Quiz on Demand and Supply

When small changes in price lead to infinite changes in quantity demanded, demand is perfectly

• elastic and will be vertical.

• elastic and will be horizontal.

• inelastic and will be horizontal.

• inelastic and will be vertical.

For economists, people's tastes and demand are

• positively related.

• not related.

• beyond the realm of economics.

• negatively related.

If the price of a substitute to good X increases, then the

• demand for good X will increase.

• demand for good X will decrease.

• quantity demanded for good X will increase.

• market price of good X will decrease.

What will happen in the rice market if buyers are expecting higher prices in the near future?

• The demand for rice will increase.

• The demand for rice will be unaffected.

• The supply of rice will increase.

• The demand for rice will decrease.

Pens are normal goods. What will happen to the equilibrium price of pens if the price of pencils rises, consumers experience an increase in income, writing in ink becomes fashionable, people expect the price of pens to rise in the near future, the population increases, fewer firms manufacture pens, and the wages of pen-makers increase?

• Price will fall.

• Price will rise.

• The price change will be ambiguous.

• Price will stay exactly the same.

Beef is a normal good. You observe that both the equilibrium price and quantity of beef has fallen over time. Which of the following would be most consistent with this observation?

• Consumers have experienced an increase in income and beef-production technology has improved.

• The price of chicken has risen and the price of steak sauce has fallen.

• The demand curve for beef must be positively sloped.

• Consumer tastes have changed so as to prefer beef less than before.

If an increase in income results in a decrease in the quantity demanded of a good, then the good is

• a necessity.

• a luxury.

• a normal good.

• an inferior good.

Which of the following would have a large income elasticity?

• complements

• substitutes

• necessities

• luxuries

If Francis receives a decrease in his pay, we would expect

• Francis's demand for luxury goods to increase.

• Francis's demand for inferior goods to increase.

• Francis's demand for normal goods to increase.

• Francis's demand for each good he purchases to remain unchanged.

Demand is unit elastic if elasticity is

• greater than 1.

• equal to 0.

• equal to 1.

• less than 1.