WorksheetsBusiness 1.2 Edexcel AS Level
Total questions: 102
Worksheet time: 51mins
What is effective demand?
The desire to buy goods
The willingness and ability to buy goods at a given price
The total demand of the market
The demand from high-income consumers
What happens to the quantity demanded when the price of a good increases?
It increases
It stays the same
It decreases
It fluctuates randomly
Which of the following causes a movement along the demand curve?
A change in income
A change in the price of the good
A change in consumer preferences
A change in the price of substitutes
What does a rightward shift in the demand curve indicate?
A decrease in demand
A movement along the demand curve
An increase in demand
A decrease in supply
If the price of a substitute good increases, what happens to the demand for the related good?
It decreases
It stays the same
It increases
It becomes perfectly inelastic
What effect does an increase in consumer income generally have on the demand for normal goods?
Decreases demand
No effect on demand
Increases demand
Decreases supply
Which factor does NOT lead to a shift in the demand curve?
Change in income
Change in the price of complements
Change in the cost of production
Change in consumer preferences
What is the effect of seasonality on demand?
It decreases demand for all products
It only affects demand in the winter
It causes demand to vary at different times of the year
It makes demand perfectly elastic
What is the likely impact of an effective advertising campaign on demand?
Shift the demand curve to the left
Shift the demand curve to the right
Decrease demand
Increase supply
How does a decrease in the price of complementary goods affect demand?
It increases demand for both goods
It decreases demand for the complement
It has no effect on demand
It decreases supply
What is the law of supply?
As price increases, quantity supplied decreases
As price decreases, quantity supplied decreases
As price increases, quantity supplied increases
Supply remains constant regardless of price
What causes a movement along the supply curve?
A change in consumer preferences
A change in production technology
A change in the price of the good
A change in the price of inputs
What does a rightward shift in the supply curve indicate?
A decrease in supply
An increase in supply
An increase in demand
A movement along the supply curve
If production costs decrease, what happens to the supply curve?
It shifts to the left
It shifts to the right
There is movement along the supply curve
It becomes perfectly inelastic
What is the impact of an indirect tax on the supply curve?
It shifts to the right
It shifts to the left
There is no impact on the supply curve
It shifts to the right and then left
How does new technology affect supply?
It increases supply, shifting the supply curve to the right
It decreases supply, shifting the supply curve to the left
It increases demand, shifting the demand curve to the right
It has no effect on supply
What does a decrease in the number of firms in an industry do to the supply curve?
It shifts the supply curve to the left
It shifts the supply curve to the right
It causes a movement along the supply curve
It makes supply perfectly elastic
Which of the following is a non-price factor affecting supply?
A change in the price of the good
A change in consumer income
A change in production technology
A change in consumer preferences
What effect does a government subsidy have on supply?
Decreases supply
Increases supply
No effect on supply
Increases demand
What is likely to happen to supply if the cost of raw materials decreases?
Supply decreases
Supply increases
Demand decreases
Demand increases
What is a market?
A place where only buyers gather
A place where only sellers gather
A place where buyers and sellers meet to trade
A place where goods are stored
What is the equilibrium price?
The price at which supply exceeds demand
The price at which demand exceeds supply
The price at which supply equals demand
The highest possible price in the market
What happens when the price is set above the equilibrium price?
There is a shortage
There is a surplus
Demand exceeds supply
The market clears
What is the likely outcome if the price is set below the equilibrium price?
Surplus
Shortage
No change in market conditions
Increase in equilibrium price
Which of the following causes a surplus in the market?
Price set above equilibrium
Price set below equilibrium
A shift in the demand curve to the right
A shift in the supply curve to the left
What happens to the equilibrium price if there is an increase in demand?
It decreases
It remains unchanged
It increases
It fluctuates
What happens to the equilibrium quantity if there is a decrease in supply?
It increases
It remains unchanged
It decreases
It fluctuates randomly
What is the likely effect on the market if there is a fall in supply and demand remains constant?
Price decreases
Price increases
Quantity increases
Quantity remains unchanged
Which of the following is NOT a characteristic of a market?
Interaction between buyers and sellers
Prices are determined by bargaining
It requires a physical location
Equilibrium price and quantity can be established
What happens to business revenue if both price and quantity increase due to a rise in demand?
Revenue decreases
Revenue increases
Revenue stays the same
Revenue fluctuates randomly
What does the price elasticity of demand (PED) measure?
The relationship between supply and demand
The responsiveness of quantity demanded to a change in price
The responsiveness of supply to a change in demand
The relationship between income and demand
What is the formula for calculating PED?
% change in price / % change in quantity demanded
% change in quantity demanded / % change in price
% change in demand / % change in supply
% change in income / % change in price
If PED is less than 1, demand is said to be:
Elastic
Inelastic
Perfectly elastic
Perfectly inelastic
Which of the following indicates elastic demand?
PED > 1
PED = 1
PED < 1
PED = 0
Which of the following indicates elastic demand?
