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- Subject
- Supply and Demandeconomics-mcqs › supply-and-demand
- Published
- 29 May 2019
- Last updated
- 28 May 2026
When does a rise in aggregate demand primarily impact prices the most?
Multiple choice question for Supply and Demand. Select an option, then review the explanation below.
Explanation
The effect of an increase in aggregate demand on prices depends largely on the responsiveness of aggregate supply. If aggregate supply is price elastic, meaning it can increase output significantly as prices rise, then price levels will be more affected. Conversely, if supply is inelastic, output cannot adjust easily, limiting price changes. Therefore, prices are most influenced when aggregate supply is price elastic.
More Supply and Demand MCQs
Practice related questions from the same subject.
- 1.What is the typical shape of a demand curve?
- 2.What term describes a company earning profits beyond its normal profit level?
- 3.How does an increase in marginal cost affect output, and how does an increase in marginal revenue impact output?
- 4.Marginal revenue refers to the ________ resulting from producing an additional ________ of output.
- 5.What are firms generally assumed to do with their costs and profits?