Econ U2: Supply, Demand, & Equilibrium

What happens to the supply curve when there is an improvement in technology?

• It shifts to the left.

• It shifts to the right.

• It remains unchanged.

• It becomes vertical.

Answer explanation

When there is an improvement in technology, the supply curve shifts to the right as it becomes easier and more efficient to produce goods, increasing the quantity supplied at each price level.

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DOK Level 1: Recall

Which of the following factors can cause a shift in the demand curve?

• Changes in consumer income

• Changes in the price of the good itself

• Changes in the quantity supplied

• Changes in production technology

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DOK Level 1: Recall

If the price of coffee increases, what is likely to happen to the demand for tea?

• Demand decreases

• Demand increases

• Demand remains unchanged

• Demand becomes perfectly elastic

Answer explanation

If the price of coffee increases, consumers may switch to tea as a substitute, leading to an increase in the demand for tea.

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DOK Level 1: Recall

How does an increase in the cost of raw materials affect the supply curve?

• It shifts to the right.

• It shifts to the left.

• It remains unchanged.

• It becomes horizontal.

Answer explanation

An increase in the cost of raw materials leads to a decrease in supply, shifting the supply curve to the left.

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DOK Level 1: Recall

Explain how a decrease in consumer income affects the demand curve for a normal good.

• The demand curve shifts to the right.

• The demand curve shifts to the left.

• The demand curve becomes steeper.

• The demand curve becomes flatter.

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DOK Level 2: Skill/Concept

What is the likely effect on equilibrium price and quantity if there is an increase in both supply and demand?

• Equilibrium price increases, equilibrium quantity decreases.

• Equilibrium price decreases, equilibrium quantity increases.

• Equilibrium price remains unchanged, equilibrium quantity increases.

• Equilibrium price and quantity both increase.

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DOK Level 2: Skill/Concept

A new tax is imposed on producers of a good. Predict the changes in the supply curve and the new equilibrium.

• Supply curve shifts to the right, equilibrium price decreases.

• Supply curve shifts to the left, equilibrium price increases.

• Supply curve remains unchanged, equilibrium price increases.

• Supply curve shifts to the left, equilibrium price decreases.

Answer explanation

Supply curve shifts to the left, equilibrium price increases. Supplier costs increase, which makes supply lower. Supply curve crosses Demand curve at a lower price.

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DOK Level 3: Strategic Thinking

What is the Law of Demand?

• The Law of Demand states that, as the price of a good or service increases, the quantity demanded remains constant.
• The Law of Demand states that, as the price of a good or service increases, the quantity demanded decreases, and vice versa.
• The Law of Demand states that, as the price of a good or service increases, the quantity demanded increases.
• The Law of Demand states that, as the price of a good or service decreases, the quantity demanded decreases.

What is the Law of Supply?

• The Law of Supply states that as the price of a good or service increases, the quantity supplied by producers also increases, ceteris paribus.
• The Law of Supply states that as the price of a good or service increases, the quantity supplied by producers remains constant.
• The Law of Supply states that as the price of a good or service decreases, the quantity supplied by producers decreases.
• The Law of Supply states that as the price of a good or service increases, the quantity demanded by consumers decreases.

Define Equilibrium as it relates to Supply and Demand.

• Equilibrium is the point where supply exceeds demand.
• Equilibrium is the point where the demand curve is horizontal.
• Equilibrium is the point where the supply and demand curves intersect.
• Equilibrium is the point where the supply curve is vertical.