Demand and Supply Practice Multiple Choice questions 1.

If an increase in the price of paper leads to a decrease in the demand for pencils, then paper and pencils are: a. b. c. d. substitutes complements normal goods inferior goods

2. The law of demand states that an increase in the price of a good:

a. decreases the demand for that good b. increases the supply of that good c. decreases the quantity demanded for that good d. increases the quantity supplied of that good

3. The law of supply states that an increase in the price of a good:

a. b. c. d. decreases the demand for that good increases the supply of that good decreases the quantity demanded for that good increases the quantity supplied of that good

4. If an increase in consumer income leads to a decrease in the demand for good x, then
good x is: a. b. c. d. a substitute a complementary good a normal good a inferior good

5. Which of the following shifts the demand for watches to the right?
a. b. c. d. a decrease in the price of watches a decrease in consumer income if watches is a normal good an increase in the price of watches an increase in consumer income if watches is a normal good

6. All of the following shift the supply curve of watches to the right except: a. b. c. d. an advance in the technology used in manufacturing watches a decrease in the wages/salaries of workers employed to manufacture watches an increase in the price of watches manufacturers expectations of lower watch prices in the future

7. If the price of a good is above the equilibrium price, a. b. c. d. there is a surplus and the price will fall there is a surplus and the price will rise there is a shortage and the price will fall there is a shortage and the price will rise

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8. If the price of a good is below the equilibrium price, a. b. c. d. there is a surplus and the price will fall there is a surplus and the price will rise there is a shortage and the price will fall there is a shortage and the price will rise

9. If the price of a good is equal to the equilibrium price, a. b. c. d. there is a surplus and the price will fall there is a shortage and the price will rise the quantity demanded exceeds the quantity supplied and the price remains unchanged the quantity demanded is equal to the quantity supplied and the price remains unchanged

10. An increase in the demand for a good will tend to cause: a. b. c. d. an increase in the equilibrium price and quantity a decrease in the equilibrium price and quantity an increase in the equilibrium price and a decrease in the equilibrium quantity a decrease in the equilibrium price and an increase in the equilibrium quantity

11. A decrease in the supply of a good will tend to cause: a. b. c. d. an increase in the equilibrium price and quantity a decrease in the equilibrium price and quantity an increase in the equilibrium price and a decrease in the equilibrium quantity a decrease in the equilibrium price and an increase in the equilibrium quantity

12. Suppose there is an increase in both the supply and demand for laptops. In the market for laptops we would expect: a. b. c. d. the equilibrium quantity to rise and the equilibrium price to rise the equilibrium quantity to rise and the equilibrium price to fall the equilibrium quantity to rise and the equilibrium price to remain constant the equilibrium quantity to rise and the change in equilibrium price to be ambiguous

13. Suppose cold weather destroys much of the orange crop. At the same time, suppose consumer tastes shift towards orange juice. What would you expect to happen to the equilibrium price and quantity in the market for orange juice? a. b. c. d. price will increase; quantity is ambiguous price will increase; quantity will increase price will increase; quantity will decrease price will decrease; quantity is ambiguous

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