#1
Which of the following would cause an increase in demand?
A decrease in the price of the good itself
ExplanationA lower price encourages more buyers, leading to increased demand.
#2
What does the law of demand state?
There is an inverse relationship between price and quantity demanded
ExplanationAs price rises, quantity demanded falls, and vice versa.
#3
Which of the following would cause a movement along the demand curve?
A change in the price of the good itself
ExplanationMovements along the curve result from changes in the price of the specific good.
#4
What is the law of supply?
There is a direct relationship between price and quantity supplied
ExplanationAn increase in price typically leads to an increase in the quantity supplied.
#5
What is the difference between a movement along the supply curve and a shift of the supply curve?
A movement along the curve is caused by a change in price, while a shift is caused by a change in factors other than price
ExplanationPrice changes cause movements along the curve, while shifts result from non-price factors.
#6
If supply increases while demand remains constant, what will happen to equilibrium price and quantity?
Price will decrease, quantity will increase
ExplanationMore supply with constant demand lowers prices but increases the quantity traded.
#7
What does the concept of elasticity of demand measure?
The responsiveness of quantity demanded to a change in price
ExplanationElasticity indicates how much quantity demanded changes in response to price changes.
#8
If demand decreases while supply remains constant, what will happen to equilibrium price and quantity?
Price will increase, quantity will decrease
ExplanationLess demand and constant supply raise prices but reduce the quantity traded.
#9
What is a perfectly elastic demand curve?
A horizontal demand curve
ExplanationA demand curve where quantity demanded is extremely responsive to price changes, resulting in a horizontal line.
#10
If both demand and supply increase, what will happen to equilibrium price and quantity?
Price will increase, quantity may increase or decrease depending on the magnitude of change
ExplanationAn increase in both demand and supply generally raises prices, but the effect on quantity depends on the magnitude of the changes.
#11
What is the effect of a binding price floor in a market?
It creates a surplus of the good
ExplanationA price floor above equilibrium leads to excess supply, creating a surplus.
#12
In the long run, what can firms do to adjust to changes in market conditions?
All of the above
ExplanationFirms can change production levels, enter or exit the market, and adjust factors of production in response to market changes.
#13
What happens to the price of a good when both demand and supply decrease?
Price may increase or decrease depending on the magnitude of change
ExplanationThe impact on price depends on the relative magnitude of the decrease in demand and supply.
#14
What happens to the equilibrium price and quantity if both demand and supply decrease, but the decrease in supply is greater than the decrease in demand?
Price increases, quantity decreases
ExplanationA greater decrease in supply than demand results in higher prices and reduced quantity traded.
#15
What is a price ceiling, and what is its impact on the market?
A price ceiling sets a maximum price that sellers can charge, leading to excess demand
ExplanationPrice ceilings prevent prices from rising above a certain level, causing a shortage due to excess demand.