When prices of input materials increase, supply curve shifts to the left while demand remains stable. The shift of supply will tend to cause which of the following?

• A.An increase in the equilibrium price and quantity
• B.A decrease in the equilibrium price and quantity
• C.A decrease in the equilibrium price and an increase in the equilibrium quantity
• D.An increase in the equilibrium price and a decrease inthe equilibrium quantity

Correct Answer: D

The case in the question is illustrated as below:
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The equilibrium price initially at P0 with quantity Q0, when supply curve shifts to the left, it will converge with demand curve at new equilibrium pointwith price P1 and quantity Q1. As you can see from the graph, P1 is greater than P0 and Q1 is smaller than Q0.

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In general, which of the following is the consequence of a flatter demand curve?

• A.Quantityelastic
• B.Price elastic
• C.Price inelastic
• D.Unit price elastic

Correct Answer: B

Explanation
Elasticity refers to the responsiveness of quantity demanded or quantity supplied to a change in price or another factor.
In microeconomic graphs,elasticity and inelasticity can be shown by the slope of the demand curve. If a demand curve is almost horizontal, then the product pricing can be described as very elastic. If a demand curve is almost vertical, then the product pricing can be described asvery inelastic.
The formulae of elasticity:
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LO 2, AC 2.2

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A senior buyer analyses the supply market and he realises that his organisation is treated asExploit according to supplier's perspective model. What does he need to do?

• A.Adopt opaque processes
• B.Increase the spend value
• C.Raise the transactional costs to do business
• D.Pay the suppliers on time

Correct Answer: D

Explanation
The supplier's perspective model has two axes: Spend value and Attractiveness:
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Exploit is the quadrant where the buyer has high spend but low attractiveness. Overarching supplier objective would be: "Milk this customer and charge a high price to compensate for all the painthey put us through".
The buyer should increase its attractiveness to raise the position to Core customer. To do this, a buyer may:
- Simplify procurement processes
- Simplify contracting processes
- Use clear and concise documentation
- Eliminateonerous supplier terms and conditions
- Make the payment on time
- Use transparent processes
- Promote ethical behaviours
LO 1, AC 1.4

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Which of the following are most likely to be characteristics of a perfectly competitive market? Select TWO that apply

• A.In a competitive market, both buyers and sellers areprice givers
• B.Firms can freely enter or exit the market
• C.In a perfectly competitive market, each seller has a large impact on the market price A perfectly competitive market consists of products that are all slightly different from one another
• D.There are many buyers and sellers in the market

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XYZ Ltd needs to purchase a bundle of IT products from suppliers. The procurement manager requests details of costs regarding designing and managing those products. After receiving reports from suppliers, she realises that they have charged up to a 1,095% mark-up on IT products. In order to ensure value for money, which of the following should be a priority pricing arrangement of the procurement manager in the negotiation with these IT suppliers?

• A.Premium pricing
• B.Cost plus arrangement
• C.Market skimming
• D.Market penetration pricing

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