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Supply/Demand test review
When a consumer is able and
willing to buy a good or service, he
or she creates which of the
following?
a. Consumption
b. Demand
c. Elasticity
d. allocation
Law of Demand
• When prices go up, demand goes down
• When prices go down, demand goes up
• Law of Supply- when prices go up, supply
goes up, when prices go down, supply
goes down
What determines the price and the
quantity produced of most goods?
a. the consumer’s perception of necessity
b. the interaction of supply and demand
c. the availability of substitutes for the
goods
d. the quality of the goods that are
produced
What are inferior goods?
• a.goods that are not well produced
• b.goods that no one wants to buy
• c.goods for which the demand rises when
income rises
• d.goods for which the demand falls when
income rises
How is future price related to current demand?
• a. If the price is expected to rise, current
demand will drop
• b. If the price is expected to fall, current demand
will rise.
• c. If the price is expected to rise, current demand
will rise.
• d. Future price is not related to current demand.
What determines how a change in prices
will affect total revenue for a company?
a. elasticity of demand
b. values of elasticity
c. the company’s pricing policy
d. the consumers’ incomes
What does it mean when the demand for a
product is inelastic?
a. People will not buy any of the product when the
price goes up.
b. A price increase does not have a significant
impact on buying habits.
c. Customers are sensitive to the price of the
product.
d. There are very few satisfactory substitutes for
the product.
What is a basic principle of the law of demand?
a. The higher the price, the more people will want
the good.
b. Everyone has a limited income that they will
spend.
c. When a good’s price is lower, people will buy
more of it.
d.Services are of interest in the same way that
goods are.
Which of the following is a good that might
not be bought when prices rise?
• a. elastic
• b. inelastic
What kind of changes would not be
expected in the demand of a country that
has a growing population?
• a. a rise in the demand for recreation
• b. a shift in the demand for high-quality
food
• c. a rise in the demand for shelter
• d. decreased demand for automobiles
A shift in the demand curve means which
of the following?
• a. a change in demand at every price
• b. a rise in prices
• c. a decrease in both price and quantity
demanded
• d. a change in consumer income
When prices rise, which of the following
happens to income?
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a. It goes down
b. It rises to meet prices.
c. It buys less
d.It is used to buy different things.
Which of the following goods would be likely
to be bought in the same quantity even if it
doubled in price?
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a. cars
B. insulin
c. cell phones
d. shirts
Which of the following is an example of lower
production costs brought about by the use of
technology?
• a. the delivery costs of gasoline to the consumer
by diesel trucks
• b. the use of e-mail to replace slower surface
mail
• c. the making of breads and pastries in local
shops rather than large bakeries
• d. the importing of fresh vegetables from South
America rather than using canned vegetables
What do sellers do if they expect the price of
goods they have for sale to increase
dramatically in the near future?
• a. sell the goods now and try to invest the
money instead of resupplying
• b. sell the goods now but try to get the higher
price for them
• c. store the goods until the price rises
• d. store the goods indefinitely regardless of
when the price rises
Which of the following is the best example of the law of
supply?
• a. A sandwich shop increases the number of sandwiches
they supply every day when the price is increased
• b. A food producer increases the number of acres of
wheat he grows to supply a milling company.
• c. A catering company buys a new dishwasher to make
their work easier.
• d. A milling company builds a new factory to process flour
to export.
When the selling price of good
goes up, what is the relationship
to the quantity supplied?
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A.
B.
C.
D.
Suppliers supply more
Suppliers supply less
Consumers buy more
Consumers buy less
When a producer is able and willing to produce
a good or service, he or she creates
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A.
B.
C.
D.
Supply
Demand
Equilibrium
None of the above
Hot dogs and hot dog buns are
what types of goods
• A. Substitute
• B. Complementary
If the price of butter goes up, what happens
to the demand for margarine?
• A. It goes up
• B. It goes down
• Give an example of a normal good.
