APPLIED ECONOMICS

QUIZ NO. 4

Name: _____________________________________ Section: __________________ Score: ____________

I. TRUE or FALSE: Write TRUE on the space provided if the statement is correct and FALSE if not.

1. __________ If firms have spare capacity, the price elasticity of supply is elastic.
2. __________ If supply is inelastic, producers can increase output without a rise in cost or a time delay.
3. __________ Income elasticity of demand is the effect on the change in demand of one good as a
result of a change in price of related to another product.
4. __________ Normal goods shifts to the right as income rises.
5. __________ Any point above the midpoint has elasticity less than 1.
6. __________ Price elasticity of demand is the responsiveness of quantity demanded, or how much
quantity demanded changes, given a change in the price of goods or services.
7. __________ If a good is in surplus the price tends to rise.
8. __________ Price is the indication of the acceptance of a product; the more popular the product, the
higher the price that can be charged.
9. __________ Elastic demand is one where a given percentage change in price will cause a smaller
percentage change in quantity demanded or supplied
10. __________ Either the producers or consumers can impact prices; consumers can buy whatever they
want; or can producers make and sell whatever they want

II. Answer the following problems. Show your solutions. (5 points each)

1. Last week, the price of coffee in sachets was P50 per bundle and Wilfred was willing to buy 10 bundles.
However, the price went up to P60 and now Wilfred is willing to buy 8 bundles. Is the demand for coffee
elastic or inelastic?

2. Last year, Miguel’s income is P5,000 and ordered food in a Mang Inasal worth P1000. Today, his
income is P6,000 and ordered the same set of foods amounting to P900. In this situation, what type of
good would food be?

3. The table below shows the price and demand for good Y and good X. What is the cross price elasticity
of demand for Good X? Are the goods substitutes, complements or unrelated?

Price of Good Y Demand for Good Y Demand for Good X

Php 1,000 100 250

Php 800 150 300

4. Given the following data for the supply and demand of movie tickets, calculate the price elasticity of
supply when the prices changes from P250 to P300. Is the price for movie tickets elastic or inelastic?

Price Quantity Demanded Quantity Supplied

P150 100 25

P200 90 45

P250 75 75

P300 55 105

P350 30 125