SSEMI2 Supply and Demand 2024

Why does a decrease in the price of a substitute good typically lead to a decrease in the demand for a related good?

• Consumers perceive the substitute as higher quality.

• The substitute good becomes more affordable, reducing demand for the related good.

• The related good becomes more expensive as a result.

• Producers reduce the supply of the related good in response.

How does an increase in consumer income affect the demand curve for a normal good, and why?

• The demand curve shifts to the left because consumers buy less of the good.

• The demand curve shifts to the right because consumers buy more of the good.

• The demand curve remains unchanged because income does not affect demand.

• The demand curve becomes steeper due to increased purchasing power.

Why might a government-imposed price ceiling lead to a shortage in the market?

• It incentivizes producers to increase supply, leading to overproduction.

• It sets the price above the equilibrium, leading to excess supply.

• It sets the price below the equilibrium, leading to excess demand.

• It encourages consumers to buy less, resulting in surplus.

How does a technological advancement in production typically affect the supply curve, and why?

• The supply curve shifts to the left because production becomes more expensive.

• The supply curve shifts to the right because production becomes more efficient and less costly.

• The supply curve remains unchanged as technology has no effect on supply.

• The supply curve becomes flatter because technology reduces variable costs.

Why does the law of demand state that there is an inverse relationship between price and quantity demanded?

• Higher prices increase consumer income, reducing the quantity demanded.

• Higher prices discourage consumers from buying more, reducing the quantity demanded.

How does the introduction of a new competitor in a market affect the supply curve of existing firms, and why?

• The supply curve of existing firms shifts to the right due to increased competition.

• The supply curve of existing firms shifts to the left as they produce less to avoid oversupply.

• The supply curve remains unchanged because competition does not affect supply.

• The supply curve becomes vertical because the market becomes perfectly competitive.

Why might a decrease in the cost of raw materials lead to a lower equilibrium price in a competitive market?

• The demand curve shifts to the left due to reduced consumer interest.

• The supply curve shifts to the right, increasing supply and lowering the price.

• The equilibrium price rises because lower costs increase demand.

• The supply curve shifts to the left, reducing supply and lowering the price.

How does consumer expectation of future price increases affect current demand, and why?

• Current demand increases as consumers try to purchase before prices rise.

• Current demand decreases because consumers wait for the price to drop.

• Current demand remains unchanged as future expectations do not affect current decisions.

• Current demand decreases because consumers anticipate a future surplus.

Why does an increase in the price of complementary goods typically lead to a decrease in demand for the related good?

• The demand curve shifts to the right as both goods are less affordable.

• The demand curve shifts to the left because consumers buy less of both goods.

• The supply curve shifts to the right because producers lower prices.

• The demand curve becomes vertical as price sensitivity increases.

How does the expectation of a future price decrease for a good affect the current supply, and why?