• Coke and pepsi are what types of goods?
• What will cause the demand curve to
shift?
• What will cause the supply curve to shift?
What happens when wages are set above the
equilibrium level by law?
• a. Firms tend to try to break the law and hire
people at the equilibrium level.
• b. Firms employ more workers than they would at
the equilibrium wage.
• c. Firms employ fewer workers than they would at
the equilibrium wage.
• d. Firms hire more workers but for fewer hours
than they would at the equilibrium wage.
When buyers will purchase exactly as much
as sellers are willing to sell, what is the
condition that has been reached?
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a. supply and demand
b. equilibrium
c. excess demand
d. price floor
Which of the following is an example of a
good whose price goes down because of
improvements in technology?
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a. computer
b. hard-bound books
c. running shoes
d. typewriters
What happens when the supply of a nonperishable
good is greater than the consumer wants to buy?
• a. the good is discarded
• b. the good becomes a luxury and the price rises
• c. either the good remains unsold or the price
drops
• d. either the good is saved for later sale or the
price is lowered
Price is the most important determinant to both
consumers and producers
A. True
B. False
What happens to a market in equilibrium when
there is an increase in supply?
• a. Excess supply means that producers will
make less of the good
• b. Quantity demanded will exceed quantity
supplied, so the price will drop.
• c. Quantity supplied will exceed quantity
demanded, so the price will drop
• d. Undersupply means that the good will
become very expensive.
In a command economy, who has a large
role in the setting of prices?
A. People
B. Suppliers
C. Government
A subsidy is
a. a tax on the production or sale of a good
b. a form of government regulation
c. a government payment to support a
business or market
d. illustrated by the market supply curve
A market is in equilibrium when
• a. quantity demanded is greater than
quantity supplied
• b. quantity supplied and quantity
demanded are equal
• c. quantity supplied is greater than
quantity demanded
• d. the government takes action to bring it
into equilibrium
• A market is in equilibrium when quantity
supplied equals quantity demanded.
Disequilibrium occurs when:
• a. quantity supplied and quantity
demanded are not equal
• b. prices are higher than quantity supplied
• c. quantity supplied is greater than
quantity demanded
• d. there is neither excess supply nor
excess demand
• Disequilibrium occurs when quantity
supplied and quantity demanded are
not equal
when there is extra supply (surplus)
• Prices tend to fall….think clearance sales
Which statement explains why
prices rise in a market?
• a. producers produce a quantity greater
than consumers want to buy
• b. new producers enter the market
• c. consumers buy much less of a good
than they have in previous years
• d. there is excess demand in the market
Prices might rise if there is
excessive demand
When does a surplus exist?
• a. when new products are brought to the
market for sale
• c. when there are too few items for hte
people who want to buy them
• b. whenever the prices drop
• d. when there is a greater supply of a good
than people want to buy
Surplus
• Supply is greater than demand
Which of the following is an
example of a shortage?
• a. stores cannot sell all the new popular
toys they have on hand
• b. consumers cannot find enough of a
popular new toy in stores
• c.manufacturers make too many units of a
popular new toy
• d. consumers cannot afford to buy a new
popular toy
shortage
• Demand is greater than supply
How are goods and services
distributed in a free market
economy?
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a. through rationing
b. through government action
c. through prices
d. through disequilibrium
How are goods and services
distributed in a free market
economy?
• Through prices
Rationing is a common form of
distribution in
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a. centrally planned economy
b. price-based system
c. free market economy
d. market based on competition
Rationing is common in centrally
planned economies
If there is a shortage in the market,
the price is likely to
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a. increase
c. decrease
b. remain the same
d. fluctuate
Price ceilings that are set artificially
low are likely to create a
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a. price floor
c. equilibrium
b. surplus
d. shortage
• Know the difference between a change in
demand and a change in quantity
demanded
• Difference between change in supply and
change in quantity supplied