Question 1

Suppose the price of energy bars increases from $$1.00 to 1.50 $$per bar. According to the law of supply, what will happen to the quantity supplied, ceteris paribus?

Accepted Answer

The quantity supplied will increase.

Question 2

Given the following demand and supply equations for a good: $$Q_d = 700 - 20P$$ and $$Q_s = 300 + 20P. $$What is the equilibrium price?

Accepted Answer

$$P = 10$$

Question 3

If the price of a substitute good increases, what is likely to happen to the demand curve for energy bars?

Accepted Answer

It will shift rightward.

Question 4

Which of the following best describes the law of demand?

Accepted Answer

As the price of a good rises, the quantity demanded decreases.

Question 5

Suppose the market for energy bars is in equilibrium at $$P = 1.50$$ and $$Q = 10$$ million bars per week. If the price rises to $$2.50$$, what will occur?

Accepted Answer

A surplus will occur.

Question 6

Which of the following would cause a movement along the supply curve, not a shift of the supply curve?

Accepted Answer

A change in the price of the good.

Question 7

If income increases and energy bars are a normal good, what happens to the demand for energy bars?

Accepted Answer

Demand increases.

Question 8

A market is in equilibrium at $$P = 4$$ and $$Q = 500. If $$the price is set at $$P = 7$$, what will be the result?

Accepted Answer

There will be a surplus.

Question 9

Which of the following is NOT a factor that shifts the demand curve?

Accepted Answer

A change in the price of the good itself.

Question 10

Suppose the cost of machinery used to produce energy bars increases. What happens to the supply curve for energy bars?

Accepted Answer

It shifts leftward.

Question 11

If the demand for pizza shifts from $$D_2 to$$ $$D_1 as $$shown in the graph, which of the following could explain this shift?

Accepted Answer

A fall in the price of a substitute good.

Question 12

Which of the following statements is TRUE about market equilibrium?

Accepted Answer

At equilibrium, quantity demanded equals quantity supplied.

Question 13

If the price of energy bars is set below the equilibrium price, what will occur in the market?

Accepted Answer

A shortage will occur.

Question 14

Which of the following best describes an inferior good?

Accepted Answer

A good for which demand decreases as income increases.

Question 15

Suppose the demand curve for energy bars shifts rightward. What will happen to the equilibrium price and quantity, ceteris paribus?

Accepted Answer

Equilibrium price increases, equilibrium quantity increases.

Question 16

If both demand and supply increase simultaneously, what can we predict about the equilibrium quantity?

Accepted Answer

It will definitely increase.

Question 17

Which of the following is an example of the substitution effect?

Accepted Answer

When the price of energy bars rises, people buy fewer energy bars and more granola bars.

Question 18

If the supply curve for a good shifts rightward, what happens to the equilibrium price and quantity, ceteris paribus?

Accepted Answer

Equilibrium price decreases, equilibrium quantity increases.

Question 19

Which of the following is a result of a surplus in the market?

Accepted Answer

The price will fall.

Question 20

Suppose the demand curve for energy bars is $$P = 3 - 0.1Q$$ and the supply curve is $$P = 1 + 0.1Q. $$What is the equilibrium quantity?

Accepted Answer

$$Q = 20$$

Demand and Supply: Foundations of Market Equilibrium

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