Understanding Supply and Demand

What is the law of demand?

• As the price of a product increases, the quantity demanded increases.

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

• As the price of a product decreases, the quantity demanded decreases.

• The price of a product does not affect the quantity demanded.

Which of the following is an example of a fixed cost for a business?

• Raw materials

• Employee wages

• Rent for the building

• Utility bills

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

• It shifts to the left.

• It shifts to the right.

• It becomes steeper.

• It becomes flatter.

If the price of a substitute good increases, what is likely to happen to the demand for the original good?

• Demand decreases.

• Demand increases.

• Demand remains unchanged.

• Demand becomes zero.

Which of the following is a variable cost for a business?

• Insurance premiums

• Salaries of permanent staff

• Cost of raw materials

• Lease payments

What is the equilibrium price in a market?

• The highest price consumers are willing to pay.

• The price at which quantity supplied equals quantity demanded.

• The lowest price producers are willing to accept.

• The average price over a period of time.

If a product is considered a necessity, how is its demand likely to be affected by a price increase?

• Demand will increase significantly.

• Demand will decrease significantly.

• Demand will remain relatively stable.

• Demand will become zero.

What is the effect of a government-imposed price ceiling on a product?

• It leads to a surplus of the product.

• It leads to a shortage of the product.

• It has no effect on the market.

• It increases the equilibrium price.

Which of the following scenarios would cause a movement along the demand curve for a product?

• A change in consumer income.

• A change in the price of the product.

• A change in consumer preferences.

• A change in the price of a complementary good.

What is the primary goal of a business when setting the price of its product?

• To maximize production.

• To maximize profit.

• To minimize costs.

• To maximize market share.