Supply and demand

What is not held constant when constructing the supply curve of a firm?

• the price of the factors of production paid for by the firm

• indirect taxes and subsidies on the firm’s products

• the level of technology used by the firm in production

• the market price of the good produced by the firm

What can cause the supply curve for a product to shift to the right?

• an increase in demand for the product

• an increase in government subsidies to producers

• an increase in indirect taxes on the product

• an increase in the costs of production

There has been a movement upwards along the supply curve of a product. What is the most likely explanation for this?

• Consumer incomes have fallen

• New technology has made the product cheaper to produce

• The government has imposed a tax on the product

• The price of a substitute has increased

A newspaper reported that ‘The world market for coffee has returned to equilibrium’. Which situation supports this statement?

• A sequence of poor harvests resulted in shortages

• Decreased transport costs led to a surplus of supply

• Farmers matched demand by planting more coffee bushes

• The price of coffee was fixed between producers.

What is meant by equilibrium in a market?

• where products offered for sale equal consumer demand

• where profit is at the expected level

• where the quantity of inputs equals the quantity of output

• where total costs equal total revenue

What is meant by the equilibrium price in the market for a good?

• the average price paid by consumers

• the price at which maximum profit is made

• the price at which the producer breaks even

• the price at which the supply and demand curves intersect

What is most likely to increase the total output of a firm in the short run?

• a rise in the length of the working day

• a rise in the number of days holiday

• a rise in the school leaving age

• a rise in unemployment payments

Petrol (fuel) retailers in a country have noticed a sharp increase in sales in August when many people take their holidays.

Why might this take place?

• Consumers’ demand curve for petrol shifts to the left in August.

• Consumers’ demand curve for petrol shifts to the right in August.

• Oil refineries increase their output in August

• Travel companies increase their hotel prices in August.

In 2015, the world price of oil fell rapidly due to changes in the conditions of demand and supply. One change was the use of a new method of extraction called fracking.

Which event would not have contributed to the fall in prices?

• China’s growth slowed leading to lower oil imports.

• Saudi Arabia increased the volume of its oil supplies

• UK protest groups prevented the introduction of fracking projects.

• USA became more self-sufficient in oil due to fracking and reduced imports.

What is least likely to lead to an increase in consumer spending on a new car?

• a decrease in the cost of car repairs

• a decrease in the price of petrol

• a decrease in the rate of interest

• a decrease in train fares