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Supply and Demand – MCQs
81 questions. Click to practice.
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1.
Which statement most accurately defines a supply curve?
The amount buyers desire to purchase under perfect conditions
The quantity that sellers are prepared and able to offer at every price, assuming all else remains constant
The volume sellers are ready and able to provide at every income level, holding other factors fixed
The quantity producers are willing and capable of selling at every moment in time, with other factors unchanged
2.
Which of the following correctly describes the elasticities associated with an inferior good?
Price elasticity of demand is negative; income elasticity of demand is negative
Price elasticity of demand is positive; income elasticity of demand is negative
Price elasticity of demand is negative; income elasticity of demand is positive
Price elasticity of demand is positive; income elasticity of demand is positive
None of the above
3.
If the price rises from 10 pence to 12 pence and the price elasticity of demand is -0.5, what is the new quantity demanded given that the original quantity was 500 units?
550 units
500 units
450 units
490 units
4.
If the income elasticity of demand is +2 and income rises by 20%, what will be the new sales volume given the initial sales were 5,000 units?
3,000 units
7,000 units
5,500 units
4,500 units
6,000 units
5.
What happens to total revenue when the price elasticity of demand equals one and the price decreases?
Total revenue decreases
Total revenue remains the same
Total revenue increases
Costs decrease
No effect on demand
6.
If the average annual income rises from Rs 20,000 to Rs 22,000 and the yearly quantity demanded increases from 5,000 to 6,000 units, which statement is accurate?
The demand is insensitive to price changes
This item is considered an inferior good
The income elasticity equals -2
The good is classified as normal
None of the above
7.
What characterizes the demand for a Veblen good?
Demand decreases as consumer income rises
Demand falls when the product's price goes up
Demand increases when the product's price rises
Demand drops as the price of substitute goods decreases
Demand remains unchanged regardless of price changes
8.
What is the effect on the demand for product A if the price of its complementary good rises?
The demand curve for product A shifts to the right
The demand curve for product A shifts to the left
The supply curve for product A shifts to the right
The supply curve for product A shifts to the left
No change occurs in the demand or supply of product A
9.
What does it indicate when marginal utility equals zero?
The overall utility is zero
Consuming one more unit will reduce total utility
Consuming an additional unit will raise total utility
The total utility has reached its highest point
10.
Under which circumstance would the demand curve for a normal good shift to the right?
When the product's own price drops
When the cost of an alternative product decreases
When the price of a complementary good increases
When consumers experience a decline in income
11.
Which statement most accurately defines a demand curve?
The amount buyers desire to purchase under perfect conditions
The quantity sellers are prepared to offer
The volume consumers can and want to purchase at every income level, assuming other factors remain constant
The amount consumers are willing and able to buy at every possible price, holding other factors constant
12.
If the demand for beef rises by 5% as the price of chicken goes up by 20%, what is the cross-price elasticity of demand between beef and chicken?
-4.0
0.25
4.0
-0.25
None of the above
13.
If the price of burgers rises by 22% and the quantity demanded decreases by 25%, how would you describe the demand for burgers?
elastic
perfectly elastic
unit elastic
inelastic
none of the above
14.
What does the price elasticity of demand measure?
The proportion of price change relative to the change in quantity demanded.
The ratio of the percentage change in quantity demanded to the percentage change in price.
The proportion of quantity demanded change compared to the price change.
The ratio of the percentage change in price to the percentage change in quantity demanded.
The absolute difference between price and quantity demanded.
15.
At the current market price, when does market equilibrium occur?
The amount buyers want equals the amount sellers offer
The quantity buyers desire is lower than what sellers provide
The quantity sellers provide exceeds what buyers want
The quantity buyers want surpasses what sellers supply
16.
If the cost of computer chips, a key component in making personal computers, declines, what will be the effect on the market for personal computers?
a reduction in the quantity of personal computers supplied
a decline in the overall supply of personal computers
a rise in the quantity of personal computers supplied
an expansion in the supply of personal computers
no change in supply or quantity supplied of personal computers
17.
Which factor does NOT lead to a shift in the demand curve for compact discs?
Variation in consumer wealth
Alteration in the price of compact discs
Change in consumer income
Modification in the price of substitute goods
Change in consumer preferences
18.
If the demand for product Z increases as the price of product Y decreases, how would you classify the relationship between goods Z and Y?
exact substitutes
complementary goods
independent goods
alternative goods
none of the above
19.
When deriving demand curves, which factors are assumed to remain unchanged?
Consumers' incomes, preferences, and prices of related goods.
Income levels, preferences, and the price of the good itself.
Income and consumer preferences only.
Preferences and prices of substitute or complementary goods.
None of the above.
20.
Which phenomenon occurs when a decrease in the price of a product leads consumers to purchase more of it instead of alternative products?
The all other factors held constant effect
The effect of declining additional satisfaction
The substitution effect
The purchasing power effect
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