P.

NSS Economics Class

Chapter 4 – Change in Demand and Supply
Test 4e

Multiple-Choice Questions

1. Which of the following is an example of competitive demand?

A. computers and printers

B. canola oil (芥花籽油) and corn oil

C. DVD players and DVDs

D. magazines and paper

2. Suppose the price of photo printers drops. Which of the following would happen?

A. The quantity demanded for photo printers and the demand for photo paper
increase at the same time.

B. The quantity demanded for photo printers and the demand for photo paper
decrease at the same time.

C. The demand for photo printers and the demand for photo paper increase at the
same time.

D. The demand for photo printers and the demand for photo paper decrease at the
same time.

3. Which of the following CANNOT lead to an increase in demand for a good?

A. An increase in income

B. A decrease in income

C. An increase in the price of its substitutes

D. An increase in the price of its complements

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4. McDonald’s hamburgers and Burger king’s hamburgers are examples of

A. competitive demand.

B. joint demand.

C. derived demand.

D. superior goods.

5. After receiving a pay rise, Ming switched to eating dragon fruit instead of bananas.
Which of the following statements is correct?

A. Bananas are a normal good.

B. Bananas are an inferior good.

C. Bananas and apples are examples of joint demand.

D. Bananas and apples are examples of competitive demand.

6. Despite a substantial increase in its input prices, the price of plastic bags has
decreased. This is because

A. the production cost of environmentally-friendly shopping bags has decreased,

and the change in demand for plastic bags is smaller than that of the supply.

B. the production cost of environmentally-friendly shopping bags has increased, and

the change in demand for plastic bags is larger than that of the supply.

C. supermarkets offer price rebates (價格回贈) for customers who carry

environmentally-friendly shopping bags with them, and the change in demand for
plastic bags is smaller than that of the supply.

D. more people are willing to use environmentally-friendly shopping bags, and the
change in demand for plastic bags is larger than that of the supply.
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7. There were two brands of soft drinks in the market, Y and Z. The market of soft drink
Y was originally at its equilibrium. Recently, the popularity of soft drink Z increased
because of an advertising campaign. Suppose the producer of soft drink Y did not
adjust the price accordingly, which of the following statements about soft drink Y is
CORRECT?

A. The sales revenue would increase.

B. There would be an excess demand.

C. The quantity transacted would increase.

D. The quantity demanded would be smaller than the quantity supplied.

8. Which of the following pairs is in competitive demand?

A. Bowls and chopsticks

B. Rubber and pencils

C. Textbooks and past public exam questions

D. Yahoo! Messenger and MSN Messenger

9. Which of the following pairs is in joint demand?

A. Blackboard and chalk

B. Nike sneakers (運動鞋) and Reebok sneakers

C. Fish and pork

D. Bus service and taxi service

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10. The price of electric cars decreases due to technological improvements. This leads
to an increase in the demand for

(1) gasoline cars.

(2) battery charge stations for electric cars.

(3) batteries for electric cars.

A. (2) only

B. (1) and (2) only

C. (1) and (3) only

D. (2) and (3) only

11. When the price of good X increases, the supply of good Y also increases. Good X is
most likely ____________ and good Y is most likely ___________.

A. VCD player … DVD player

B. pork … pigskin

C. fresh fish … frozen fish

D. yarn (毛線) … knitting needle

12. Which of the following will lead to an increase in the supply of a good?

A. An increase in its price.

B. An increase in the price of the other good in joint supply with it.

C. A rise in its production cost.

D. Some producers quit the industry.

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13. An increase in the price of cloth will NOT lead to a decrease in

A. the supply of cloth bags.

B. the quantity demanded for table cloths.

C. the supply of shirts.

D. the demand for skirts.

14. Suppose the supply curve of vegetables is upward sloping. Which of the following
will lead to an increase in the price and quantity transacted of vegetables in Hong
Kong?

