Applied Economics

Long Test

Name: ___________________________________________ Date: _______________ Score: ____________

Read each of the following very carefully and answer NEATLY. Use the space provided for your
answer.

I. Choose the letter of your answer inside the box.

a. Equilibrium price e. Elastic i. Point elasticity m. Oligopoly

b. Elasticity f. Arc elasticity j. Market n. Imperfectly
c. Equilibrium g. Inelastic k. Perfect competition competitive
d. Unitary elastic h. Competition l. Monopoly

______ 1. A change in determinant that leads to a proportionately greater change in demand and
supply is known as _____.
______ 2. It is a situation of diffused, impersonal competition among sellers who compete to sell
their goods and among buyers who use their purchasing power to acquire the available
goods.
______ 3. The price at which demand and supply is equal.
______ 4. A change in determinant that leads to proportionately equal change in demand and supply
is called ____.
______ 5. It is an ideal situation for the buyers and sellers.
______ 6. The value of elasticity is computed by choosing two point on the demand curve and
comparing the percentage changes in the quantity and the price of those two points.
______ 7. It is the state of balance when demand is equal to supply.
______ 8. It exists when a single firm that sells in the market has no close substitutes.
______ 9. A change in determinant that leads to proportionately lesser change in demand and
supply is referred to ____.
______ 10. The measure of how much buyers and sellers respond to changes in market conditions.
______ 11. The market becomes ____ if one or more of the assumptions of perfect competition will
not be met.
______ 12. It is a market dominated by a small number of strategically interacting firms.
______ 13. It measures the degree of elasticity on a single point on the demand curve.
______ 14. It is the rivalry among various sellers in the market.

II. Enumerate the following.

1-3. Types of elasticity of demand 4-6. Degrees of elasticity

III. Answer as required.

1. Using the following demand function, solve the demand schedule of consumer Arthur given
the following prices for a soft drink:
Qd = 25 – P/2

Prices (P) Qd
0
2
4
6
8
10
12
14
16

Based on this schedule, construct a demand curve for Arthur.

 2. On the other hand, for Angel, a seller of a soft drink in the market, the supply function
is given as:
Qs = 4P - 5

Prices (P) Qs
0
2
4
6
8
10
12
14
16

Based on this schedule, construct a supply curve for Angel.

3. What is the equilibrium price and quantity of the soft drink?

Shown to: ______________________________________________

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