#1
What happens to the equilibrium price and quantity when demand increases?
Equilibrium price increases; equilibrium quantity increases
ExplanationHigher demand drives prices up and increases the quantity traded.
#2
What causes a shift in the supply curve?
Changes in input prices
ExplanationAlterations in input costs affect the supply of goods in the market.
#3
Which of the following is NOT a determinant of demand?
Cost of production
ExplanationThe cost of production primarily affects supply, not demand.
#4
What does the price elasticity of demand measure?
The responsiveness of quantity demanded to changes in price
ExplanationIt quantifies how demand changes with variations in price.
#5
What is the main reason for the law of demand?
Substitution effect
ExplanationConsumers switch to alternatives when prices rise, lowering demand.
#6
Which of the following would likely increase the equilibrium quantity of a good?
A decrease in the price of substitute goods
ExplanationLower prices of substitutes encourage consumers to buy more of the good in question.
#7
What is the likely effect of a decrease in both supply and demand on equilibrium price and quantity?
Equilibrium price decreases; equilibrium quantity decreases
ExplanationDecreases in both supply and demand lead to lower prices and quantity traded.
#8
What is the effect of an increase in both supply and demand on equilibrium quantity?
Equilibrium quantity may increase or decrease depending on the magnitude of the changes
ExplanationThe net effect on equilibrium quantity depends on the relative magnitude of supply and demand shifts.
#9
What happens to equilibrium price and quantity when supply decreases and demand increases?
Equilibrium price increases; equilibrium quantity may increase or decrease
ExplanationPrice increases due to increased demand, but quantity traded depends on the magnitude of changes.
#10
If the price elasticity of supply for a good is greater than 1, the supply curve is:
Relatively elastic
ExplanationChanges in price lead to proportionately larger changes in quantity supplied.
#11
If the price of a good is above the equilibrium price, what is likely to happen?
There will be a surplus, causing the price to decrease
ExplanationExcess supply at higher prices drives down prices to reach equilibrium.
#12
If the demand for a good is perfectly elastic, what does this imply?
Any increase in price will lead to zero quantity demanded
ExplanationConsumers are extremely responsive to price changes, buying none if the price increases.
#13
When supply and demand are both elastic and a tax is imposed on the good, who bears more of the burden of the tax?
It is shared equally between consumers and producers
ExplanationBoth consumers and producers absorb some portion of the tax burden.
#14
What happens to equilibrium price and quantity when both supply and demand decrease?
Equilibrium price decreases; equilibrium quantity may increase or decrease
ExplanationPrice falls due to decreased demand, but quantity traded depends on the magnitude of changes.
#15
If a price floor is set above the equilibrium price, what is the likely outcome?
A surplus of the good
ExplanationPrice floor prevents prices from falling, leading to excess supply.