A. People become aware that eating vegetables is good for health.

B. People now prefer fruit to vegetables.

C. There is an improvement in agricultural technologies.

D. There is bad harvest of vegetables in the Mainland.

15. Suppose more people in Hong Kong like travelling abroad for holiday. Which of the
following statements is INCORRECT?

A. The demand for air tickets increases.

B. The supply of air tickets increases.

C. If the supply curve of air tickets is upward sloping, the equilibrium price of air
tickets increases.

D. If the supply curve of air tickets is upward sloping, the quantity transacted of air
tickets increases.
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16. Owing to a decrease in the number of school age children,

A. the supply of both teachers and textbooks decreases.

B. the demand for both teachers and textbooks decreases.

C. the demand for teachers decreases while the demand for textbooks increases.

D. the supply of teachers increases while the supply of textbooks decreases.

17. This year, while the price is lower, the quantity transacted of deep-water fish is
higher than that of last year. Which of the following is a possible explanation?

A. More people like eating deep-water fish.

B. People are afraid of the toxic pollutants such as mercury in the deep-water fish.

C. The number of deep-water fish supplier increases.

D. The number of deep-water fish decreases due to over-fishing.

18. The economy of a country is recovering and most people receive a pay rise. At the
same time, the price of cement and wages of construction workers increase. If the
demand curve for new flat is downward sloping and supply curve of new flat is
upward sloping, the equilibrium price of new flat _________ and its quantity
transacted _________.

A. increases … decreases

B. increases … may increase, decrease or remain unchanged

C. decreases … decreases

D. is uncertain … increases
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19. Suppose some red wine producers enter the market and the level of income for most
people in the economy has increased. If the demand curve for red wine is downward
sloping and the supply curve is upward sloping, which of the following statements is
CORRECT?

A. There will be a decrease in the supply of red wine.

B. The quantity transacted of red wine will decrease.

C. The equilibrium price of red wine may remain the same.

D. The quantity demanded for red wine increases but the demand for red wine
remains unchanged.

20. When both the demand for and the supply of a good decrease,

A. the equilibrium price of the good must increase.

B. the equilibrium price of the good must decrease.

C. the equilibrium quantity of the good must increase.

D. the equilibrium quantity of the good must decrease.

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21. The diagram below is the supply-demand diagram for wool scarves.
Unit price

S1

S0

D1

D0
0
Quantity

Which of the following would cause the demand curve and the supply curve of wool
scarves to shift in the ways as shown by the above diagram?

A. The price of wool scarves increases and new methods are invented to produce
more beautiful scarves.

B. The weather is colder compared with last year and the price of wool increases.

C. Most people receive a pay rise.

D. People think it is not fashionable to wear wool scarves and more producers enter
the wool scarves market.

22. Which of the following statements about endogenous and exogenous variables is
INCORRECT?

A. A change in endogenous variables leads to a movement along the demand or

supply curve.

B. A change in exogenous variables leads to a shift of the demand or supply curve.

C. Within the demand and supply framework, income is an endogenous variable.

D. Exogenous variables are those variables with values cannot be determined in the
model.
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23. The following diagrams show the effect of an increase in the demand for Good X on
Good Y.

Price Price
Good X Good Y
S
S0 S1

D1
D0
0 Quantity 0 Quantity

Good X and Good Y are most likely ________ and ________, respectively.

A. laser printers; inkjet printers

B. snake soup; snake gall bladders (蛇膽)

C. Li Ning badminton shoes; Li Ning tennis shoes

D. tinned food (罐頭食品); aluminium cans

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24. The following shows the market for HDTV (高清電視) in Hong Kong.

Price
S2
H S0

S1
F E G

D1
I D0
D2
0 Quantity

Suppose the technology involved in the production of HDTV improves. Moreover, more
Hong Kong people want to replace their traditional televisions with HDTV. As a result of
the above events, the equilibrium point of the HDTV market in Hong Kong will change
from Point E to

A. Point F.

B. Point G.

C. Point H.

D. Point I.
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25. The following shows the market for toys from the mainland of China in the United
States.

Price
S2
H S0

S1
F E G

D1
I D0
D2
0 Quantity

The initial equilibrium is Point E. Suppose cases where children are poisoned by
materials in the toys from the mainland of China increase and the shipping cost of these
toys increases. As a result, the new equilibrium point would be

A. Point H.

B. Point G.

C. Point F.

D. Point I.
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26. The following shows the market for tinned luncheon meat (午餐肉).

