Polytechnic University of the Philippines

Department of Economics
BASIC MICROECONOMICS Chapter 2 Exercises–The Market

Name: Jan Maui A. Vasquez Score: ________________

Course/Year and Section: BSBAMMOUMN 2-A Date: July 19, 2022

Exercise 2
I. Underline the best answer.
1. A favorable change in consumer tastes for a product will (increase, decrease, unchanged)
demand, the demand curve will shift to the (right, left, no shift).
2. An increase in the number of buyers in a market (increases, decreases, unchanged) demand,
demand curve will shift to the (right, left, no shift).
3. As your income rises, your demand for inferior goods (increases, decreases, unchanged),
demand curve for this good will shift to the (right, left, no shift).
4. As your income rises, your demand for superior goods (increases, decreases, unchanged),
demand curve for this good will shift to the (right, left, no shift).
5. A newly expectation of higher prices may cause consumers to (increase, decrease,
unchanged) its current demand, demand curve will shift to the (right, left, no shift).
6. An increase in the price of a good will (increase, decrease, unchanged) the demand for its
substitute good, demand curve for the substitute good will shift to the (right, left, no shift).
7. An increase in the price of a good will (increase, decrease, unchanged) the demand for its
complement, demand curve for its complement will shift to the (right, left, no shift).
8. If there will be a super typhoon tomorrow, present demand will (increase, decrease,
unchanged), demand curve will shift to the (right, left, no shift).
9. When resource prices fall, firms will (increase, decrease, unchanged) their supply, supply
curve will shift to the (right, left, no shift).
10. Due to an increase in resource prices, firms will (increase, decrease, unchanged) their
supply, supply curve will shift to the (right, left, no shift).
11. Increase number of suppliers will (increase, decrease, unchanged) the supply, supply curve
will shift to the (right, left, no shift).
12. A decrease in the sales or property taxes will (increase, decrease, unchanged) supply,
supply curve will shift to the (right, left, no shift).
13. An increase in sales or property taxes will (increase, decrease, unchanged) supply, supply
curve will shift to the (right, left, no shift).
14. If the government subsidizes the production of a good, supply for this good will (increase,
decrease, unchanged), supply curve will shift to the (right, left, no shift).
15. Adopting advance technologies will (increase, decrease, unchanged) supply, supply curve
will shift to the (right, left, no shift).

Exercise 3
1. Consider the following table and answer the following problems:
Price (P) Quantity Demanded Quantity Supplied
(Qd) (Qs)
10 60 50
8 90 40
4 50 60
2 70 70
0 100 30
6 80 20

Demand and Supply Schedule

A. Arrange the above table based on law of demand and law of supply.

Price (P) Quantity Demanded Quantity Supplied

(Qd) (Qs)
0 100 20
2 90 30
4 80 40
6 70 50
8 60 60
10 50 70

B. Derive the demand function using the table.

C. Derive the supply function using the table.
D. Determine the equilibrium price and quantity mathematically.

E. Plot the demand and supply schedules in a diagram. Identify the equilibrium price and
quantity.
F. Suppose the government sets a price floor of 10. Will there be a shortage or surplus?
How large will it be?
ANSWER: the government sets a price floor of 10 there will be a surplus of 30 units
G. Suppose there is an effective price ceiling of 4. Will there be a shortage or surplus? How
large will it be?
ANSWER: If there is an effective price ceiling of 4 there will be a shortage of 40 units.
2. Assume that demand for commodity is represented by the equations P=10-0.20Qd and supply
by the equation P=2+0.20Qs where Qd and Qs, are quantity demanded and quantity supplied,
respectively, and P is the price. Using the equilibrium condition Qs=Qd, solve the equations to
determine equilibrium price and equilibrium quantity. Graph the two equations to substantiate
your answer.

Quantity Demand
Assume that the price is 0.
P= 10 -
Exercise 4
In the space provided, determine the effect increase, decrease or indeterminate on the
equilibrium price and equilibrium quantity on the changes in demand and/or supply.

1. Constant demand; increase in supply.

Pe – decrease, Qe – increase
2. Constant demand; decrease in supply.
Pe – increase, Qe – decrease
3. Increase in demand; constant supply.
Pe – increase, Qe – increase
4. Decrease in demand; constant supply.
Pe – decrease, Qe – decrease
5. Decrease in demand; decrease in supply.
Pe – indeterminate, Qe – decrease
6. Decrease in demand; increase in supply.
Pe – decrease, Qe – indeterminate
7. Increase in demand; increase in supply.
Pe – indeterminate, Qe – increase
8. Increase in demand; decrease in supply.
Pe – increase, Qe – indeterminate