Understanding Supply and Demand Concepts

The relationship between quantity supplied and price is _____ and the relationship between quantity demanded and price is _____.

• direct, inverse

• inverse, direct

• inverse, inverse

• direct, direct

• strong, weak

An increase in the price of a product will reduce the quantity demanded for that product because:

• supply curves are upward sloping

• the higher price means purchasing power has risen

• consumers will substitute other products for the one whose price has risen

• consumers get increasing marginal utility for each new unit of a good they consume

• more complementary goods will be purchased due to the resultant increase in consumer surplus

Which of the following will NOT cause the demand for video games to change?

• a change in the price of a close substitute

• a change in consumer incomes

• a change in the price of video games

• a change in consumer tastes

• a change in consumer preferences

If the price of a good increases, what happens to the quantity supplied, assuming all other factors remain constant?

• It decreases

• It remains unchanged

• It increases

• It becomes zero

• It fluctuates randomly

What is the term for a good that is consumed together with another good?

• Substitute

• Complement

• Inferior good

• Normal good

• Luxury good

Which of the following is an example of a price floor?

• Minimum wage

• Rent control

• Sales tax

• Import tariff

• Subsidy

What is the effect of a subsidy on the supply curve?

• It shifts the supply curve to the left

• It shifts the supply curve to the right

• It makes the supply curve steeper

• It makes the supply curve flatter

• It has no effect on the supply curve

If a product has a price elasticity of demand greater than 1, the demand is considered:

• Inelastic

• Elastic

• Unitary elastic

• Perfectly inelastic

• Perfectly elastic

Which of the following is NOT a determinant of demand?

• Consumer preferences

• Number of sellers

• Consumer income

• Price of related goods

• Expectations of future prices

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

• It decreases

• It remains unchanged

• It increases

• It becomes zero

• It fluctuates randomly