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 decreases. Which effect explains why consumers buy more of them?

Accepted Answer

Both the substitution effect and the income effect.

Question 3

Which of the following would cause a shift to the right in the demand curve for new clothes?

Accepted Answer

An increase in consumer incomes.

Question 4

If the price of gym memberships rises, what is likely to happen to the demand for reusable water bottles, assuming they are complements?

Accepted Answer

The demand for reusable water bottles will decrease.

Question 5

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

Accepted Answer

Second-hand clothes

Question 6

A change in which of the following will cause a movement along the demand curve for bottled water?

Accepted Answer

Price of bottled water

Question 7

Which of the following would shift the supply curve for reusable water bottles to the right?

Accepted Answer

A new, more efficient production technology.

Question 8

Suppose a hurricane damages several factories producing water bottles. What is the likely effect on the supply curve?

Accepted Answer

The supply curve shifts to the left.

Question 9

If the price of soybeans increases, what is likely to happen to the supply of corn, assuming they are substitutes in production?

Accepted Answer

The supply of corn will decrease.

Question 10

Market equilibrium occurs when:

Accepted Answer

Quantity demanded equals quantity supplied.

Question 11

At a price above the equilibrium price, what will occur in the market for reusable water bottles?

Accepted Answer

A surplus will occur.

Question 12

If both demand and supply increase for a normal good, what can we predict about the equilibrium quantity and price?

Accepted Answer

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

Question 13

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

Accepted Answer

A change in the price of the product.

Question 14

Suppose the government announces that the price of gasoline will increase next week. What is the likely effect on the current demand for gasoline?

Accepted Answer

Current demand will increase.

Question 15

If a new firm enters the market for reusable water bottles, what happens to the equilibrium price and quantity, all else equal?

Accepted Answer

Equilibrium price falls and equilibrium quantity rises.

Question 16

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

Accepted Answer

Technological change

Question 17

A decrease in the price of an input used to produce reusable water bottles will:

Accepted Answer

Increase the supply of reusable water bottles.

Question 18

Which equation represents the condition for market equilibrium?

Accepted Answer

$ Q_D = Q_S $

Question 19

If a pandemic causes people to avoid restaurants, what happens to the demand for restaurant meals?

Accepted Answer

Demand decreases.

Question 20

Which of the following statements is correct regarding shifts and movements of demand and supply curves?

Accepted Answer

A change in a non-price determinant causes a shift of the curve.

Study Guide: The Interaction of Demand and Supply in Markets

Study Guide - Practice Questions