Qns 1;-What are the various factors which may influence the demand for intermediate goods like cables? Explain the most appropriate method of forecasting the demand for such an item.
In early 1991, there was a sharp increase in the price of newsprint, the paper used by the newspapers. Since newsprint is the largest expense for India newspapers (after salaries) publishers were concerned about the price hike. Suppose that the demand for newsprint can be represented as follows:
Qi = 17-3 -- 0-0092 p +0-0067
Where Q. equals the quantity demanded (in kilograms per capital), P is the price of newsprint (in Rs. per metric ton) and I is the income per capita (in Rs.),
Q1. If there are 1 million people in the market, and if per capita income equals Rs. 10,000 what is the demand curve for newsprint?
Q 2. Under these circumstances, what is the price elasticity of demand if the price of newsprint equals Rs. 400 per metric ton?
Q3. According to a study, the demand curve for newsprint in India is:
Q2 = 2672 -- 0-51 p
Where, Q2 is the number of metrix tons of newsprint demanded (in thousand). What is the price elasticity of demand for newsprint in India if price equals Rs. 500 per metric ton?
Section C (MCQ)
If demand is ___________ then price cuts will __________ spending
- "inelastic, increase"
- "elastic, increase"
- " elastic, decrease"
- none of the above
Positive cross-elasticities suggest that goods are _________ and negative cross-elasticities that goods are __________
- "substitutes, inferior"
- "normal, complements"
- "substitutes, complements"
- "normal, inferior"
A measurement showing how quantity demanded varies with income is the
- price elasticity of demand
- cross-price elasticity of demand
- budget elasticity of demand
- income elasticity of demand
Inferior goods have ___________ and luxury goods have ____________
- "negative income elasticities, income elasticities greater than 1"
- " income elasticities greater than 1, negative income elasticities"
- "positive income elasticities, negative income elasticities"
- none of the above
"If your income doubles and the prices of the goods you buy double, then your demand for these goods will likely ________"
- not change
The income effect of a price increase of a normal good is to __________ of that good and the substitution effect is to _______ of that good
- "increase quantity demanded, reduce quantity demanded"
- "increase quantity demanded, increase quantity demanded"
- "reduce quantity demanded, reduce quantity demanded"
- "reduce quantity demanded, increase quantity demanded
The opportunity cost of a student is
- Course fees and rent
- A loan from the bank
- What the student could have earned in the best job available by not studying
- What the student will earn after graduation
Economics assumes that people consume goods and services to achieve
The extra utility from consuming one more unit of a good is called
- Marginal utility
- Additional utility
- Surplus utility
- Bonus utility
Adding up the quantities demanded of a good by different people facing the same price gives us the
- Supply curve
- Market demand curve
- Demand curve
- Market supply curve
Firms are assumed to _________ costs and to _________ profits
- "incur, desire"
- " pay, make"
- " charge, earn"
- "minimize, maximize"
The increase in total cost when one more unit is produced is known as
- marginal cost
- opportunity cost
- limited cost
- average cost
Marginal revenue is the _________ when output is ____________
- "change in average revenue, increased"
- "change in total revenue, increased by one unit"
- "change in average revenue, increased by one unit"
- "change in total revenue, increased"
Profits are maximized when _________________
- costs are minimized
- revenue is maximized
- average cost is less than average revenue
- marginal cost equals marginal revenue
If a firm´s wage costs increase this will cause __________ and ________
- "marginal cost to increase, output to fall"
- "marginal revenue to increase, output to fall"
- "opportunity cost to increase, the firm will close"
- "average cost will rise, output will increase"