Understanding Supply and Demand Concepts

What does the law of supply state?

• As the price of a good decreases, the quantity supplied increases.

• As the price of a good increases, the quantity supplied increases.

• As the price of a good increases, the quantity supplied decreases.

• The quantity supplied is independent of the price.

What does the law of demand state?

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

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

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

• The quantity demanded is independent of the price.

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 price is at its maximum.

If the demand curve shifts to the right, what is likely to happen to the equilibrium price and quantity?

• Both equilibrium price and quantity will decrease.

• Equilibrium price will increase, and equilibrium quantity will decrease.

• Equilibrium price will decrease, and equilibrium quantity will increase.

• Both equilibrium price and quantity will increase.

Which of the following could cause a leftward shift in the supply curve?

• A decrease in production costs.

• An improvement in technology.

• An increase in the number of suppliers.

• An increase in the cost of raw materials.

If a market is in equilibrium and there is a sudden increase in demand, what is likely to happen initially?

• A surplus will occur.

• A shortage will occur.

• The price will decrease.

• The quantity supplied will decrease.

Which of the following is a graphical representation of the law of demand?

• A downward-sloping curve.

• An upward-sloping curve.

• A vertical line.

• A horizontal line.

What happens to the equilibrium price if both supply and demand increase simultaneously?

• The equilibrium price will definitely increase.

• The equilibrium price will definitely decrease.

• The equilibrium price will remain unchanged.

• The change in equilibrium price is uncertain without more information.

Which of the following best describes a surplus in the market?

• Quantity demanded is greater than quantity supplied.

• Quantity supplied is greater than quantity demanded.

• Supply equals demand.

• Price is below equilibrium.

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

• Demand for the original good will decrease.

• Demand for the original good will increase.

• Demand for the original good will remain unchanged.

• Supply for the original good will increase.