Question 1

Which of the following best describes the law of demand?

Accepted Answer

As the price of a good increases, the quantity demanded decreases, ceteris paribus.

Question 2

Suppose the money price of a laptop is $$1000 and the money price of a tablet is 500. $$What is the relative price of a laptop in terms of tablets?

Accepted Answer

$$1000/500 = 2$, so the relative price is 2 tablets per laptop.

Question 3

If the price of gasoline (a complement to trucks) increases, what is the likely effect on the demand for trucks?

Accepted Answer

The demand for trucks will decrease.

Question 4

Which of the following events would cause a movement along the demand curve for a product, rather than a shift of the demand curve?

Accepted Answer

A change in the price of the product itself.

Question 5

Suppose the demand for a normal good increases as income rises. Which of the following is an example of a normal good?

Accepted Answer

Luxury cars during an economic boom.

Question 6

If the government provides a subsidy to producers of electric cars, what is the likely effect on the supply curve for electric cars?

Accepted Answer

The supply curve will shift to the right.

Question 7

Given the linear demand equation $$Q_d = 12 - 2P$$ and the linear supply equation $$Q_s = 2P$$, what is the equilibrium price?

Accepted Answer

$$P = 3$$

Question 8

Using the same equations as above ($$Q_d = 12 - 2P$$, $$Q_s = 2P$$), what is the equilibrium quantity?

Accepted Answer

$$Q = 6$$

Question 9

If the price of a good is set below the equilibrium price, what will occur in the market?

Accepted Answer

A shortage will occur.

Question 10

Which of the following would cause the supply curve for smartphones to shift to the left?

Accepted Answer

An increase in the cost of key inputs such as microchips.

Question 11

Suppose the price of a substitute good for laptops (such as tablets) decreases. What is the likely effect on the demand for laptops?

Accepted Answer

The demand for laptops will decrease.

Question 12

If the number of buyers in a market increases, what happens to the market demand curve?

Accepted Answer

It shifts to the right.

Question 13

Which of the following best describes a change in quantity supplied?

Accepted Answer

A movement along the supply curve due to a change in the good's own price.

Question 14

A new technology reduces the cost of producing solar panels. What is the likely effect on the equilibrium price and quantity of solar panels?

Accepted Answer

Equilibrium price decreases, equilibrium quantity increases.

Question 15

If the government imposes a price ceiling below the equilibrium price for rental apartments, what is the most likely outcome?

Accepted Answer

A shortage of rental apartments.

Question 16

Which of the following is an example of an inferior good?

Accepted Answer

Instant noodles during a recession.

Question 17

If the price of a good increases and, as a result, producers increase the quantity supplied, this is an example of:

Accepted Answer

A movement along the supply curve.

Question 18

Suppose a global recession decreases consumer incomes. What is the likely effect on the demand for normal goods and inferior goods, respectively?

Accepted Answer

Demand for normal goods decreases; demand for inferior goods increases.

Question 19

A decrease in the price of printers (a complement to computers) is likely to have what effect on the demand for computers?

Accepted Answer

Increase the demand for computers.

Question 20

If both the demand and supply curves for a product shift to the right, what can we say about the new equilibrium quantity?

Accepted Answer

It will definitely increase.

Microeconomics: Demand and Supply (ECON1110, Chapter 3 Study Notes)

Study Guide - Practice Questions