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Economics Assignment

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12 views

Economics Assignment

Uploaded by

alexanderzewdu7
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Addis Ababa Medical and Business College, Dire Dawa Campus

Individual Assignment for Introduction to Economics


Accounting and Finance I year (Regular)
Mark 30 % Feb, 2024
Deadline for submission Tomorrow
Late Submission has no credit
Plagiarism is strictly prohibited
Part I Multiple Choice (20pts)
1. When an increase in the price of one good causes the demand for the other good to decline,
then the two goods are______________
A. Complements B. Substitutes C. Superior D. Inferior
2. Which one is true about the properties of indifference curve?
A. Indifference curve has upward sloping curve
B. Two indifference curves intersect each other
C. Indifference curve is convex to the origin
D. Utility level can change on the same indifference curve
3. Law of demand shows relation between:
A. Income and price of commodity C. price and quantity demand
B. income and quantity of a commodity D. Quantity demanded and quantity supplied
4. In case income of the consumer change, with prices of the two goods remaining the same,
A. there will be a parallel shift in the budget line
B. there will be rotation in the budget line
C. there will be movement along the budget lineD. B & C
5. If quantity demanded is completely unresponsive to changes in price, demand is:
A. Inelastic B. Unit C. elastic D. perfectly inelastic
6. What does price elasticity of demand measure?
A. Change in price caused by changes in demand
B. The rate of change of sales
C. The responsiveness of demand to income changes
D. The responsiveness of demand to price changes

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7. A fall in the price of a good causes producers to reduce the quantity of the good they are
willing to produce. This fact illustrates
A. a change in supply
B. the law of demand
C. the nature of an inferior good
D. the law of supply
8. A shift of the demand curve can be caused by
A. a change in income
B. the number of buyers
C. the prices of related goods
D. price of the good
E. all except D
9. Determinants of Supply are
A. Price of the Commodity
B. Tax
C. Changes in Factor Prices
D. Subsidy
E. All
10. Which one of the following is the best reason for choosing ordinal utility rather than cardinal
utility in consumer behavior analysis?
A. Utility differs from individual to individual and does not have unit of measurement.
B. Utility of different individuals has a common cardinal measure, but we don’t know that
measure.
C. Ordinal measures of utility of different individuals measure increases in utility but not
declines in utility.
D. There are common measures of utility of different individuals and ordinal measure is an
additional measure.
E. none

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Part IIWork out(10 Pts)
1. Assume that a consumer consumes two goods, A and B. His/her limited income to spend on
his/her consumption is Birr 20, and the price of good A is Birr 1 per unit and that of good B is
Birr 2 per unit. From the following hypothetical data, find the level of his/her consumption, so
that he/she maximizes his/her utility.

Unit MuA/PA MuB/PB


1 10 24
2 8 20
3 7 18
4 6 16
5 5 12
6 4 6
7 3 4

2. Suppose that consumer utility function is U =√ Q1 Q2 , and if P1= 4, P2= 1 and the consumer
money income I = 120. What are the optimal values of Q1&Q2?
(Use Lagrangian Method)
(Illustrate your answers diagrammatically)

3. Consider the following demand and supply equations for the product of a perfectly
competitive industry: Qd = 25 - 3P
Qs = 10 + 2P

a. determine the market equilibrium price and quantity.


b. suppose that government regulatory authorities imposed a price floor on this product of
P= $4.What would be the quantity supplied and quantity demanded of this product?
How would you characterize the situation in this market?
(Illustrate your answers diagrammatically)

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