PED>1
PED=1
PED<1
PED=0
What is the PED for a luxury good?
Equal to 1
Less than 1
Greater than 1
Equal to 0
What happens to total revenue when demand is price elastic and the price is increased?
Total revenue increases
Total revenue decreases
Total revenue remains unchanged
Total revenue fluctuates randomly
What type of goods typically have inelastic demand?
Luxury goods
Necessities
Substitutes
Complements
If PED is -0.8 and the price increases by 10%, what happens to the quantity demanded?
It decreases by 8%
It increases by 8%
It decreases by 10%
It remains unchanged
For which type of product would you expect PED to be more elastic?
A necessity with no close substitutes
A luxury with many substitutes
A necessity with close substitutes
A luxury with no substitutes
Which factor does NOT affect the price elasticity of demand?
Availability of substitutes
Proportion of income spent on the good
The number of producers in the market
Whether the good is a luxury or necessity
What does income elasticity of demand (YED) measure?
The responsiveness of demand to a change in income
The responsiveness of income to a change in demand
The responsiveness of supply to a change in income
The relationship between price and income
What is the formula for calculating YED?
% change in quantity demanded / % change in price
% change in income / % change in quantity demanded
% change in quantity demanded / % change in income
% change in demand / % change in income
If YED is positive and greater than 1, the good is classified as:
A necessity
A luxury
An inferior good
A substitute good
Which type of good has a negative YED?
Luxury
Necessity
Inferior
Complementary
What happens to the demand for inferior goods when income rises?
It increases
It decreases
It remains unchanged
It becomes perfectly elastic
What type of good has a YED between 0 and 1?
Luxury
Inferior
Necessity
Complementary
If YED for a good is 0.5 and income increases by 10%, what happens to the quantity demanded?
It increases by 5%
It decreases by 5%
It increases by 10%
It remains unchanged
During a recession, which type of good is likely to see an increase in demand?
Luxury
Necessity
Inferior
Complementary
What type of good is likely to have a high positive YED?
Necessity
Inferior
Luxury
Complementary
What impact does an increase in income have on the demand for normal goods?
It decreases
It increases
It remains the same
It becomes perfectly inelastic
If the price of a product falls and total revenue decreases, what can be said about the price elasticity of demand?
Demand is elastic
Demand is inelastic
Demand is perfectly elastic
Demand is unit elastic
A good with a YED of -1.5 is likely to be:
A necessity
A luxury
An inferior good
A normal good
Which of the following would cause a movement along the supply curve?
A change in the cost of production
A change in technology
A change in the price of the product
A government subsidy
If the demand for a good increases when consumer incomes fall, the good is classified as:
Normal
Inferior
Luxury
Necessity
Which of the following is likely to have a highly inelastic demand?
A luxury car
A specific brand of a product with no close substitutes
A generic product with many substitutes
A seasonal product
If a company is operating in a market with highly elastic demand, what pricing strategy should it use to increase total revenue?
Increase prices
Decrease prices
Keep prices constant
Increase supply
What happens to the demand curve of a normal good if consumer incomes increase?
It shifts to the right
It shifts to the left
It remains unchanged
It becomes steeper
Which of the following is an example of a luxury good?
Bread
Gasoline
Smartwatches
Generic medicine
If the PED for a product is -2, and the price increases by 5%, what is the expected change in quantity demanded?
It decreases by 10%
It increases by 10%
It decreases by 5%
It increases by 5%
What type of product would have a YED of 0.8?
Luxury
Necessity
Inferior
Complementary
If the government imposes a price ceiling below the equilibrium price, what is the likely result?
Surplus
Shortage
No effect on the market
Increase in supply
Which of the following would likely decrease the supply of a good?
A decrease in production costs
The introduction of a government subsidy
An increase in production technology
An increase in the cost of raw materials
What is the impact on the market if there is a simultaneous increase in both demand and supply?
Price increases
Price decreases
Quantity increases
Quantity decreases
If a firm faces an increase in the cost of production but the price remains the same, what is the likely impact on supply?
Supply increases
Supply decreases
Supply remains unchanged
Supply becomes perfectly inelastic
What is likely to happen to the equilibrium quantity if there is an increase in demand but supply remains constant?
It increases
It decreases
It remains unchanged
It fluctuates randomly
Which of the following scenarios indicates an elastic supply?
A small increase in price leads to a large increase in quantity supplied
A large increase in price leads to a small increase in quantity supplied
Supply remains constant regardless of price changes
Supply decreases as price increases
What is the likely effect on a luxury good if consumer incomes decrease?
Increase in demand
Decrease in demand
Increase in supply
Decrease in supply
Which factor is likely to make the supply of a good more elastic?
Shorter production time
Limited availability of resources
Long production time
High fixed costs
Which of the following is likely to happen in a market where demand is perfectly inelastic?
Quantity demanded changes with price
Price changes have no effect on quantity demanded
Demand curve is downward sloping
Supply curve is perfectly elastic
What is likely to happen in a market where demand is perfectly inelastic?
