Part I: Yes/No-Questions(3 points * 7 = 21 points)

1. The law of demand simply states that the lower the price of a product, the less amount that consumers are willing to buy. ( )

2. The availability of substitutes affects the slope of the demand curve. ( )

3. Generally, a change in the price of a good cause a movement along a demand curve, while a change in any other factor besides the price the good causes a shift of the demand curve. ( )

4. An increase in the price of lamb will shift out the demand curve for steak. ( )

5. The imposition of a $5 per ton tax on coal will shift out the supply curve for coal. ( )

6. Economic tax incidence depends on the relative slopes of the supply and demand curves. Specifically, the greater share of the economic tax incidence falls on the more inelastic party. ( )

7. The price elasticity of demand, , means a 1% increase in price leads to an % change in quantity demanded. ( )

Part II: Multiple Choice Questions(3 points * 3 = 9 points)

1. Demand for park visits is Q =10,000 100P. How many visitors will attend if the park charges a $20.00 admission fee?
2. 2,000
3. 4,000
4. 6,000
5. 8,000

1. Suppose the demand for vanilla ice cream was described by the equation Q = 20 - p, and the supply was described by Q = 10 + p. What are the equilibrium price (P*) and quantity (Q*)?
2. P* = -40, Q* =20
3. P* = 5, Q* = 15
4. P* = 10, Q* =50
5. P* = 25, Q* = -25

1. When he prices of materials required in bathtub production increase, what effect (if any) does it have on the supply curve for bathtubs?

Price Quantityc. The price of bathtubs rise Price Quantity