UNIVERSIDAD DE ZAMBOANGA – IPIL

PRINCIPLES OF ECONOMICS
MIDTERM EXAMINATION
ACADEMIC YEAR 2019-2020
2ND SEMESTER

Name: Date:
Year & Section: Score

TEST I. MULTIPLE CHOICE: Identify the letter of the choice that best completes the statement or answers
the question.

____ 1.Which of the following would NOT be a determinant of demand?

a. the price of related goods
b. income
c. tastes
d. the prices of the inputs used to produce the good

____ 2.If the price of a substitute to good X increases, then

a. the demand for good X will increase.
b. the market price of good X will decrease.
c. the demand for good X will decrease.
d. the demand for good X will not change.

____ 3.Suppose you like banana cream pie made with vanilla pudding. Assuming all other things are constant,
you notice that the price of bananas is higher. How would your demand for vanilla pudding be affected by
this?
a. It would decrease.
b. It would increase.
c. It would be unaffected.
d. There is insufficient information given to answer the question.

____ 4.A higher price for batteries would tend to

a. increase the demand for flashlights.
b. decreasethe demand for electricity.
c. increase the demand for electricity.
d. increase the demand for batteries.

____ 5.What will happen in the rice market if buyers are expecting higher prices in the near future?
a. The demand for rice will increase.
b. The demand for rice will decrease.
c. The demand for rice will be unaffected.
d. The supply of rice will increase.

_____ 6. Refer to the graph above, the movement from point A to point B on the graph shows
a. a decrease in demand.
b. an increase in demand.
c. an increase in quantity demanded.
d. a decrease in quantity demanded.

____ 7. Ceteris paribus is a Latin phrase that literally means

a. "other things being equal."
b. "afterthis therefore because of this."
 c. "to respond slowly to a change in price."
d."There's no such thing as a free lunch."

____ 8. Refer to Graph. On the graph, the movement from S to S1could be caused by a.
a decrease in the price of the good.
b. an increase in income.
c. an improvement in technology.
d. an increase in input prices.

____ 9. If, at the current price, there is a shortage of a good,

a. the price is below the equilibrium price.
b. the market can be in equilibrium.
c. sellers are producing more than buyers wish to buy.
d. All of the above answers are correct.

____ 10. Refer to Graph, according to the graph, equilibrium price and quantities are
a.P7, 20. b.P7, 60. c.P5, 40. d.P3, 60.

____ 11.Referto Graph, According to the graph, at a price of $7,

a. there would be a shortage of 40 units.
b. there would be a surplus of 40 units.
c. there would be a surplus of 20 units.
d. the market would be in equilibrium

PRICE QUANTITY DEMANDED QUANTITY SUPPLIED

10 10 100
8 20 80
6 30 60
4 40 40
2 50 20

____ 12. Refer to Table. In the table shown, if the price were P8,
a. a surplus of 30 units would exist and price would tend to fall.
b. a surplus of 60 units would exist and price would tend to rise.
c. a surplus of 60 units would exist and price would tend to fall.
d. a shortage of 30 units would exist and price would tend to rise.

____ 13. Suppose that a decrease in the price of X results in less of good Y sold. This would mean that X and Y
are
a. complementary goods.
b. substitute goods.
c. unrelated goods.
d. normal goods
____ 14. Which of the following is a determinant of demand?
a. the price of a substitute good
b. the price of a complement good
c. the price of the good next month
d. all of the above

____ 15.When we move up or down a given demand curve,

a. only price is held constant.
b. all nonprice determinants of demand are assumed to be constant.
c. income and the price of the good are held constant.
d. all determinants of quantity demanded are held constant.

____ 16. When quantity demanded falls more than proportionally in response to a price increase then demand is
a. Elastic b. Inelastic c. Unitary d. Infinitely inelastic

____ 17. If demand is inelastic and price decreases then total revenue will
a. Rise b. Fall c. Remain constant d. Equal one

____ 18. Price elasticity of supply is calculated by dividing the percentage change in
a. Quantity supplied by the percentage change in quantity demanded
b. Quantity demanded by the percentage change in price
c. Quantity supplied by the percentage change in income
d. Quantity supplied by the percentage change in price

____19. If supply is perfectly inelastic and demand decreases then

a. Price will fall and quantity remain the same
b. Price will rise and quantity will decrease
c. Price will fall and quantity will increase
d. Price will rise and quantity remain the same
____20. he price elasticity of demand measures
a. the slope of a budget curve.
b. how often the price of a good changes
c. the responsiveness of the quantity demanded to changes in price
d. how sensitive the quantity demanded is to changes in demand

TEST – II. FILL IN THE BLANKS. Read each statement or question below carefully and fill in the blank(s)
with the correct answer. Answers may be more than one word.

