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ECON 260
COURSE NUMBER
Fundamentals of Microeconomics
INSTRUCTOR NAME
Assignment NAME
STUDENT NAME
ID NUMBER
Abdulla Alhajeri
20123155
DATE
B-
C-
D-
2- If an increase in the price of blue jeans leads to an increase in the demand for tennis shoes, then
blue jeans and tennis shoes are
A- Substitutes
B- Complements
C- Normal goods
D- Inferior goods
3- The law of demand states that an increase in the price of a good
A- Decreases the demand for the good
B- Decreases the quantity demanded for that good
C- Increases the supply of the good
D- Increases the quantity supplied of that good
4- The law of supply states that an increase in the price of a good
A- Decreases the demand for the good
B- Decreases the quantity demanded for that good
C- Increases the supply of the good
D- Increases the quantity supplied of that good
5- If an increase in consumer incomes leads to a decrease in the demand for camping equipment,
then camping equipment is
A- A complementary good
B- A substitute good
C- A normal good
D- An inferior good
6- Which of the following shifts the demand for watches to the right?
A- A decrease in the price of watches
B- A decrease in consumer incomes if watches are a normal good
C- A decrease in the price of watch batteries if watch batteries and watches are
complements
D- An increase in the price of watches
7- All of the following shift the supply of watches to the right except
ABCD-
Part 2.Suppose that you have been hired as an economic consultant by OPEC and given the following
schedule showing the world demand and supply for oil:
(60 Marks)
Price ($/barrel)
10
Quantity Demanded
(millions of barrels/day)
60
Quantity Supplied
(millions of barrels/day)
20
20
30
40
50
50
40
30
20
30
40
50
60
What do we call the gap between the quantity demanded and quantity supplied?
Answer (1)
70
60
50
40
Price
30
20
Equilibrium
10
Quantity
0
10
20
30
40
50
Quantity
(2)
If the price raises from $20 to $30 a barrel, will the total revenue from oil sales will raise
(3)
Q p
.
p q
= (40-50)/ (30-20)*20/50
=-2/5
Q p
.
p q
= (50-40)/ (30-20)*20/50
=2/5
(4) If the price of oil degrease from equilibrium price $30 to new price $20 then:
-
The gap between the quantity demanded and quantity supplied is called shortage
The Value of the Gab = 10$
The advice to return to the equilibrium situation is Suppliers will raise the price due
to too many buyers chasing too few goods, thereby moving toward equilibrium