Question 1

Which of the following best describes the concept of 'demand' in microeconomics?

Accepted Answer

The definite purchase of a good or service, with both willingness and ability to pay.

Question 2

Suppose the price of coffee increases. According to the substitution effect, what is likely to happen to the demand for tea?

Accepted Answer

The demand for tea will increase because tea becomes relatively cheaper compared to coffee.

Question 3

If the price of a normal good decreases, what is the income effect on the quantity demanded?

Accepted Answer

Consumers feel richer and buy more of the good.

Question 4

Which of the following best illustrates the difference between a 'change in demand' and a 'change in quantity demanded'?

Accepted Answer

A change in demand is a shift of the demand curve; a change in quantity demanded is a movement along the demand curve.

Question 5

If the price of iPhones rises, what happens to the demand for other smartphones, assuming they are substitutes?

Accepted Answer

The demand for other smartphones increases.

Question 6

Which of the following is NOT a factor affecting supply?

Accepted Answer

Consumer preferences

Question 7

A rightward shift in the supply curve indicates:

Accepted Answer

An increase in supply at every price.

Question 8

Which scenario best illustrates the income effect?

Accepted Answer

After a decrease in the price of bread, consumers buy more bread because their purchasing power has increased.

Question 9

If a firm lowers its production costs, what is the likely effect on supply and revenue?

Accepted Answer

Supply increases and revenue may increase if more units are sold.

Question 10

Which of the following is a determinant of demand?

Accepted Answer

Consumer income

Question 11

A leftward shift in the supply curve can be caused by:

Accepted Answer

An increase in production costs

Question 12

Which of the following equations represents the law of demand?

Accepted Answer

$$ Q_d = f(P) $$ where $$ Q_d $$ decreases as $$ P $$ increases

Question 13

A successful advertising campaign for a product is most likely to:

Accepted Answer

Shift the demand curve to the right.

Question 14

If both the demand curve shifts rightward and the supply curve shifts leftward, what is the likely effect on equilibrium price?

Accepted Answer

Equilibrium price will increase.

Question 15

Which of the following best explains why a firm should change its products according to customer needs?

Accepted Answer

To expand the market and reach more customers.

Question 16

If the price of a product increases and the quantity demanded decreases, this is an example of:

Accepted Answer

A movement along the demand curve.

Question 17

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

Accepted Answer

Consumers buy more generic cereal when the price of branded cereal increases.

Question 18

If a company uses promotions to reach more customers, which factor affecting demand is it leveraging?

Accepted Answer

Advertising and consumer preferences

Question 19

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 product

Question 20

If the supply curve shifts rightward while the demand curve remains unchanged, what happens to equilibrium price and quantity?

Accepted Answer

Equilibrium price decreases and equilibrium quantity increases.

Microeconomics Tutorial 3: Demand, Supply, and Market Effects

Study Guide - Practice Questions