Tutorial 2 of 14 Mrt.-2 2

TUTORIAL 2 14 March 2023 for EECF1614/EFEC2614
1. Market demand
A. shows how much an individual is willing and able to consume at each and every price.
B. is the horizontal summation of all the individual demand curves in a market.
C. is the vertical summation of all the individual demand curves in a market.
D. is positively sloped.
E. shows how much individuals are willing to supply at each and every price.
2. Which of the following is true with regard to a decrease in the demand for cheese, ceteris
paribus
A. It is represented by a rightward shift of the demand curve.
B. It is represented by a movement upward along the demand curve.
C. It is represented by a movement downward along the demand curve.
D. It is most likely caused by an increase in the price of the good.
E. It is represented by a leftward shift of the demand curve.
3. A decrease in the cost of flour used to bake bread, is most likely to

A. decrease the demand for bread.
B. increase the supply of bread.
C. decrease the equilibrium quantity of bread traded.
D. decrease the quantity of bread demanded.
E. decrease the supply of bread.
4. Which of the following will not cause a shift in the demand curve for tea?
A. A decrease in the price of milk, a complement
B. An increase in the price of tea
C. An increase in the price of coffee, a substitute
D. An increase in the number of people drinking tea
E. An increase in the income of households
5. If there is a successful advertising campaign promoting the health benefits of drinking milk,
then,
A. the demand for milk will increase.
B. the demand for milk will decrease.
C. the supply of milk will increase.
D. the supply of milk will decrease.
E. the demand and supply of milk will increase.
6. If there is a technological breakthrough in the beer manufacturing process then, ceteris paribus
A. the supply of beer will increase.
B. the supply of beer will decrease.
C. the demand for beer will increase.
D. the demand for beer will decrease.
E. there will be no effect on the supply or demand of beer.
7. If the equation for a market demand curve is Qd = 15 – 1/5P and the equation for a market
supply curve is Qs = –1 + 3/5P, the market equilibrium price and quantity are
A. P = 25; Q = 10
B. P = 20; Q = 11
C. P = 15; Q = 12
D. P = 10; Q = 13
E. P = 5; Q = 14
8. If the equation for the demand curve is Q = 450 – 25P and the equation for the supply curve is Q
= –175 + 37,5P, then the equilibrium values for price and quantity are
A. P = 4,4 and Q = 340.
B. P = 5 and Q = 325.
C. P = 10 and Q = 200.
D. P = 11 and Q = 175.
E. P = 12 and Q = 150.
9. Which one of the following statements is incorrect?

A. If the market price is above the equilibrium price, a market surplus will develop.
B. If the market price is below the equilibrium price, there will be an excess demand
for the product.
C. If the market price is below the equilibrium price, a market shortage will develop.
D. If the market price is above the equilibrium price, there will be an excess supply of
the product.
E. If the market price is above the equilibrium price, the quantity demanded is greater
than the quantity supplied.
10. Martin really wants to buy a new surf board. He has been saving for months, he is
willing to pay R3 500 for the new surf board. The day he bought the surf board, it
was on sale; marked down from R3 200 to R3 000. What is Martin’s consumer
surplus?
A. R3 000
B. R500
C. R300
D. R200
E. R0
QUESTION 2
Imagine that there are only three consumers in a particular market for potatoes: Andiswa, Ben and
Corine. We are interested in the demand for potatoes. To illustrate how the market demand curve is
derived, we have to horizontally add the individual demand schedules. The demand equations for
three consumers are as follows.
Andiswa: Qd = 10 – 2P
Ben: Qd = 8 – P
Corine: Qd = 14 – 2P
a) Complete the following table.
Price Qd by Andiswa Qd by Ben Qd by Corine Qd in market

(R/Kg)
1
2
3
4
5
6
7
8
b) Use a set of scaled axes to draw the demand schedules for Andiswa, Ben and Corine, as well
as the market demand schedule. The following is just an example. Draw your graphs big enough
to work with ease.
10
9
8
7
6
5
Price
4
3
2
1
0
5 10 15 20 25 30 35
Quantity
1. Suppose the demand function is given as P = 25 - 1.5QD and the supply function is given as P = 2
+ 0.8QS. Determine algebraically the equilibrium quantity and price?
2. Suppose the market price is R8, what will be the size of the disequilibrium and state if it is a
shortage or a surplus.
3. Briefly explain the difference between a change in demand and a change in the quantity
demanded, noting the cause(s) of each.
4. The diagram below shows a typical market supply and demand curves. Use the diagram to
calculate the size of the consumer surplus and producer surplus.
20
18
16
14
12
10
PRICE
8
6
4
2
0
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
QUANTITY
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TUTORIAL 2 14 March 2023 for EECF1614/EFEC2614

3. A decrease in the cost of flour used to bake bread, is most likely to

9. Which one of the following statements is incorrect?

a) Complete the following table.

Price Qd by Andiswa Qd by Ben Qd by Corine Qd in market

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