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 from $25 to $20. According to the demand schedule, what happens to the quantity demanded?

Accepted Answer

It increases from 4 million to 5 million bottles per week.

Question 3

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

Accepted Answer

A consumer buys more reusable water bottles when their price falls, instead of buying bottled spring water.

Question 4

If the demand for a good increases as income rises, the good is classified as:

Accepted Answer

A normal good

Question 5

Which of the following would cause a shift to the right in the demand curve for reusable water bottles?

Accepted Answer

A successful advertising campaign by influencers promoting reusable water bottles

Question 6

If the price of gym memberships (a complement to reusable water bottles) increases, what happens to the demand for reusable water bottles?

Accepted Answer

The demand curve shifts to the left.

Question 7

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

Accepted Answer

Technological change

Question 8

A change in the price of a product causes:

Accepted Answer

A movement along the demand curve

Question 9

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

Accepted Answer

A hurricane that damages manufacturing plants

Question 10

Suppose the equilibrium price of reusable water bottles is $20 and the equilibrium quantity is 5 million per week. If the price is set at $25, what will occur?

Accepted Answer

A surplus of 2 million bottles

Question 11

If both the demand and supply curves for reusable water bottles shift to the right, 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 12

Which equation represents market equilibrium in a perfectly competitive market?

Accepted Answer

$Q_d = Q_s$

Question 13

If the price of soybeans rises, what is likely to happen to the supply of corn, assuming a farmer can plant either crop?

Accepted Answer

The supply of corn will decrease.

Question 14

Which of the following is an example of a normal good?

Accepted Answer

Restaurant meals

Question 15

A technological improvement in the production of reusable water bottles will:

Accepted Answer

Shift the supply curve to the right

Question 16

If consumers expect the price of gasoline to rise tomorrow, what will happen to the demand for gasoline today?

Accepted Answer

Demand will increase today.

Question 17

Which of the following best explains why the demand for used cars increased during the Covid-19 pandemic?

Accepted Answer

Supply shortages for new cars and reduced rental car fleets

Question 18

A movement along the supply curve is caused by:

Accepted Answer

A change in the price of the product

Question 19

If the price of a product is below equilibrium, what will occur in the market?

Accepted Answer

A shortage

Question 20

Which of the following is a complement in production for beef?

Accepted Answer

Leather

Where Prices Come From: The Interaction of Demand and Supply

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