Question 1

Which of the following best describes the law of demand?

Accepted Answer

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

Question 2

Suppose the price of eggs (as shown in the first image) rises from €2.10 to €2.60 per carton. According to the law of demand, what is the most likely outcome?

Accepted Answer

The quantity demanded of eggs will decrease.

Question 3

Which of the following would cause a shift to the right in the demand curve for gasoline (as shown in the second image)?

Accepted Answer

An increase in the number of car owners.

Question 4

If the demand schedule for tablets is given by the table in the third image, what does the demand schedule illustrate?

Accepted Answer

The relationship between the price of tablets and the quantity demanded.

Question 5

Which of the following is an example of an inferior good, as discussed in the study materials?

Accepted Answer

Second-hand furniture

Question 6

If the price of grape jelly increases, what is likely to happen to the demand for plum jam, a substitute good?

Accepted Answer

The demand for plum jam will increase.

Question 7

Which of the following would NOT cause a shift in the demand curve for Big Macs (as shown in the fourth image)?

Accepted Answer

A decrease in the price of Big Macs.

Question 8

Which of the following is a determinant of supply?

Accepted Answer

Cost of inputs/resources

Question 9

Suppose a new technology reduces the cost of producing tablet computers. What is the likely effect on the supply curve?

Accepted Answer

The supply curve shifts to the right.

Question 10

If the market for a product is in equilibrium, which of the following must be true?

Accepted Answer

Quantity demanded equals quantity supplied.

Question 11

If a hurricane is approaching Florida and consumers expect a shortage of plywood, what will happen to the current demand for plywood?

Accepted Answer

Demand will increase.

Question 12

Which of the following best explains why the equilibrium price is also called the market-clearing price?

Accepted Answer

It is the price at which quantity demanded equals quantity supplied.

Question 13

If the cost of steel rises, what is the likely effect on the supply of cars?

Accepted Answer

Supply decreases.

Question 14

Which of the following scenarios would result in a movement along the demand curve, rather than a shift of the curve?

Accepted Answer

A decrease in the price of the good.

Question 15

If both the demand and supply for lobster increase during the summer, but the increase in supply is greater than the increase in demand, what happens to the equilibrium price?

Accepted Answer

The equilibrium price falls.

Question 16

Which of the following equations represents market equilibrium?

Accepted Answer

$$ Q_d = Q_s $$

Question 17

If the number of sellers in a market increases, what is the likely effect on the supply curve?

Accepted Answer

The supply curve shifts to the right.

Question 18

Suppose the price of a complement good (e.g., peanut butter for grape jelly) decreases. What is the likely effect on the demand for grape jelly?

Accepted Answer

The demand for grape jelly will increase.

Question 19

Which of the following statements is TRUE regarding shifts in demand and supply curves?

Accepted Answer

A change in consumer income can shift the demand curve.

Question 20

If the demand for a normal good increases as income rises, which equation best represents this relationship?

Accepted Answer

$$ D = f(P, I, T, P_r, N, E) $$ where $$ \frac{\partial D}{\partial I} \u003e 0 $$

Supply and Demand: Foundations of Market Equilibrium

Study Guide - Practice Questions

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