Supply and Demand

What is market equilibrium?

• When the quantity supplied equals the quantity demanded.
• When the supply curve and demand curve are parallel.
• When the price is at its highest point.
• When the supply curve shifts rightward.

What happens when there is a shortage of goods in a market?

• The price tends to rise.
• The price tends to fall.
• The price remains constant.
• The quantity supplied increases.

Which of the following is an example of a complementary good?

• Printers and ink cartridges.
• Cars and bicycles.
• Coffee and tea.
• Shirts and shoes.

When there is a rightward shift in the demand curve, what happens to the equilibrium price?

• The equilibrium price rises.
• The equilibrium price falls.
• The equilibrium price stays the same.
• The quantity demanded decreases.

What is the effect of a price ceiling on a market?

• It creates a shortage if set below the equilibrium price.
• It creates a surplus if set below the equilibrium price.
• It encourages suppliers to increase production.
• It has no effect on the market.

Which of the following could cause a decrease in supply?

• An increase in the cost of raw materials.
• A decrease in the price of the good.
• An increase in consumer demand.
• An increase in government subsidies.

Which of the following could increase the supply of a good?

• A decrease in the cost of production.
• An increase in consumer demand.
• An increase in the price of the good.
• A decrease in the availability of resources.

What is the effect of a price floor on a market?

• It creates a surplus if set above the equilibrium price.
• It creates a shortage if set above the equilibrium price.
• It decreases production costs.
• It has no effect on the market.

When the quantity supplied is greater than the quantity demanded, the market experiences:

• A surplus.
• A shortage.
• Equilibrium.
• Price stability.

What is the primary determinant of supply?

• The price of inputs and production costs.
• The price of substitutes.
• Consumer preferences.
• The price of the good.

What is a determinant of the elasticity of supply?

• The time period available for producers to respond to price changes.
• The price of the good.
• The quantity demanded.
• The income level of consumers.

If the price is above the equilibrium price, what is likely to occur?

• There will be a surplus of goods.
• There will be a shortage of goods.
• The market will reach equilibrium.
• The demand will increase.

How does the availability of substitutes affect the demand for a product?

• More substitutes lead to more elastic demand.
• More substitutes lead to less elastic demand.
• Substitutes have no effect on demand.
• Substitutes increase the price of the good.

When demand increases and supply remains constant, what happens to the price?

• The price increases.
• The price decreases.
• The price stays the same.
• There is no impact on the price.

If the price of a good rises and the quantity supplied decreases, what does this indicate?

• The good is inelastic in supply.
• The good is elastic in supply.
• The good is a normal good.
• The good is perfectly elastic in supply.

What does the supply curve represent?

• The relationship between price and quantity supplied.
• The relationship between price and quantity demanded.
• The equilibrium point between supply and demand.
• The total quantity demanded at each price.

What is the result of an increase in both demand and supply?

• The equilibrium quantity increases, but the price is uncertain.
• The equilibrium price increases, but the quantity is uncertain.
• The equilibrium quantity decreases, but the price is uncertain.
• Both the price and quantity decrease.

What is the primary determinant of the elasticity of demand?

• The availability of substitutes.
• The price of the good.
• The income of consumers.
• The cost of production.

If the price of a good decreases and its demand increases, this is an example of:

• The law of demand.
• The law of supply.
• Price elasticity of demand.
• Price elasticity of supply.

What happens when both supply and demand decrease in a market?

• The equilibrium quantity decreases, but the effect on price is uncertain.
• The equilibrium price decreases, but the effect on quantity is uncertain.
• The equilibrium quantity and price both increase.
• The equilibrium price and quantity both decrease.

If a good has a perfectly elastic demand curve, what happens to the demand if the price changes?

• The demand becomes zero.
• The demand increases.
• The demand remains unchanged.
• The demand decreases.

What is an example of a perfectly inelastic good?

• Life-saving medicine.
• Luxury cars.
• Fast food.
• Clothing.

What is the relationship between price and quantity supplied according to the law of supply?

• As price increases, the quantity supplied increases.
• As price decreases, the quantity supplied decreases.
• As price increases, the quantity supplied decreases.
• There is no relationship between price and quantity supplied.

What does the price elasticity of demand measure?

• The responsiveness of quantity demanded to changes in price.
• The relationship between price and quantity supplied.
• The effect of supply shifts on price.
• The effect of income changes on demand.

What is the effect of an increase in consumer income on the demand for a normal good?

• Demand increases.
• Demand decreases.
• Demand remains constant.
• There is no effect.

Which factor does NOT shift the demand curve?

• The price of the good itself.
• The income of consumers.
• Consumer preferences.
• The price of related goods.

Which of the following would cause the demand curve to shift to the left?

• A decrease in consumer income.
• An increase in consumer income.
• An increase in the price of substitutes.
• An increase in population.

What is the law of demand?

• As price increases, demand decreases.
• As price decreases, demand decreases.
• As price increases, demand increases.
• Demand remains constant regardless of price changes.

What happens to the equilibrium quantity when both demand and supply increase?

• The equilibrium quantity increases.
• The equilibrium quantity decreases.
• The equilibrium quantity stays the same.
• The effect on quantity depends on the price change.

If a good has an elastic demand, what happens when the price increases?

• The total revenue decreases.
• The total revenue increases.
• There is no change in total revenue.
• The quantity demanded stays the same.

If the price of a good decreases and the quantity supplied decreases, this demonstrates:

• The law of supply.
• The law of demand.
• A shortage.
• A surplus.

What does an increase in supply usually result in?

• A lower equilibrium price and a higher equilibrium quantity.
• A higher equilibrium price and a lower equilibrium quantity.
• A lower equilibrium price and a lower equilibrium quantity.
• No change in equilibrium price or quantity.

What does it mean if a good is considered a "normal good"?

• Demand increases as consumer income rises.
• Demand decreases as consumer income rises.
• Price increases as consumer income rises.
• Price decreases as consumer income rises.

Which of the following factors would cause the demand curve to shift to the left?

• A decrease in the price of complementary goods.
• An increase in income.
• A decrease in the number of substitutes.
• An increase in consumer preferences.

If the price of a good increases and the quantity demanded decreases, this is an example of which economic concept?

• The law of demand.
• The law of supply.
• Elasticity of demand.
• Elasticity of supply.

Which of the following would cause the demand curve to shift to the right?

• An increase in consumer income.
• A decrease in consumer income.
• A decrease in the price of related goods.
• A decrease in population.

Which of the following would cause a leftward shift in the supply curve?

• An increase in production costs.
• A decrease in production costs.
• An increase in consumer demand.
• A decrease in consumer demand.

What will happen if the government imposes a price ceiling below the equilibrium price?

• There will be a shortage.
• There will be a surplus.
• The market will reach equilibrium.
• Price stability will be maintained.

What happens to the market when there is an excess supply?

• The price tends to fall.
• The price tends to rise.
• The price stays the same.
• The quantity demanded decreases.

When supply increases and demand decreases, what happens to the equilibrium price?

• The equilibrium price falls.
• The equilibrium price rises.
• The equilibrium price stays the same.
• There is no change in equilibrium price.

How does an increase in the price of a substitute good affect demand for the original good?

• Demand for the original good increases.
• Demand for the original good decreases.
• There is no change in demand.
• The supply of the original good increases.