Understanding Supply and Demand Dynamics

What is market equilibrium?

• The point where supply exceeds demand

• The point where demand exceeds supply

• The point where supply equals demand

• The point where prices are highest

If the demand curve shifts to the right, what happens to the equilibrium price and quantity?

• Price decreases, quantity decreases

• Price increases, quantity increases

• Price decreases, quantity increases

• Price increases, quantity decreases

Which of the following factors could cause a shift in the supply curve to the left?

• A decrease in production costs

• An improvement in technology

• An increase in taxes on production

• A decrease in the price of raw materials

What does price elasticity of demand measure?

• The responsiveness of demand to a change in supply

• The responsiveness of demand to a change in price

• The responsiveness of supply to a change in demand

• The responsiveness of supply to a change in price

If a product has a price elasticity of demand greater than 1, what is it considered to be?

• Inelastic

• Elastic

• Unitary elastic

• Perfectly inelastic

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

• The equilibrium price increases

• The equilibrium price decreases

• The equilibrium price remains the same

• The equilibrium price becomes zero

Which of the following is likely to cause a rightward shift in the demand curve for electric cars?

• An increase in the price of petrol

• A decrease in consumer income

• A decrease in the price of electric cars

• An increase in the cost of production for electric cars

If the supply curve shifts to the right, what happens to the equilibrium quantity?

• It decreases

• It increases

• It remains the same

• It becomes zero

What is the effect on equilibrium price and quantity if both demand and supply increase simultaneously?

• Price increases, quantity decreases

• Price decreases, quantity increases

• Price remains uncertain, quantity increases

• Price increases, quantity remains uncertain

Which of the following is an example of a good with inelastic demand?

• Luxury cars

• Salt

• Designer clothing

• Smartphones