Quantity demanded changes with price
Price changes have no effect on quantity demanded
Demand curve is downward sloping
Supply curve is perfectly elastic
What is the effect of an external shock, such as a natural disaster, on the supply curve of a good?
Shifts to the right
Shifts to the left
Remains unchanged
Becomes perfectly inelastic
Given a PED of -1.5 and a price increase of 10%, what is the expected change in total revenue?
Total revenue increases
Total revenue decreases
Total revenue remains unchanged
Total revenue doubles
If the price of a complementary good decreases, what is the likely effect on the demand for the related good?
Increase in demand
Decrease in demand
No effect on demand
Increase in supply
What would be the impact on a normal good if consumer income rises by 5% and the YED is 0.7?
Quantity demanded increases by 3.5%
Quantity demanded decreases by 3.5%
Quantity demanded increases by 5%
Quantity demanded remains unchanged
If the YED for a luxury car is 2.5, what happens to the demand when income increases by 10%?
It increases by 25%
It increases by 2.5%
It decreases by 2.5%
It decreases by 25%
Which scenario would result in a movement along the demand curve?
A change in the price of the good
A change in consumer income
A change in the price of a substitute
A change in consumer preferences
What is the likely outcome if supply decreases and demand remains constant?
Increase in equilibrium price
Decrease in equilibrium price
Increase in equilibrium quantity
Decrease in equilibrium quantity
If the price of a necessity increases, what is the likely impact on quantity demanded?
Large decrease
Small decrease
No change
Large increase
Which factor would likely cause the demand curve for a normal good to shift to the left?
Increase in consumer income
Decrease in consumer income
Improvement in consumer preferences
Decrease in the price of substitutes
If the YED for a product is negative, what can be inferred about the product?
It is a luxury good
It is an inferior good
It is a necessity
It is a complementary good
In a market where demand is highly elastic, what happens to total revenue if the price decreases?
Total revenue increases
Total revenue decreases
Total revenue remains unchanged
Total revenue fluctuates randomly
What is the impact on the quantity supplied if the price is expected to increase in the future?
Increase in current supply
Decrease in current supply
Increase in future supply
Decrease in future supply
If a good has a PED of -0.5, how would a 20% decrease in price affect total revenue?
Increase by 10%
Decrease by 10%
Increase by 20%
Decrease by 20%
What happens to the equilibrium price if there is a simultaneous increase in demand and a decrease in supply?
It increases
It decreases
It remains unchanged
It fluctuates randomly
Which of the following is a characteristic of an inelastic good?
High availability of substitutes
It is a luxury item
It is a necessity
It is a non-essential good
Which factor is most likely to make a product’s demand more price elastic?
Few substitutes
Many substitutes
It is a necessity
High brand loyalty
If consumer income falls and YED for a good is positive, what happens to demand for that good?
It increases
It decreases
It remains unchanged
It becomes perfectly inelastic
Which of the following goods is most likely to have a positive YED greater than 1?
Basic food items
Luxury cars
Generic clothing
Public transportation
In which scenario would a business benefit from raising prices if PED is inelastic?
When demand is elastic
When demand is inelastic
When demand is unit elastic
When demand is perfectly elastic
What is the effect on total revenue if a firm with inelastic demand raises its prices?
Total revenue increases
Total revenue decreases
Total revenue remains unchanged
Total revenue fluctuates randomly
If the price of a good increases and its quantity supplied increases, which economic principle does this illustrate?
Law of demand
Law of supply
Law of diminishing returns
Price elasticity of demand
Which of the following statements is true about elastic demand?
Demand is highly responsive to price changes
Demand is not responsive to price changes
Demand remains constant regardless of price changes
Price changes have no effect on demand
What type of demand curve does a perfectly elastic demand represent?
Horizontal
Vertical
Downward sloping
Upward sloping
Which of the following describes a necessity good?
It has a YED greater than 1
It has a YED between 0 and 1
It has a negative YED
It has a perfectly inelastic demand
What does it mean if a product has a PED of 0?
Demand is perfectly elastic
Demand is perfectly inelastic
Demand is unit elastic
Demand is elastic
Which of the following would most likely have a highly elastic demand?
Water
Salt
Luxury watches
Electricity
If the price of a product increases by 15% and the quantity demanded decreases by 30%, what is the PED?
-2
-0.5
2
0.5
Which of the following goods is likely to have a positive YED?
An inferior good
A luxury good
A necessity with no close substitutes
A complementary good
What is the expected impact on a firm’s total revenue if it raises prices in a market with elastic demand?
Total revenue increases
Total revenue decreases
Total revenue remains unchanged
Total revenue becomes perfectly elastic
Which of the following represents the relationship between price and quantity supplied?
Inverse relationship
Direct relationship
No relationship
Unpredictable relationship
Which of the following would cause a movement along the demand curve rather than a shift in the curve?
A change in the price of the good
A change in consumer income
A change in the price of a substitute
A change in consumer preferences
