Demand, Supply, Elasticity, Equilibrium

Which of the following best describes the law of demand?

• As price rises, quantity demanded increases

• As income falls, demand increases

• As price rises, quantity demanded falls

• Demand is independent of price

• Price and demand move together

What happens when the price is below equilibrium?

• Surplus

• Market clears

• Shortage

• Price remains unchanged

• Marginal utility is constant

An increase in consumer income would cause the demand curve for normal goods to:

• Shift to the left

• Stay unchanged

• Shift to the right

• Move along the curve

• Become vertical

If the supply of coffee decreases due to drought, what happens to equilibrium price?

• Decreases

• Stays constant

• Increases

• Drops to zero

• Cannot be determined

Which of the following would shift the supply curve of wheat to the right?

• A drought in wheat-producing regions

• A tax on wheat producers

• A technological advancement in farming

• Increase in fertilizer prices

• Workers’ strike

What does the price elasticity of demand measure?

• The change in supply due to price

• Responsiveness of demand to income

• Responsiveness of quantity demanded to price

• Total revenue from sales

• Marginal cost of consumers

If demand is elastic, what happens when price increases?

• Total revenue increases

• Total revenue decreases

• Total revenue stays constant

• Demand rises

• Quantity demanded is unaffected

Which good is most likely to have perfectly inelastic demand?

• Luxury cars

• Ice cream

• Insulin

• Smartphones

• Vacation trips

What causes a movement along the supply curve?

• Technology

• Price change

• Number of sellers

• Input costs

• Weather conditions

Which statement is true about equilibrium?

• Supply always exceeds demand

• There is no shortage or surplus

• Price is fixed by government

• Only buyers are satisfied

• It always leads to profit