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ECO THEORY OF DEMAND AND SUPPLY

Total questions: 90

Worksheet time: 48mins

Name
Class
Date
1.
Demand is unit elastic if it is less than 1.0
a)
True
b)
False
2.
Demand is almost always more elastic at higher prices and less elastic at lower prices.
a)
True
b)
False
3.
Suppose that elasticity of demand of socks is 0.7.  If the price of socks is reduced by 10%, how will sales be effected?
a)
sales will grow by more than 10%
b)
Sales will grow by 10%
c)
Sales will grow by less than 10%
d)
Sales will decrease by 10%
4.
The formula for calculating elasticity of demand is:
a)
The % change in price over the % change in quantity demanded
b)
The % change in quantity demanded over the % change in price
c)
The change in price over the change in quantity demaned
d)
The change in quantity demanded over the change in price
5.
The elasticity of demand for tissues is 0.66. This means the demand for tissues is
a)
elastic
b)
unit elastic
c)
inelastic
d)
really expensive
6.

The desire to have some good or service and the ability to pay for it

a)

supply

b)

equilibrium

c)

demand

d)

quantity demanded

7.

Which of these best describes the law of demand?

a)

if prices go up, quantity demanded will fall and if prices go down, quantity demanded will go up

b)

if prices go up, quantity demanded will also go up and if prices go down, quantity demanded will also go down

c)

there is no law of demand, each situation is unique and demand and prices cannot be predicted

d)

prices will go up for certain goods when quantity demanded goes up and vice versa

8.

A change in the price of a good causes people to buy more or less of an item. This best describes the concept of

a)

the demand curve

b)

change in quantity demanded

c)

change in demand

d)

elasticity

9.

Elasticity refers to

a)

how producers of goods and services react to price changes

b)

how consumers of goods and services react to price changes

c)

how far a supply of scarce goods can be stretched

d)

how often the price of a good or service changes when quantity demanded changes

10.

Water has seen an increase in demand 8% this summer, while the price has decreased 12%

a)

1.5 inelastic

b)

1.5 elastic

c)

.67 inelastic

d)

.67 elastic

11.

Wheat has seen a decrease in demand of 5%, while the price has increased 7%

a)

1.4 inelastic

b)

1.4 elastic

c)

.71 inelastic

d)

.71 elastic

12.
Demand is almost always more elastic at higher prices and less elastic at lower prices.
a)
True
b)
False
13.

According to the Law of Demand, when prices drop...

a)

demand will also drop

b)

demand will increase

c)

quantity demanded is unchanged

d)

supply increases

14.

The more money that a person makes, the more they are willing to spend..

a)

diminishing marginal utility

b)

substitute effect

c)

total revenue

d)

income effect

15.

The more of a product that you consume, the less satisfaction the consumer enjoys..

a)

income effect

b)

diminishing marginal utility

c)

demand elasticity

d)

purchasing power

16.

As prices for a product decrease, demand for a product should increase..

a)

diminishing marginal utility

b)

elasticity

c)

income effect

d)

law of demand

17.

A product may be amazing, but unless consumers are __ and __ to purchase it, it's not in demand.

a)

willing

b)

wishing

c)

able

d)

planning

18.

When prices rise for a particular product, consumers will purchase lower-priced similar items..

a)

income effect

b)

substitute effect

c)

diminishing marginal utility

d)

law of demand

19.

The basic problem of economics is ___.. we just don't have the resources to take care of ALL of our wants/needs!

a)

opportunity cost

b)

diminishing marginal utility

c)

purchasing power

d)

scarcity

20.

A product may be amazing, but unless people can actually afford it, it's not really in deman.

a)

True

b)

False

21.

An oil refinery fire could cause the price of gas to __

a)

increase

b)

decrease

c)

stabilize

d)

fluctuate wildly

22.

The shape of the Budget Line is ....

a)

upward sloping

b)

vertical straight line

c)

downward sloping

d)

all of these

23.

All the bundles on the budget line cost....

a)

more than consumer's income

b)

less than consumer's income

c)

exactly equal to consumer's income

d)

All the above

24.

Budget Line is represented by

a)

(p1x1) + (p2x2) = M

b)

(p1x1) + (p2x2) ≤ M

c)

(p1x1) + (p2x2) >M

25.

The slope of Budget line is given by

a)

1) relative price

b)

2) absolute price

c)

3) -(Px/Py)

d)

4) both option (1) &( 3)

26.

