$$Q_d = f(P)$$, \text{ where } Q_d \text{ decreases as } P \text{ increases}$

Question 1

Which of the following best describes a competitive market?

Accepted Answer

A market with many buyers and sellers where no single participant can influence the price.

Question 2

According to the law of demand, what happens when the price of a product falls?

Accepted Answer

The quantity demanded increases.

Question 3

Which effect explains why a decrease in the price of a good increases the purchasing power of consumers?

Accepted Answer

Income effect

Question 4

If the price of tea increases and people buy more coffee instead, which concept does this illustrate?

Accepted Answer

Substitution effect

Question 5

A shift in the demand curve can be caused by all of the following EXCEPT:

Accepted Answer

A change in the price of the good itself

Question 6

Which of the following is true about normal goods?

Accepted Answer

Demand increases when income increases.

Question 7

If the price of a substitute good decreases, what happens to the demand for the original good?

Accepted Answer

It decreases.

Question 8

Which of the following would cause a movement along the supply curve, rather than a shift?

Accepted Answer

A change in the price of the good

Question 9

Suppose the population in a city increases significantly. What is the likely effect on the demand curve for housing?

Accepted Answer

The demand curve shifts to the right.

Question 10

If the price of a complementary good increases, what happens to the demand for the related good?

Accepted Answer

It decreases.

Question 11

Which of the following equations represents the law of demand?

Accepted Answer

$$Q_d = f(P)$$, 	ext{ where } Q_d 	ext{ decreases as } P 	ext{ increases}$

Question 12

A decrease in consumer income will most likely cause the demand for which type of good to increase?

Accepted Answer

Inferior good

Question 13

Which of the following best describes a shift in the supply curve?

Accepted Answer

A change in supply due to factors other than the price of the good.

Question 14

If only the price of a good changes, what happens to the supply curve?

Accepted Answer

There is movement along the supply curve.

Question 15

Which of the following scenarios would cause a shift in the demand curve for ice cream?

Accepted Answer

A heat wave increases consumer preference for ice cream.

Question 16

If the price of a product increases from $$10 to 20 $$and the quantity supplied increases from 50 to 100 units, which law does this illustrate?

Accepted Answer

Law of supply

Question 17

Which of the following is NOT a determinant of demand?

Accepted Answer

Cost of production

Question 18

If consumers expect the price of a good to rise in the future, what is the likely effect on current demand?

Accepted Answer

Current demand increases.

Question 19

Which of the following best describes the relationship between price and quantity supplied according to the law of supply?

Accepted Answer

As price increases, quantity supplied increases.

Question 20

A decrease in the price of fast food leads to a decrease in the demand for home-cooked meals. What type of goods are fast food and home-cooked meals?

Accepted Answer

Substitute goods

Demand and Supply: Foundations of Microeconomics

Study Guide - Practice Questions