Advanced Understanding Supply & Demand

1. What does the law of demand state?

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

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

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

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

1. What happens to the equilibrium price if the demand for a good increases while the supply remains constant?

• • It decreases.

• • It remains unchanged.

• • It increases.

• • It becomes unpredictable.

1. Which of the following is a factor that can cause a shift in the supply curve?

• • Changes in consumer income

• • Changes in the price of related goods

• • Changes in production technology

• • Changes in consumer preferences

1. If a price floor is set above the equilibrium price, what is the likely outcome?

• • A surplus of the good

• • A shortage of the good

• • No effect on the market

• • An increase in equilibrium quantity

1. Which of the following factors would cause a rightward shift in the demand curve?

• • An increase in the price of a substitute good

• • A decrease in the price of a complementary good

• • A decrease in consumer income (for a normal good)

• • A decrease in consumer preferences for the good

1. Which of the following would cause the supply curve to shift to the left?

• • A decrease in the price of raw materials

• • An increase in labor productivity

• • An increase in the cost of production

• • An improvement in technology

1. An increase in the price of a complement good will likely result in:

• • A decrease in the demand for the original good

• • An increase in the demand for the original good

• • A decrease in the supply of the original good

• • An increase in the equilibrium price of the original good

1. Which of the following will not cause a shift in the demand curve for a good?

• • A change in consumer income

• • A change in the price of the good itself

• • A change in consumer preferences

• • A change in the price of a substitute good

1. Which of the following would not be considered a determinant of supply?

• • Changes in production technology

• • Changes in consumer income

• • Changes in the number of suppliers

• • Changes in the prices of inputs

1. If a decrease in the price of a good leads to an increase in the quantity demanded, this is known as:

• • A shift in the demand curve

• • A movement along the demand curve

• • A shift in the supply curve

• • A movement along the supply curve