DEMAND, SUPPLY AND MARKET EQUILIBRIUM

According to the Law of Demand, when the price of a good increases (ceteris paribus):

• Quantity demanded increases

• Quantity demanded decreases

• Demand curve shifts to the right

• Demand curve shifts to the left

In the general supply function, which variable has an inverse relationship with quantity supplied?

• Price of the good (P)

• Number of firms producing (F)

• Input prices (PI)

• Technological advances (T)

Market equilibrium occurs when:

• Quantity demanded > Quantity supplied

• Quantity demanded = Quantity supplied

• Supply curve shifts right

• Demand curve shifts left

Which of the following is an example of an inferior good?

• Organic vegetables

• Bus transportation for a person who just bought a car

• High-end smartphones

• Luxury cars

If the price of a substitute good increases, what happens to the demand for the original good?

• It increases

• It decreases

• No change

• It becomes perfectly elastic

The direct demand function shows the relationship between price and quantity demanded, holding other factors constant.

• TRUE

• FALSE

The general demand function includes variables such as price of related goods, income, and expected future prices.

• FALSE

• TRUE

Technological improvements usually shift the demand curve to the right.

• FALSE

• TRUE

When price changes, there is a movement along the demand curve, not a shift of the curve.

• TRUE

• FALSE

An increase in the price of complementary goods will likely increase demand for the main good.

• TRUE

• FALSE