Supply and Demand

What does the law of demand state?

• As the price of a good increases, the quantity demanded increases.

• As the price of a good decreases, the quantity demanded remains unchanged.

• As the price of a good increases, the quantity demanded decreases.

• As the price of a good decreases, the supply of the good increases.

What is the law of supply?

• As the price of a good increases, the quantity supplied decreases.

• As the price of a good decreases, the quantity supplied increases.

• As the price of a good increases, the quantity supplied increases.

• There is no relationship between the price of a good and the quantity supplied.

What causes a movement along the demand curve?

• Changes in consumer income

• Changes in the price of the good itself

• Changes in the prices of related goods

• Changes in consumer tastes and preferences

What factor would cause a shift in the demand curve to the right?

• A decrease in the price of the good

• An increase in consumer income, assuming the good is a normal good

• An improvement in the technology used to produce the good

• A decrease in the number of suppliers

What does price elasticity of demand measure?

• The responsiveness of quantity demanded to a change in income

• The responsiveness of quantity demanded to a change in the price of the good

• The responsiveness of quantity supplied to a change in the price of the good

• The responsiveness of supply to a change in technology

If a good has a price elasticity of demand greater than 1, it is considered:

• Perfectly inelastic

• Inelastic

• Unit elastic

• Elastic

What would be an example of a shift in the supply curve to the left?

• A decrease in the price of raw materials

• An increase in the number of producers

• A natural disaster that destroys part of the production capacity

• A technological advancement that makes production more efficient

Which of the following would cause a movement along the supply curve?

• A change in government policy

• A change in the price of the good itself

• A change in the cost of production

• A change in the number of suppliers

If a good is considered a necessity, its demand is likely to be:

• Perfectly elastic

• Highly elastic

• Unit elastic

• Inelastic

What does it mean if a demand curve is perfectly inelastic?

• Quantity demanded changes significantly with a small change in price.

• Quantity demanded does not change regardless of the price change.

• Quantity demanded changes at the same rate as the price change.

• Quantity demanded increases as the price increases.