Econ Basics: Supply & Demand

What is the law of demand?

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

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

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

• The quantity demanded remains constant regardless of price changes.

Answer explanation

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

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DOK Level 1: Recall

Which of the following best describes 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.

• The quantity supplied remains constant regardless of price changes.

Answer explanation

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

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DOK Level 1: Recall

What is the equilibrium price in a market?

• The price at which the quantity demanded exceeds the quantity supplied.

• The price at which the quantity supplied exceeds the quantity demanded.

• The price at which the quantity demanded equals the quantity supplied.

• The price at which the government sets a price ceiling.

Answer explanation

The price at which the quantity demanded equals the quantity supplied.

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DOK Level 1: Recall

If the price of a substitute good increases, what is likely to happen to the demand for the original good?

• The demand for the original good will decrease.

• The demand for the original good will increase.

• The demand for the original good will remain unchanged.

• The supply of the original good will increase.

Answer explanation

If the price of a substitute good increases, consumers are more likely to choose the original good, leading to an increase in demand for the original good.

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DOK Level 1: Recall

What is a price ceiling?

• A maximum price set by the government that can be charged for a good or service.

• A minimum price set by the government that can be charged for a good or service.

• The price at which the quantity demanded equals the quantity supplied.

• The price at which the quantity supplied exceeds the quantity demanded.

Answer explanation

A price ceiling is a maximum price set by the government that can be charged for a good or service.

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DOK Level 1: Recall

Which factor is most likely to cause a shift in the supply curve?

• A change in consumer preferences.

• A change in the price of inputs.

• A change in the price of a substitute good.

• A change in consumer income.

Answer explanation

A change in the price of inputs is most likely to cause a shift in the supply curve as it directly impacts production costs and supply levels.

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DOK Level 1: Recall

What happens to the equilibrium price if there is an increase in demand while supply remains constant?

• The equilibrium price decreases.

• The equilibrium price increases.

• The equilibrium price remains the same.

• The equilibrium price becomes zero.

Answer explanation

If demand increases while supply remains constant, the equilibrium price will increase as buyers are willing to pay more for the limited supply.

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DOK Level 1: Recall

Which of the following is an example of a normal good?

• As income increases, the demand for this good decreases.

• As income increases, the demand for this good remains unchanged.

• As income increases, the demand for this good increases.

• As income decreases, the demand for this good increases.

Answer explanation

As income increases, the demand for this good increases.

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DOK Level 1: Recall

What is the effect of a price floor set above the equilibrium price?

• It creates a surplus.

• It creates a shortage.

• It has no effect on the market.

• It lowers the equilibrium price.

Answer explanation

Setting a price floor above the equilibrium price creates a surplus because the quantity supplied exceeds the quantity demanded at that higher price.

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DOK Level 1: Recall

Which of the following would cause a movement along the demand curve for a good?

• A change in consumer income.

• A change in the price of the good.

• A change in consumer preferences.

• A change in the price of a substitute good.

Answer explanation

A change in the price of the good would cause a movement along the demand curve for a good, as it represents a change in quantity demanded due to a change in price.

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DOK Level 1: Recall