supply
the quantity that sellers are willing to sell = quantity that buyers are
willing to buy. When combining market demand curve and market
supply curves, is the point on the graph where the curves intersect.
a. comparative-static analysis
b. market equilibrium point
c. income elasticity
d. cross price elasticity – ANSWER- b. market equilibrium point
Compares two market equilibrium (static) points, one equilibrium point
before and the other after a change in an independent variable other than
the price of the good being analyzed.
a. cross price elasticity
b. income elasticity
c. comparative-static analysis
d. market equilibrium point – ANSWER- c. comparative-static analysis
True/False: For all comparative-static problems, perform the following
three steps when an independent variable does change:
- Determine whether the demand curve or the supply curve will be
affected. - Determine the direction in which the affected curve will shift.
(demand curves shift north-east or the south-west and supply curves
shift south-east or the north-west) - Compare the equilibrium price and equilibrium quantity before and
after the change. Price and quantity may increase, decrease, remain
unchanged, or be ambiguous because all three (an increase, a decrease,
or no change) options are possible. – ANSWER- True
True/False: The effect of a price increase of a substitute good (an
independent variable): the demand curve shifts north-east; the
equilibrium price increases and the quantity demanded in the market
increases. – ANSWER- True
True/False: The effect of a price increase of a substitute good (an
independent variable): the demand curve shifts south-west; the
equilibrium price decreases and the quantity demanded in the market
decreases. – ANSWER- False;
shifts north-east; the equilibrium price increases and the quantity
demanded in the market increases.
True/False: The effect of a price increase of a complement good (an
independent variable): the demand curve shifts south-west; the
equilibrium price decreases and the quantity demanded in the market
decreases. – ANSWER- True
True/False: The effect of a price increase of a complement good (an
independent variable): the demand curve shifts north-east; the
equilibrium price increases and the quantity demanded in the market
increases. – ANSWER- False;
shifts south-west; the equilibrium price decreases and the quantity
demanded in the market decreases.
True/False: The effect of a decrease in income in the economy of a
normal good (independent variable): the demand curve shifts to the
north-east; the equilibrium price increases and the quantity demanded in
the market increases. – ANSWER- False;
curve shifts to the south-west; the equilibrium price decreases and the
quantity demanded in the market decreases.
True/False: The effect of a decrease in income in the economy of a
normal good (independent variable): the demand curve shifts to the
south-west; the equilibrium price decreases and the quantity demanded
in the market decreases. – ANSWER- True
True/False: The effect of a decrease in income in the economy of an
inferior good (independent variable): the demand curve shifts to the
north-east; the equilibrium price increases and the quantity demanded in
the market increases. – ANSWER- True
True/False: The effect of a decrease in income in the economy of an
inferior good (independent variable): the demand curve shifts to the
south-west; the equilibrium price decreases and the quantity demanded
in the market decreases. – ANSWER- False;
curve shifts to the north-east; the equilibrium price increases and the
quantity demanded in the market increases.
True/False: An economic boom can create a relative shortage of workers
in the labor market, which causes the price of labor to increase. As the
price of labor increases, the market supply curve shifts to the north-west.
It is more expensive to produce a good. The equilibrium price increases
and the quantity demanded decreases. – ANSWER- True
True/False: An economic boom can create a relative shortage of workers
in the labor market, which causes the price of labor to increase. As the
price of labor increases, the market supply curve shifts to the south-east.
It is more expensive to produce a good. The equilibrium price increases
and the quantity demanded decreases. – ANSWER- False;
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