Slope of Budget line is a

a)

neutral value

b)

positive value

c)

ngative value

d)

none of the above

27.

If price of good 2 is Rs.20 and price of good 1 is Rs.10.Income of the consumer is Rs.100. What is Horizontal intercept ?

(a)  

28.

If the price of good 1 is Rs.20 and price of good 2 is Rs.5, the slope of budget line is (a)  

29.

Any point below the budget line represents a bundle which costs less than consumer's income

a)

False

b)

True

c)

None of these

30.

If price of good 1 is Rs.8,Price of good 2 is Rs.5 and Consumer's income is Rs.40,write Budget Line Equation

(a)  

31.

If P1 =4, P2 =5 and M=20, Find Vertical Intercept.

(a)  

32.
MU is zero when TU is....?
a)
Minimum
b)
Falling
c)
Maximum
d)
Increasing
33.

WHEN TU FALLS , MU IS

a)

POSITIVE

b)

ZERO

c)

NEGATIVE

d)

NON OF ABOVE

34.
Utility is the
a)
benefit or satisfaction that a person gets from the consumption of a good or service
b)
measure of how useful a resource is in the production process
c)
measure of productivity associated with a good or service
d)
economic term for consumption possibilities
35.

As more of a good is consumed, Total Utility

a)

increases

b)

decreases

c)

remains the same

d)

becomes negative and then turns positive

36.

The first four apples Joan consumes have total utility of 15, 27, 37, and 45 respectively. What is the marginal utility of the 4th apple ?

a)

124 units of utility

b)

45 units of utility

c)

11.25 units of utility

d)

8 units of utility

37.
The goal of a consumer is to
a)
acquire the largest possible quantity of goods
b)
acquire the largest possible variety of goods
c)
maximize utility
d)
save money
38.

In a given time period, a person consumes more and more of a good and enjoys each additional unit less and is willing to pay less for it, because of:

a)

diminishing returns

b)

diminishing marginal product

c)

diminishing marginal utility

d)

increasing marginal utility

39.
Which decreases first as more of a good is consumed?
a)
total utility
b)
average utility
c)
marginal utility
d)
marginal physical product
40.

What is utility?

a)

Satisfaction

b)

Fulfill of demand

c)

Expected from goods

d)

None are above

41.

Utility is

a)

Objective

b)

Subjective

c)

Both a and b

d)

None of the above

42.

The shape of an indifference curve is normally

a)

Convex to the origin

b)

Concave to the origin

c)

Horizontal

d)

Vertical

43.

The consumption bundles that are available to the consumer depends on

a)

Colour and shape

b)

Price and income

c)

Income and quality

d)

Land of the above

44.

The equation of budget line is

a)

PX+P1x1=M

b)

M=PoXo+Px

c)

P1x1+P2x2=M

d)

Y=MX+C

45.

The demand for these goods increases as income increases

a)

Inferior goods

b)

Giffen goods

c)

Normal goods

d)

None of the above

46.

A vertical demand curve is

a)

Perfectly elastic

b)

Perfectly inelastic

c)

Unitary elastic

d)

None of the above

47.

Ordinal utility analysis expresses utility in

a)

Numbers

b)

Returns

c)

Ranks

d)

Awards

48.

What satisfying capacity of a commodity is-----------

(a)  

49.

Tu Indifference curves never---------- each other

(a)  

50.

As income increases the demand curve for normal goods shift towards------

(a)  

51.

The demand for a good moves in the--------- the direction of its price

(a)  

52.

Method of adding two individual demand curve is called--------

(a)  

53.

What is budget line

4 lines
54.

What do you mean by indifference curve

4 lines
55.

State the law of demand

4 lines
56.

What is diminishing marginal utility theory

4 lines
57.

The lack of enough resources to produce everything people want is what economic problem?

a)

allocation

b)

productivity

c)

scarcity

58.

What is the importance of economic decision making when scarcity is a factor?

a)

decisions are made by the majority

b)

each choice has an opportunity cost

c)

decisions provide access to more resources

59.

What would a command economy do to address the problem of economic scarcity?

a)

providing temporary unemployment benefits

b)

encouraging private investment to increase production

c)

rationing limited resources to meet state needs

60.

Why do economic systems evaluate what, how, and for whom goods are produced?

a)

because of unlimited wants and limited resources

b)

because supply and demand are unreliable

c)

the inequality in the distribution of resources

61.

