IGCSE Economics Paper-1: Specimen Questions with Answers 50 - 51 of 64

Question 50

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Question

MCQ▾

The demand for good increases, equilibrium price remains unchanged. This statement represents what elasticity of supply?

Choices

Choice (4)
a.Perfectly elastic
b.Elastic
c.Elastic
d.Perfectly inelastic

Answer

a.

Explanation

  • Elasticity of supply refers to the degree of responsiveness of percentage change in quantity supplied to a percentage in price. There are five types of elasticity of supply:
    • Perfectly elastic
    • Perfectly inelastic
    • Elastic
    • Inelastic
    • Unitary elastic
  • When the price of the commodity does not changes but the quantity supplied increases it is called perfectly elastic supply i. e. at the current price infinite amount of quantity is supplied in the market and no quantity will be supplied if the price falls. The value of perfect elasticity of supply is equal to infinity.

Question 51

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Question

MCQ▾

If the supply for product X is perfectly elastic and the demand for this product increases:

Choices

Choice (4)
a.Equilibrium quantity will increase but the price will not change
b.Equilibrium price and quantity will increase
c.Equilibrium price will rise but the quantity will not change
d.Equilibrium price and quantity will decrease

Answer

a.

Explanation

  • The shape of perfectly elastic supply curve will be a horizontal straight line parallel to the X-axis and demand curve will be a downward sloping line.
  • When there is an increase in demand of the product there will be a shift in the equilibrium quantity towards the right whereas, the price of the product does not changes. Therefore, equilibrium quantity will rise but price will remain constant.

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