How Markets Work Quiz

What is the definition of an economy?

• An area where people and firms produce, trade, and consume goods and services

• A market that only exists in large countries

• A place where only goods are produced

• A system that only involves government transactions

What does microeconomics study?

• Government policies on trade

• Individual markets and their behaviors

• The entire economy as a whole

• Global economic trends

What are the three basic economic questions?

• When to produce, who consumes, and how much is consumed

• How to produce, when to produce, and where to produce

• What to produce, how to produce, and for whom to produce

• Who produces, what is produced, and how much is produced

What is effective demand?

• Desire to buy without the ability to pay

• Willingness to buy backed by the ability to pay

• Demand that is always high

• Demand that is influenced by advertising

What does the law of demand state?

• An increase in price leads to an increase in demand

• An increase in price leads to a decrease in demand

• Price has no effect on demand

• Demand is always constant regardless of price

What causes a shift to the right in the demand curve?

• Increase in consumer income

• Decrease in population

• Increase in the price of substitutes

• Decrease in consumer income

What is the definition of supply?

• The want and willingness of producers to supply a good or service

• The amount of goods consumers want to buy

• The total demand for a product in the market

• The price at which goods are sold

What does the law of supply state?

• An increase in price leads to a decrease in supply

• An increase in price leads to an increase in supply

• Supply is always constant regardless of price

• Price has no effect on supply

What is market equilibrium price?

• The price at which demand exceeds supply

• The highest price consumers are willing to pay

• The price at which supply exceeds demand

• The price at which demand and supply curves meet

What does Price Elasticity of Demand (PED) measure?

• The responsiveness of quantity supplied to price changes

• The average price of goods in the market

• The total demand in the market

• The responsiveness of quantity demanded to price changes