ECS2601 EXAM PAC
Ralph: +27 68 077 9615
Email:
http://theeconomistsoe.com/
,ECS2601 PRACTICE QUESTIONS AND ANSWERS
YEAR 2021
1. Plastic and steel are substitutes in the production of body panels for certain automobiles.
If the price of plastic increases, with other things remaining the same, we would expect:
[1] the price of steel to fall.
[2] the demand curve for steel to shift to the right.
[3] the demand curve for plastic to shift to the left.
[4] nothing to happen to steel because it is only a substitute for plastic.
[5] the demand curve for steel to shift to the left.
In the case of substitute goods these are goods that can replace each other, that is one can
be used in place of another (in our case plastic and steel can be used interchangeably ) thus
a an increase in plastic prices will lead to consumer opting for cheaper steel panels hence
the demand curve of steel shifts to the right, ceteris paribus.
2. Which of the following would shift the demand curve for new textbooks to the right?
[1] A fall in the price of paper used in publishing texts
[2] A fall in the price of equivalently used textbooks
[3] An increase in the income of students attending college
[4] A fall in the price of new textbooks
[5] An increase in the number of publishers for textbooks
The demand curve is shifted by the determinants of demand other than price which does
not shift the the curve but causes movements along the curve (In our case all other options
are price related except an increase in the number of publishers for textbooks which affects
the supply curve hence not relevant
3. Assume that cooking gas and stoves are complements. When the price of cooking gas
goes up, the demand curve for stoves:
[1] shifts to the left.
[2] shifts to the right.
[3] remains constant.
[4] shifts to the right initially and then returns to its original position.
[5] shifts to the left simultaneously with the demand curve for cooking gas.
Complements are “jointly” demanded goods or products, (in our case we can comfortably
say one cannot use a gas stove without the gas hence if one intends to buy a gas tank they
need gas. If the price of cooking gas increases there is no need to buy a gas tank hence
demand for the demand for gas shift to the left, ceteris paribus.
4. Assume that the current market price is below the market clearing level. We would expect:
[1] a surplus to accumulate.
, [2] downward pressure on the current market price.
[3] upward pressure on the current market price.
[4] no pressure for the price to change further.
[5] quantity demanded to be less than quantity supplied.
When the market price is below the market clearing equilibrium the goods are “too cheap”
and there is excess demand this should lead to upward pressure caused by the tatonnment
process which will lead to walrasian equilibrium. See mascolel
5. If the actual price were below the equilibrium price in the market for bread, a...
[1] surplus would develop that cannot be eliminated over time.
[2] shortage would develop, which market forces would eliminate over time.
[3] surplus would develop, which market forces would eliminate over time.
[4] shortage would develop, which market forces would tend to exacerbate.
[5] surplus, followed by a shortage, would develop instantly.
When prices are below the equilibrium they are artificially too low, hence this causes
shortages however the market forces will bid up prices and eliminate other buyers who
were willing to buy at low prices hence over time demand and supply interact to an
equilibrium.
Use the following information to answer questions 6 and 7: The demand for potatoes is: ��
= 120 − �
The supply of potatoes is: �� = 5�
6. What is the equilibrium price of books?
[1] 5
[2] 10
[3] 15
[4] 20
[5] none of the options [1], [2], [3] and [4]
In equilibrium the demand is equal to supply this is a market clearing equilibrium
�� = ��
120 − = 5�
120=6P
P=20
7. What is the equilibrium quantity of books?
[1] 25
Ralph: +27 68 077 9615
Email:
http://theeconomistsoe.com/
,ECS2601 PRACTICE QUESTIONS AND ANSWERS
YEAR 2021
1. Plastic and steel are substitutes in the production of body panels for certain automobiles.
If the price of plastic increases, with other things remaining the same, we would expect:
[1] the price of steel to fall.
[2] the demand curve for steel to shift to the right.
[3] the demand curve for plastic to shift to the left.
[4] nothing to happen to steel because it is only a substitute for plastic.
[5] the demand curve for steel to shift to the left.
In the case of substitute goods these are goods that can replace each other, that is one can
be used in place of another (in our case plastic and steel can be used interchangeably ) thus
a an increase in plastic prices will lead to consumer opting for cheaper steel panels hence
the demand curve of steel shifts to the right, ceteris paribus.
2. Which of the following would shift the demand curve for new textbooks to the right?
[1] A fall in the price of paper used in publishing texts
[2] A fall in the price of equivalently used textbooks
[3] An increase in the income of students attending college
[4] A fall in the price of new textbooks
[5] An increase in the number of publishers for textbooks
The demand curve is shifted by the determinants of demand other than price which does
not shift the the curve but causes movements along the curve (In our case all other options
are price related except an increase in the number of publishers for textbooks which affects
the supply curve hence not relevant
3. Assume that cooking gas and stoves are complements. When the price of cooking gas
goes up, the demand curve for stoves:
[1] shifts to the left.
[2] shifts to the right.
[3] remains constant.
[4] shifts to the right initially and then returns to its original position.
[5] shifts to the left simultaneously with the demand curve for cooking gas.
Complements are “jointly” demanded goods or products, (in our case we can comfortably
say one cannot use a gas stove without the gas hence if one intends to buy a gas tank they
need gas. If the price of cooking gas increases there is no need to buy a gas tank hence
demand for the demand for gas shift to the left, ceteris paribus.
4. Assume that the current market price is below the market clearing level. We would expect:
[1] a surplus to accumulate.
, [2] downward pressure on the current market price.
[3] upward pressure on the current market price.
[4] no pressure for the price to change further.
[5] quantity demanded to be less than quantity supplied.
When the market price is below the market clearing equilibrium the goods are “too cheap”
and there is excess demand this should lead to upward pressure caused by the tatonnment
process which will lead to walrasian equilibrium. See mascolel
5. If the actual price were below the equilibrium price in the market for bread, a...
[1] surplus would develop that cannot be eliminated over time.
[2] shortage would develop, which market forces would eliminate over time.
[3] surplus would develop, which market forces would eliminate over time.
[4] shortage would develop, which market forces would tend to exacerbate.
[5] surplus, followed by a shortage, would develop instantly.
When prices are below the equilibrium they are artificially too low, hence this causes
shortages however the market forces will bid up prices and eliminate other buyers who
were willing to buy at low prices hence over time demand and supply interact to an
equilibrium.
Use the following information to answer questions 6 and 7: The demand for potatoes is: ��
= 120 − �
The supply of potatoes is: �� = 5�
6. What is the equilibrium price of books?
[1] 5
[2] 10
[3] 15
[4] 20
[5] none of the options [1], [2], [3] and [4]
In equilibrium the demand is equal to supply this is a market clearing equilibrium
�� = ��
120 − = 5�
120=6P
P=20
7. What is the equilibrium quantity of books?
[1] 25