1. A___________________ is a group of buyers and sellers of a particular product. (MARKET)

2. A ___________________is one with many buyers and sellers, each has a negligible effect on price.(COMPETITIVE)
3. The ________________of any good is the amount of the good that buyers are willing and able to purchase
(QUANTITY DEMANDED)
4. ________________ is a table that shows the relationship between the price of a good and the quantity demanded.
(DEMAND SCHEDULE)
5. The ________________of any good is the amount that sellers are willing and able to sell. (QUANTITY SUPPLIED)
6_____________________ measures the responsiveness of the quantity demanded or supplied of a good to a change in
its price. It is computed as the percentage change in quantity demanded—or supplied—divided by the percentage
change in price.(PRICE ELASTICITY)
7______________ demand or supply curves indicate that the quantity demanded or supplied responds to price
changes in a greater than proportional manner.(ELASTIC)
8. An ______________ demand or supply curve is one where a given percentage change in price will cause a smaller
percentage change in quantity demanded or supplied.(INELASTIC)
9____________ elasticity means that a given percentage change in price leads to an equal percentage change in
quantity demanded or supplied.(UNITARY)
10. ____________________ is a table that shows the relationship between the price of a good and the quantity
supplied.(SUPPLY SCHEDULE)

TEST – III. APPLICATION/COMPUTATION. Answer the following question below. Show your solution and
explain your answer is elastic, inelastic or unit elastic. (5pts) each.

1. Yesterday, the price of envelopes was P3 a box, and Julie was willing to buy 10 boxes. Today, the price has gone
up to P3.75 a box, and Julie is now willing to buy 8 boxes. Is Julie's demand for envelopes elastic or inelastic? What
is Julie's elasticity of demand?

To find Julie's elasticity of demand, we need to divide the percent change in quantity by the percent change in price.

% Change in Quantity = (8 - 10)/(10) = -0.20 = -20%

% Change in Price = (3.75 - 3.00)/(3.00) = 0.25 = 25%
Elasticity = |(-20%)/(25%)| = |-0.8| = 0.8

Her elasticity of demand is the absolute value of -0.8, or 0.8. Julie's elasticity of demand is inelastic, since it is less
than 1.

2. If a rightward shift of the supply curve leads to a 6 percent decrease in the price and a 5 percent
increase in the quantity demanded, the price elasticity of demand is?

3. A 10 percent increase in the quantity of spinach demanded results from a 20 percent decline in its
price. The price elasticity of demand for spinach is?

4. A 20 percent increase in the quantity of pizza demanded results from a 10 percent decline in its
price. The price elasticity of demand for pizza is?

5. Suppose a rise in the price of peaches from P5.50 to P6.50 per bushel decreases the quantity
demanded from 12,500 to 11,500 bushels. The price elasticity of demand is?

6) A fall in the price of lemons from P10.50 to P9.50 per bushel increases the quantity demanded from
19,200 to 20,800 bushels. The price elasticity of demand is?

7.) A fall in the price of cabbage from P10.50 to P9.50 per bushel increases the quantity demanded from
18,800 to 21,200 bushels. The price elasticity of demand is?

8.) Suppose that the quantity of root beer demanded declines from 103,000 gallons per week to 97,000
gallons per week as a consequence of a 10 percent increase in the price of root beer. The price
elasticity of demand is?

9) The price elasticity of demand is 5.0 if a 10 percent increase in the price results in a ________
decrease in the quantity demanded.

10.) A shift of the supply curve of oil raises the price of oil from P9.50 a barrel to P10.50 a barrel and
reduces the quantity demanded from 41 million to 39 million barrels a day. The price elasticity of
demand for oil is?

PREPARED BY: REVIEWED BY: APPROVED BY:

CHRISTINE H. LEAL NEMIA B. HULAGNO, MBA GERALDINE R. TABLATE, ED.D

Instructor Program Chair, BSA & BSBA School Administrator