Nat 5 Economics Supply, Demand and Equilibrium

According to the law of demand, a decrease in price WILL

• Shifts the demand curve to the right

• Shifts the demand curve to the left

• Results in a contraction of demand (movement along the demand curve to the left)

• Results in an extension of demand (movement along the demand curve to the right)

Which of the following WILL NOT cause a shift in the demand curve to the right?

• An increase in the price of apples, a substitute for oranges

• A new study showing orange juice is good for your kidneys

• A new technology for orange picking making harvesting oranges cheaper

• Consumers expect high prices for oranges later in the month due to hurricanes destroying crops

An increase in the price of pencil lead, an input for No.2 pencils, will;

• cause the demand curve for No. 2 pencils to shift to the right

• cause the supply curve for No. 2 pencils to shift to the left

• cause the demand curve for ballpoint pens , a substitute for pencils to shift to the left

• cause the supply curve for No. 2 pencils to shift to the right

An increase in the price of roses will;

• result in a shift to the right of the supply curve

• result in an increase in the quantity demanded of roses

• result in a decrease in the quantity demanded of roses

• result in a shift to the left of the demand curve

An increase in the price of oat milk, a substitute for almond milk, will:

• decrease the quantity supplied of almond milk

• increase the quantity demanded of oat milk

• shift the demand curve for oat milk to the right

• shift the demand curve for almond milk to the right

According to the law of supply, sellers will be more likely to increase their quantity supplied when

• they can sell their goods cheaply

• when the selling price increases

• when they are the only supplier of a good

• when there are lots of suppliers in the market

Answer explanation

More suppliers is likely to result in lower prices. If the seller is the only supplier they are a monopoly and will most likely restrict output to maintain higher prices.

What happens to the market for cheese when the price of milk decreases?

• the price of cheese decreases and the equilibrium quantity stays the same

• the price of cheese decreases and the quantity of cheese at equilibrium increases, since milk is an ingredient in cheese.

• the price of cheese is unrelated to the price of milk

• the price of cheese increases

Demand for toilet paper soared at the beginning of the pandemic. Some retailers maintained the same price for toilet paper. This generated a (answer) because the quantity supplied was less than the quantity demanded.

When quantity demanded is less than quantity supplied, there is a

• surplus

• shortage

• market equilibrium

• bidding war

The diagram shows the market for ceramic coffee mugs, in which consumers are switching to stainless mugs. There is ONE error. What is it?

• The quantity arrow should be showing the quantity demanded increased

• The equilibrium prices are mislabelled. P1 and P2 should be swapped.

• The equilibrium quantities are mislabelled. Q1 and Q2 should be swapped.

• The demand curves are mislabelled. D1 and D2 should be swapped.