Price
S2
H S0

S1
F E G

D1
I D0
D2
0 Quantity

Since a new bauxite mine (鋁礦) has been found, the production cost of tins for tinned
food has decreased. However, more Hong Kong people are avoiding tinned luncheon
meat as many livestock in the mainland of China are infected by foot and mouth disease
(口蹄病). As a result of the above events, the equilibrium point will change from Point E
to

A. Point F.

B. Point G.

C. Point H.

D. Point I.
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27. Suppose in view of the increasing business costs, the government reduces the tax
on gasoline.

Price

S0

S1

D
Quantity

The above graph shows the effect of the policy on which of the following markets?

A. The tourist industry.

B. The food and beverage industry.

C. The banking and finance industry.

D. The transportation industry.

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28. After the water supply system in southern China was devastated by a flood, the price
of drinking water in southern China increased drastically. Which of the following
diagrams best describes the market for drinking water in southern China?

A. B.
Price Price
S2 S

S1
P2
P2
P1
P1
D2
D
D1
0 0
Q2 Q1 Drinking Q1 Q2 Drinking
water water
C. D.
Price Price
S2
S S1

P2 P2
P1
P1
D2
D1
D1 D2
0 0
Q1 Q2 Drinking Q2 Q1 Drinking
water water
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29. The MTRCL (港鐵公司) has implemented its ‘Ride 10 get 1 free’ special offer. Which
of the following diagrams illustrates the effect?

A. MTR services B. MTR services

Price Price S1

S S2
P2
P
P1
D2
D1
0 0
Q1 Q2 Quantity Q1 Q2 Quantity

C. Bus services D. Bus services

Price Price
S S

P1 P2

P2 P1
D1 D2
D2 D1
0 0
Q2 Q1 Quantity Q1 Q2 Quantity
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30. The Eastern Harbour Tunnel has raised the tunnel toll for private cars from $15 to
$[Link] of the following diagrams illustrates the effect?

A. Minibus services B. MTR services

Price Price

S
P2
P
P1

D2
D1
0 0
Q1 Q2 Quantity Q1 Q2 Quantity

C. Taxi services D. Bus services

Price S1
Price
S2 S

P1
P2 P1

P2
D D1
D2
0 0
Q1 Q2 Quantity Q2 Q1 Quantity
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31. Which of the following shows the effect of an increase in water charge in Hong Kong?

A. Unit price B.
Unit price
S1
S0
S

D D0
D1
Laundry Laundry
service service
C. Unit price D.
Unit price
S1
S S0

D0
D1
D1 D0
Domestic Domestic
water water
consumption consumption
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32. Suppose the Hong Kong government reduces the sale of live chicken in Hong Kong
in an attempt to prevent the spread of avian influenza. Which of the following
diagrams illustrates the effect of the above measure?

A. B.
Price Price
S1 S

S2
P1
P1
P2
P2
D1
D
D2
0 0
Q1 Q2 Quantity of Q2 Q1 Quantity of live
live chicken in chicken in Hong
C. Kong
Hong Kong D.
Price Price
S1
S2
S
P2 P1
P1 P2
D2
D2
D1 D1
0 0
Q1 Q2 Quantity of Q1 Q2 Quantity of
chilled chicken chilled chicken
from Brazil from Brazil
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Short Questions

33. Many private clinic chains have opened in recent years. However, it has also been
reported that the shortage of public medical services has increased at the same time.
Explain this phenomenon with the aid of a diagram. (7 marks)

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34. Recently, a number of banks announced that they would raise their mortgage
interest rates on private residential properties. With the aid of a diagram, explain
how this affects the price and quantity transacted of public residential properties. (6
marks)

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35. Nowadays, more people run organic farms and the number of shops selling organic
food increases drastically. At the same time, more people know the advantages of
eating organic food. This makes eating organic food more popular. Nevertheless, it
is observed that the price of organic food falls. Explain this situation with the aid of a
diagram. (7 marks)

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