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Fundamentals of Business Economics

2.4 The price of coffee beans rose by 5% last year and quantity purchased rose
by 5%. Which of the following statements best explains this?

A There was an increase in supply as a result of new production techniques
but not changes in conditions of demand

B Consumer incomes increased substantially and coffee is a normal good

C The price of cocoa fell substantially and cocoa is a substitute for coffee

D There was a major frost in Brazil that reduced its coffee production, and
Brazil has a big share of world production

2.5 Which one of the following will shift the supply curve for Good B to the
right?

A An increase in the subsidy paid to produce Good B

B A reduction in labour productivity while producing Good B

C An increase in the price of raw materials used to produce Good B

D An increase in wages paid to workers who produce Good B

2.6 A minimum price is set for Good X at £100 which is below the free market
price. A decrease in the supply of Good X, keeping the minimum price fixed
at £100 will result in:

A A rise in price and a surplus of Good X

B A rise in price and a shortage of Good X

C A rise in price and a balance between supply and demand for Good X

D No change in price and a shortage of Good X

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