CFA Level I:Economics - DEMAND AND SUPPLY ANALYSIS INTRODUCTION 学习要点和习题精选 supply, process, causes, achieve, demand

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Demand and Supply Analysis: Introduction(Reading 13)


Learning Outcome Statements (LOS)


a  Distinguish among types of markets;

b  Explain the principals of demand and supply;

c  Describe causes of shifts in and movements along demand and supply curves;

d  Describe the process of aggregating demand and supply curves, the concept of equilibrium, and mechanisms by which markets achieve equilibrium;

e  Distinguish between stable and unstable equilibria and identify instances of such equilibria;     .

f   Calculate and interpret individual and aggregate demand, inverse demand and supply functions and interpret individual and aggregate demand and supply curves;

g  Calculate and interpret the amount of excess demand or excess supply associated with a non-equilibrium price;

h  Describe the types of auctions and calculate the winning price(s) of an auction;

i  Calculate and interpret consumer surplus, producer surplus, and total surplus;

j  Analyze the effects of government regulation and intervention on demand and supply;

k  Forecast the effect of the introduction and the removal of a market interference on price and quantity;

l  Calculate and interpret price, income, and cross-price elasticities of demand and describe factors that affect each measure;

Wendy01

13. The cross elasticity of demand for a complementary product would most likely be: A. zero B. positive C. negative

Ans: C; two goods whose cross-price elasticity of demand is negative are defined to be complements. Alternatively, substitutes have positive cross-price elasticity of demand.

Wendy01

12. Demand for guest rooms in a resort hotel increases from 100 to 150 rooms per night when the nightly room rate increases from $150 to $200. The elasticity of supply of guest rooms in the resort hotel is closest to: A. 0.72 B. 1.40 C. 1.50

Ans: B; we use arc elasticity here:

Wendy01

11. A company determines that the quantity demanded of a product increases by 5% when price is reduced by 10%. The product’s price elasticity of demand is best described as: A. elastic B. inelastic C. perfectly elastic

Ans: B; Here, elasticity is The magnitude of the elasticity coefficient is less than one, so we would say that demand is inelastic at that price.

Wendy01

10. If a price cut of a product increases total revenue, demand is best described as: A.   elastic B.   inelastic C.   unit elastic

Ans: A; a price cut will increase total revenue only if the decrease of price will cause a much more increase in quantity. So the demand is elastic.

Wendy01

9. A consumer good demonstrates the following changes in price and quantity: Quantity Price($) Initial quantity and price 25 15 Quantity and price following a shift in the demand curve 30 20 The elasticity of supply is closest to: A. 0.60 B. 0.64 C. 0.67

Ans: B; we use arc elasticity here:

Wendy01

8. Assume that at current production and consumption levels, a product exhibits price elasticity of demand equal to 1.20 and elasticity of supply equal to 1.45. the true economic consequences of taxes imposed on the seller of such a product are most likely borne: A. By the seller B. By the buyer C. Partly by the buyer and partly by the seller

Ans: C; tax on the seller will cause the supply curve shift to the left, which will also raise the new equilibrium price. So the taxes are partly by the buyer and partly by the seller.

Wendy01

7. If the quantity demanded of pears falls by 4% when the price of apples decreases by 3%, then apples and pears are best described as:       A. substitutes B. complements C. inferior goods

Ans: A; the price of another good might very well have an impact on the demand for a good or service, so we should be able to define an elasticity with respect to the other price. That elasticity is called the cross-price elasticity demand. In this problem, The cross-price elasticity of demand is positive, so they are substitutes.

Wendy01

6. The price of a good falls from $15 to $13. Given this decline in price, the quantity demanded of the good rises from 100 units to 120 units. The price elasticity of demand for the good is closest to: A. 1.3 B. 1.5 C. 10.0

Ans: A; sometimes, we might not have the entire demand function or demand curve, we use something called arc elasticity In this problem,

Wendy01

5. Over a given period, the price of a commodity falls by 5.0% and the quantity demanded rises by 7.5%. the price elasticity of demand for the commodity is best described as: A. elastic B. inelastic C. perfectly elastic

Ans: A; elasticity is defined as the ratio of percentage changes. It is a general measure of how sensitive one variable is to any other variable. Here, elasticity is The magnitude of the elasticity coefficient is greater than one, so we would say that demand is elastic at that price.