#1
Which of the following represents the law of demand?
As price decreases, quantity demanded increases.
ExplanationInverse relationship between price and quantity demanded.
#2
What happens to equilibrium price and quantity when there is an increase in demand?
Equilibrium price increases; equilibrium quantity increases.
ExplanationBoth price and quantity rise due to increased demand.
#3
Which of the following is likely to result in a decrease in demand for oranges?
A decrease in consumer income.
ExplanationLess purchasing power for oranges.
#4
Which of the following is likely to result in an increase in demand for coffee?
An increase in the price of sugar (a complement).
ExplanationHigher sugar price increases demand for coffee as substitute.
#5
Which of the following is likely to result in a decrease in demand for laptops?
A decrease in consumer income.
ExplanationReduced purchasing power for laptops.
#6
Which of the following is likely to result in an increase in demand for bicycles?
A decrease in the price of cars (a substitute).
ExplanationCheaper cars lead to more demand for bicycles as substitute.
#7
What is the result when there is a surplus in the market?
Excess supply
ExplanationMore goods available than demanded.
#8
Which factor would not cause a shift in the supply curve?
Change in consumer preferences
ExplanationSupply curve is not influenced by consumer preferences.
#9
What is the effect of a price ceiling set below the equilibrium price?
Creates a shortage.
ExplanationDemand exceeds supply at the ceiling price.
#10
What would cause a movement along the supply curve?
Change in input prices.
ExplanationShifts along the supply curve due to input cost changes.
#11
What is the effect of a price floor set above the equilibrium price?
Creates a surplus.
ExplanationSupply exceeds demand at the floor price.
#12
What would cause a shift of the demand curve?
Change in consumer income.
ExplanationIncome changes affecting purchasing power.
#13
What is the effect of a subsidy on equilibrium price and quantity?
Decreases equilibrium price, increases equilibrium quantity.
ExplanationSubsidies lower cost to consumers, stimulating demand.
#14
What would cause a shift of the supply curve to the left?
An increase in the price of inputs.
ExplanationHigher input prices reduce supply.
#15
What is the effect of a tax on equilibrium price and quantity?
Increases equilibrium price, decreases equilibrium quantity.
ExplanationTax raises price for consumers, reducing quantity demanded.
#16
What would cause a shift of the demand curve to the right?
A decrease in government regulations.
ExplanationFewer regulations stimulate consumer demand.
#17
What is consumer surplus?
The difference between the price consumers are willing to pay and the price they actually pay.
ExplanationBenefit consumers gain by paying less than their maximum willingness to pay.
#18
What does the price elasticity of demand measure?
The responsiveness of quantity demanded to a change in price.
ExplanationDegree of responsiveness of quantity demanded to price changes.
#19
In the long run, how is the price elasticity of supply likely to change?
It becomes more elastic.
ExplanationSupply becomes more responsive to price changes.
#20
What does the price elasticity of supply measure?
The responsiveness of quantity supplied to a change in price.
ExplanationDegree of responsiveness of quantity supplied to price changes.
#21
In the long run, how is the price elasticity of demand likely to change?
It becomes less elastic.
ExplanationConsumers have more time to adjust to price changes.
#22
What is the primary determinant of the price elasticity of demand?
Availability of substitutes.
ExplanationDegree to which substitutes are available.
#23
How does a perfectly elastic demand curve look like?
Horizontal line.
ExplanationQuantity demanded changes infinitely with price.
#24
What is the formula for price elasticity of demand?
Percentage change in quantity demanded / Percentage change in price
ExplanationMeasure of responsiveness of quantity demanded to price change.
#25
What is a perfectly inelastic demand curve?
Vertical line.
ExplanationQuantity demanded remains constant regardless of price.