Study Guide: Intro to Supply and Demand

What does the law of demand state?

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

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

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

• The price of a good is unrelated to the quantity demanded.

Which of the following would cause a shift to the right in the demand curve for a product?

• An increase in the price of a substitute good.

• A decrease in consumer incomes (for normal goods).

• A rise in consumer preferences for the product.

• A decrease in population.

Which of the following would lead to a decrease in the supply of a product?

• Technological advancements that make production cheaper.

• An increase in the number of producers in the market.

• A tax imposed on producers.

• A reduction in production costs.

If the price of a good is below the equilibrium price, what is likely to happen?

• There will be a surplus of goods in the market.

• There will be a shortage of goods in the market.

• The market will reach equilibrium.

• The demand curve will shift to the left.

Which factor would NOT cause a shift in the supply curve?

• A) A change in the cost of inputs.

• B) A change in consumer preferences.

• C) A change in technology.

• D) A change in government regulations.

The price elasticity of demand measures: A) The responsiveness of supply to changes in demand. B) The responsiveness of demand to changes in income. C) The responsiveness of demand to price changes. D) The amount of consumer surplus in the market.

• The responsiveness of supply to changes in demand.

• The responsiveness of demand to changes in income.

• The responsiveness of demand to price changes.

• The amount of consumer surplus in the market.

Explain how the concepts of supply and demand determine the equilibrium price in a market. In your answer, describe how the interaction between supply and demand leads to the equilibrium price.

• The equilibrium price is determined by the intersection of supply and demand curves.

• Supply alone determines the equilibrium price, regardless of demand.

• Demand alone determines the equilibrium price, regardless of supply.

• Equilibrium price is set by government intervention.

Imagine the government imposes a tax on a good that has inelastic demand. What are the likely effects of this tax on the equilibrium price, quantity sold, and consumer behavior?

• The equilibrium price will increase, quantity sold will decrease, and consumer behavior will remain largely unchanged.

• The equilibrium price will decrease, quantity sold will increase, and consumer behavior will change significantly.

• The equilibrium price and quantity sold will remain unchanged, but consumer behavior will change significantly.

• The equilibrium price will increase, quantity sold will increase, and consumer behavior will remain largely unchanged.

Which of the following factors can cause a shift in the supply curve?

• Changes in technology

• Input costs

• Government policies

• All of the above

The quantity of a good or service that producers are willing and able to offer for sale at different prices is called ____.

• Supply.

• Demand.

• Consumption.

• Distribution.