#1
If the price of a product decreases and the quantity demanded increases, what is likely happening?
A movement along the demand curve
ExplanationThis is a movement along the demand curve, indicating a change in quantity demanded due to a change in price.
#2
What is the likely effect of an increase in the price of laptops on the market for computer accessories?
An increase in demand for computer accessories
ExplanationAs laptops and computer accessories are complements, an increase in laptop prices boosts demand for accessories.
#3
Which of the following is an example of a substitute good?
Coffee and tea
ExplanationSubstitute goods can be used in place of each other, such as coffee and tea in the case of beverages.
#4
Which of the following is NOT a determinant of demand?
Cost of production
ExplanationCost of production is a determinant of supply, not demand.
#5
What is the likely effect of a decrease in the price of smartphones on the market for digital cameras?
Decrease in demand for digital cameras
ExplanationSmartphones and digital cameras are substitutes; a decrease in smartphone price reduces the demand for digital cameras.
#6
What is likely to happen to the supply of umbrellas during a rainy season?
It will increase
ExplanationDuring a rainy season, the supply of umbrellas rises as producers anticipate higher demand.
#7
What is the relationship between price and quantity demanded according to the law of demand?
Inverse
ExplanationAccording to the law of demand, as price decreases, quantity demanded increases, and vice versa.
#8
Which of the following factors can cause a shift in the demand curve?
All of the above
ExplanationChanges in consumer income, preferences, and expectations can shift the demand curve.
#9
Which of the following is not a determinant of supply?
Consumer preferences
ExplanationConsumer preferences do not directly determine supply; they affect demand.
#10
Which of the following is a determinant of supply?
Input prices
ExplanationInput prices, like labor and raw materials, directly impact the cost of production, influencing supply.
#11
If the government imposes a tax on a good, what happens to the equilibrium price and quantity?
Price increases, quantity decreases
ExplanationTaxes increase the cost to producers, leading to higher prices for consumers and a decrease in quantity demanded.
#12
If the price of coffee increases, what happens to the equilibrium price and quantity of tea?
Price increases, quantity increases
ExplanationTea and coffee are substitutes; an increase in coffee price leads consumers to demand more tea, raising its price and quantity.
#13
Which of the following would cause a rightward shift of the supply curve?
A decrease in the price of inputs
ExplanationLower input prices increase profitability, incentivizing firms to supply more at each price level, shifting the supply curve rightward.
#14
If the demand for a product is inelastic, how would a decrease in price affect total revenue?
Remain unchanged
ExplanationWith inelastic demand, the percentage change in quantity demanded is smaller than the percentage change in price, resulting in unchanged total revenue.
#15
What happens to the equilibrium price and quantity if both supply and demand increase?
Price increases, quantity increases
ExplanationWith both supply and demand increasing, equilibrium price rises due to higher demand, and equilibrium quantity increases due to higher supply.
#16
When the government imposes a price ceiling below the equilibrium price, what is the likely outcome?
A shortage
ExplanationA price ceiling creates excess demand, leading to shortages.
#17
Which of the following would most likely cause a decrease in the supply of oranges?
A decrease in the cost of fertilizer (an input)
ExplanationA decrease in input costs, like fertilizer, reduces production costs, leading to an increase in supply.
#18
What happens to the equilibrium price and quantity if there is a simultaneous increase in both demand and supply?
Price decreases, quantity increases
ExplanationWith an increase in both supply and demand, price decreases due to oversupply, but quantity increases.
#19
In the market for used textbooks, if students expect the price of textbooks to decrease in the future, what is the likely effect on the current market?
Decrease in supply
ExplanationAnticipated future price drops reduce current supply as sellers withhold goods, expecting better prices later.
#20
If both the demand and supply of a product increase simultaneously, what will happen to the equilibrium quantity?
It depends on the magnitude of the shifts
ExplanationThe equilibrium quantity will increase, decrease, or remain unchanged depending on the magnitude of the shifts in demand and supply.
#21
If the demand for a product is perfectly elastic, what is the elasticity coefficient?
Infinity
ExplanationPerfectly elastic demand means any change in price results in an infinite change in quantity demanded.