WHALES Economics: Demand & Supply 2

What is generally considered to be one of the advantages of using the price mechanism as a rationing device?

A It ensures that goods are allocated in accordance with the needs of consumers.

B It ensures that suppliers cannot make excessive profits.

C No one can be prevented from consuming a good if they are willing and able to pay the market price.

D The allocation of goods is determined by consumers’ wealth.

• A

• B

• C

• D

What is not held constant in calculating a demand schedule?

A the incomes of consumers

B the prices of complementary goods

C the price of the good itself

D the tastes of consumers

• A

• B

• C

• D

A change in market conditions causes a reduction in supply. This results in a higher price for the product, which has a downward-sloping demand curve. What must be the outcome of this higher price?

A an increase in the factors employed in the industry

B an increase in producer’s revenue

C a reduction in the quantity demanded

D a reduction in the demand for substitutes

• A

• B

• C

• D

A supply curve for a commodity is drawn to show how quantity supplied varies with

A government taxes.

B income.

C tastes.

D the price of the commodity.

• A

• B

• C

• D

In 2010, floods caused severe damage to wheat production. How would this be shown on a market demand and supply diagram for wheat?

• A

• B

• C

• D

The market for a normal good is in equilibrium at point X. Consumers’ incomes fall and the cost of producing the good rises. In which area of the diagram will the new equilibrium be?

• A

• B

• C

• D

Which statement indicates that the price mechanism is allocating resources successfully?

A Belgian chocolate companies increase supplies to China because of higher than expected sales.

B Train operators in India lower fares because of overcrowding on trains.

C US supermarkets throw away large amounts of food because of misjudging demand.

D World fish stocks decline because of over-fishing.

• A

• B

• C

• D

The table shows the demand for tickets for a concert.

The capacity of the concert hall is 6000. What price should be charged to maximise total revenue?

A $20

B $30

C $40

D $50

• A

• B

• C

• D

The table shows the demand and supply schedules for a good before and after the imposition of a tax. What was the amount of the tax?

A $1

B $2

C $3

D $4

• A

• B

• C

• D

The demand curve in the diagram shows the relationship between the number of car journeys and the cost of a car journey. What would cause the demand curve to shift to the left?

A a reduction in car tax

B a reduction in petrol prices

C a reduction in public transport prices

D the introduction of tolls on motorways

• A

• B

• C

• D