Question 1

Which of the following best describes the law of demand?

Accepted Answer

As the price of a product falls, the quantity demanded increases, ceteris paribus.

Question 2

Suppose the price of reusable water bottles falls from $$30 to 25. $$According to the demand schedule, what happens to the quantity demanded?

Accepted Answer

The quantity demanded increases from 3 million to 4 million bottles per week.

Question 3

Which of the following is an example of a substitute good for reusable water bottles?

Accepted Answer

Bottled spring water

Question 4

If the price of gym memberships increases, what is the expected effect on the demand for reusable water bottles?

Accepted Answer

Demand for reusable water bottles will decrease.

Question 5

A shift to the right of the demand curve for reusable water bottles is most likely caused by:

Accepted Answer

An increase in consumer income, assuming reusable water bottles are a normal good.

Question 6

Which equation best represents market equilibrium?

Accepted Answer

$$ Q_d = Q_s $$

Question 7

If a new producer enters the market for reusable water bottles, what happens to the supply curve and equilibrium price?

Accepted Answer

Supply curve shifts right; equilibrium price falls.

Question 8

Which of the following is NOT a variable that shifts market demand?

Accepted Answer

Technological change

Question 9

What is the effect of a natural disaster on the supply of goods?

Accepted Answer

Supply decreases due to disruptions in production.

Question 10

If the price of an input used to produce reusable water bottles increases, what happens to the supply curve?

Accepted Answer

The supply curve shifts to the left.

Question 11

Which of the following best describes a movement along the demand curve?

Accepted Answer

A change in quantity demanded due to a change in the price of the product.

Question 12

Suppose both demand and supply for reusable water bottles increase. What can be predicted about equilibrium quantity and price?

Accepted Answer

Equilibrium quantity will rise, but the effect on equilibrium price is ambiguous.

Question 13

Which of the following is an example of an inferior good?

Accepted Answer

Second-hand clothes

Question 14

If the price of bottled spring water increases, what happens to the demand for reusable water bottles?

Accepted Answer

Demand for reusable water bottles increases.

Question 15

Which of the following is a complement in production?

Accepted Answer

Beef and leather

Question 16

A shortage occurs in a market when:

Accepted Answer

Quantity demanded is greater than quantity supplied.

Question 17

If consumers expect the price of gasoline to rise tomorrow, what happens to demand today?

Accepted Answer

Demand for gasoline today increases.

Question 18

Which of the following best describes the law of supply?

Accepted Answer

As the price of a product rises, the quantity supplied increases, ceteris paribus.

Question 19

Which of the following is NOT a characteristic of a perfectly competitive market?

Accepted Answer

Barriers to entry

Question 20

Suppose a pandemic causes people to work from home and increases demand for computing equipment. What type of shift is this?

Accepted Answer

A rightward shift of the demand curve for computing equipment.

Chapter 3: Where Prices Come From – The Interaction of Demand and Supply

Study Guide - Practice Questions