When an automobile manufacturer builds more of its top selling model, the company is responding to?

a)

what to produce

b)

how to produce

c)

who to produce for

62.

What is not a factor of production needed for industralization?

a)

capital

b)

labor

c)

entrepeneurs

d)

profit

63.

What is the relationship between labor and capital?

a)

entrepreneurs use capital and labor to make goods

b)

capital is the result of competition between laborers

c)

capital determines the number of laborers

64.

deciding to go to the movies versus studying is an example of

a)

comparative advantage

b)

income effect

c)

opportunity cost

65.

what do consumers do?

a)

balance supply and demand

b)

meet government production goals

c)

purchase goods and services

66.

The amount of a good or service that consumers are willing to buy at a particular price is defined as

a)

quantity demanded

b)

final product

c)

personal savings

67.

% Change in Demand% Change in Pr⁡ice\frac{\%\ Change\ in\ Demand}{\%\ Change\ in\ \Pr ice}  



What does this fraction represent?

a)

opportunity cost

b)

elasticity of demand

c)

supply and demand

68.

When demand is less than supply, the market

a)

has a surplus

b)

is in equilibrium

c)

has a shortage

69.

An increase in suppliers will lead to

a)

higher supply and higher prices

b)

lower supply and lower prices

c)

higher supply and lower prices

70.

Supply is shifted by all but:

a)

price

b)

cost

c)

technology

d)

expectations

71.

What happens to supply when the price of resources goes up?

a)

decrease in demand

b)

decrease in supply

c)

increase in supply

72.

How do global interactions affect the domestic economy?

a)

foreign trade removes money from the flow

b)

foreign trade doesn't affect the flow

c)

foreign trade adds money from the flow

73.

if taxes increase, what happens to circular flow?

a)

business wages increase

b)

labor available to businesses decreases

c)

money available to businesses decreases

74.

Which government action would likely increase the flow of money from households to businesses?

a)

increase in interest rates

b)

expansion of public services

c)

reduction of personal income tax

75.

the main factor that causes a change in supply

a)

price

b)

style

c)

taxes

d)

regulations

76.

besides price, supply can shift due to factors that are known as --

a)

price of resources

b)

determinants of supply

c)

demand

d)

competition

77.

When the gov't pays money to businesses, usually to encourage them to produce a certain product..

a)

taxes

b)

regulations

c)

competition

d)

subsidies

78.

Businesses pay the gov't, which helps pay for gov't services- but can lead to higher prices for their products

a)

subsidies

b)

cost of production

c)

regulations

d)

taxes

79.

The gov't sets rules on how businesses must be run, which can also affect the cost of production.

a)

taxes

b)

regulations

c)

competition

d)

subsidies

80.

If determinants of supply lead to an increased level of production, the supply curve will shift

a)

downward

b)

to the right

c)

to the left

d)

directly upward

81.

The cost of production includes the price of resources. If resources become more expensive, what will happen to supply levels?

a)

increase

b)

decrease

c)

remain the same

d)

come to a complete stop

82.

Which government tool can cause changes in supply levels and force the supply curve to shift?

a)

taxes

b)

subsidies

c)

regulations

d)

all of these

83.

If a slight price increase leads to an increase of production, then that supply is considered __

a)

inelastic

b)

elastic

84.

The motivation for ALL companies to be successful..

a)

save the world

b)

feed the children

c)

social justice

d)

profit

85.

Once a business has paid all of its costs, the money left over is ___

a)

revenue

b)

profit

c)

supply

d)

tax

86.

When prices rise, supply levels will also increase. If prices drop, supply will also fall.

a)

law of supply

b)

law of demand

c)

determinant of supply

d)

cost of production

87.

Which of these would be figured in to the cost of production? (choose all that apply)

a)

wages

b)

natural resources

c)

utilities

d)

insurance

88.
If a price floor was set at 320, what quantity would be purchased?
a)
20
b)
40
c)
60
d)
80
89.
What does this graph show?
a)
Shortage
b)
Surplus
c)
Supply Table
d)
Equilibrium
90.
Which of the following would not shift the supply curve for iphones?
a)
an increase in the price of iphones
b)
a decrease in the number of sellers of iphone
c)
an increase in the price of plastic, an input into the production of iphones
d)
an improvement in the technology used to produce iphones

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