Market Dynamics and Economic Principles Quiz

A local independent coffee shop notices that a new office block with 500 staff has just opened next door. Nothing else in the area has changed (coffee prices, opening hours, etc.). What is the most likely effect on the market demand for the coffee shop’s products in the short run?

• A movement along the existing demand curve for coffee towards a lower quantity

• A rightward shift of the demand curve for coffee

• A leftward shift of the demand curve for coffee

• No change in the demand curve; only supply will change

A manufacturer of electric scooters faces a substantial increase in the wage rate it must pay skilled technicians. All other factors remain constant. How is the market supply of electric scooters most likely to change?

• Supply curve shifts right because higher wages motivate workers to produce more

• Supply curve shifts left because higher wages increase production costs

• Movement down along the supply curve because price has increased

• Supply curve becomes perfectly elastic

A business analyst estimates the price elasticity of demand for a firm’s product to be 1.8. Which statement best describes this demand?

• Inelastic

• Elastic

• Perfectly elastic

• None of the above

A fashion retailer sells a line of designer trainers. Market research shows the price elasticity of demand for these trainers is –2.0. The retailer is considering a 10% increase in price. What is the most likely effect on the firm’s total revenue from these trainers?

• Total revenue will increase

• Total revenue will decrease

• Total revenue will stay the same

• Total revenue will be maximised

The market for ride sharing services (e.g. app-based taxis) in a city becomes more competitive as two new firms enter the market. Assume demand remains unchanged. What is the most likely effect on the market equilibrium?

• Equilibrium price rises and equilibrium quantity falls

• Equilibrium price falls and equilibrium quantity rises

• Equilibrium price and quantity both rise

• Equilibrium price and quantity both fall

The government introduces a minimum price for milk, set above the current market equilibrium price, to support dairy farmers’ incomes. What is the most likely outcome in the milk market?

• Excess demand (shortage) and rising market price

• Excess supply (surplus) and unsold stocks of milk

• Market clears with no surplus or shortage

• Demand curve shifts left to restore equilibrium

The government sets a maximum rent for student accommodation below the market equilibrium rent to make housing more affordable. Statement: 'In the long run, this policy is likely to reduce the quantity and quality of available student accommodation.' Is this statement:

• True

• False