1.2 The Market

What happens to the quantity demanded of a good when its price decreases, assuming all other factors remain constant?

• It increases (no shift in the curve)

• It decreases (no shift in the curve)

• Demand curve shifts to the right

• Demand curve shifts to the left

Which of the following best describes market equilibrium?

• When supply exceeds demand

• When demand exceeds supply

• When supply equals demand

• When there is no demand

If the income elasticity of demand for a product is greater than 1, the product is considered to be:

• A necessity

• An inferior good

• A luxury good

• A substitute good

What does a price elasticity of demand of -0.5 indicate about a product?

• Demand is perfectly elastic

• Demand is inelastic

• Demand is elastic

• Demand is unitary elastic

Which of the following factors does NOT affect the supply of a product?

• Production costs

• Consumer income

• Technology

• Number of suppliers

If a 10% increase in income leads to a 5% increase in the quantity demanded of a good, what is the income elasticity of demand?

• 0.5

• 1.0

• 1.5

• 2.0

Which of the following is true if a product has a price elasticity of demand greater than 1?

• The product is a necessity

• The product is a luxury

• Demand is inelastic

• Demand is elastic

What is the effect on equilibrium price if there is an increase in demand while supply remains constant?

• Equilibrium price decreases

• Equilibrium price increases

• Equilibrium price remains the same

• Equilibrium price becomes zero

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 the same

• Demand becomes zero

Which of the following is an example of a factor that can shift the supply curve?

• Change in consumer preferences

• Change in production technology

• Change in consumer income

• Change in the price of the good