Econ 11 (Introductory Economics)

FS AY 2021-2022

EXERCISE 2 (Demand and Supply)

As a student of the University of the Philippines, I pledge to act

ethically and uphold the value of honor and excellence.

I understand that any suspected misconduct on given assignments and examinations will be reported to the
appropriate office and, if established, will result in disciplinary action in accordance with University rules,
policies, and procedures. I may work with others only to the extent allowed by the Instructor.

I am typing my name below to signify that I adhere to the honor code.

Name: Jomel Malones De Guzman

Date:
Section: Section 11 MTH 02:30-04:00

After providing answers to the items, you are expected to submit the document
in a printable display format (PDF) through the Google Classroom course page.
The filename must be in this format: Econ11_Exer2_SectionNo_YourSurname.

A. MULTIPLE CHOICE QUESTIONS. Mark the check box that corresponds to the correct answer.
1. Assuming Good X is a normal good, which of the following cannot increase the demand for
Good X?
☐ a. an increase in income
☐ b. a decrease in the price of Good X
 c. an increase in the price of a substitute good
☐ d. an increase in the number of buyers

2. If supply rises and demand is constant,

☐ a. equilibrium price rises and equilibrium quantity falls.
☐ b. equilibrium price falls, and equilibrium quantity falls.
☐ c. equilibrium price rises, and equilibrium quantity rises.
☐ d. equilibrium price falls, and equilibrium quantity rises.

3. If the price of Good X falls and the demand for Good X is price elastic, then
☐ a. the percentage rise in quantity demanded is greater than the percentage fall in price,
and total revenue rises.
☐ b. the percentage rise in quantity demanded is less than the percentage fall in price, and
total revenue falls.
☐ c. the percentage rise in quantity demanded is greater than the percentage fall in price,
and total revenue falls.
☐ d. the percentage rise in quantity demanded is equal to the percentage fall in price, and
total revenue remains unchanged.
4. If supply rises and demand is constant,
 ☐ a. equilibrium price rises, and equilibrium quantity falls.
☐ b. equilibrium price falls, and equilibrium quantity falls.
☐ c. equilibrium price rises, and equilibrium quantity rises.
☐ d. equilibrium price falls, and equilibrium quantity rises.

5. Consider a market whose market demand and market supply for fish (in kilos) are specified as
Qd = 300 – 2.5P and Qs = – 20 + 1.5 P, respectively. The government has decided to impose a
price floor of Php 40 per kilo. What would be the resulting market distortion?
☐ a. Shortage of 160 kilos of fish.
☐ b. Surplus of 120 kilos of fish.
☐ c. Surplus of 160 kilos of fish.
☐ d. There would be no market distortion.

B. STRUCTURED QUESTIONS (You may use Excel Tool 2 to answer items in this section.)

Consider the market for good X. Assume that the market is perfectly competitive. Q is the market
quantity of good X, and P is the market price. The inverse market supply and demand equations are
specified as:
(inverse) demand curve (D):1 P = 200 − 20Q
(inverse) supply curve (S): P = 100 + 10Q

Plot the demand and supply curves in a diagram for the range Q=[0,10] in a PvsQ plane.

1
Inverse demand and supply curves are expressed as P=f(Q) instead of Q=f(P). Using the inverse functions allow you to
take advantage of properties of slope-intercept from (Y=mX + b) in plotting in a P vs Q plane.
1. What is the equilibrium price? Click here to enter text.

2. What is the equilibrium quantity? Click here to enter text.

3. What is the surplus if a price floor is at 160? Click here to enter text.

4. What is the price level where there is a shortage of 3 units? Click here to enter text.

5. What is the price elasticity of demand between P = 5 and P = 6? Click here to enter text.
5.a
Is demand price elastic, price inelastic, or unit elastic? Choose an answer.
.
6. What is the price elasticity of supply between P = 5 and P = 6? Click here to enter text.
6.a
Is supply price elastic, price inelastic, or unit elastic? Choose an answer.
.