Laws of Demand and Supply

Question No. 1 Marks +1 -0 Time

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According to the Law of Demand, ceteris paribus, what is the relationship between the price of a good and the quantity demanded?

A. They are directly related, both increasing or decreasing together.
B. They are inversely related, as one increases, the other decreases.
C. There is no direct relationship between them.
D. Quantity demanded is always constant regardless of price.

Question No. 2 Marks +1 -0 Time

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A 'change in quantity demanded' refers to a:

A. Shift of the entire demand curve.
B. Movement along a stationary demand curve.
C. Change in consumer tastes and preferences.
D. Change in the price of a substitute good.

Question No. 3 Marks +1 -0 Time

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Which of the following would cause a leftward shift in the demand curve for coffee?

A. A decrease in the price of tea (a substitute good).
B. An increase in consumer income, assuming coffee is a normal good.
C. A decrease in the cost of producing coffee.
D. A widely published report praising the health benefits of coffee.

Question No. 4 Marks +1 -0 Time

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The Law of Supply states that, ceteris paribus, an increase in the price of a good leads to:

A. A decrease in the quantity supplied.
B. An increase in the quantity supplied.
C. No change in the quantity supplied.
D. A shift in the supply curve to the left.

Question No. 5 Marks +1 -0 Time

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What is the primary factor that causes a movement along the supply curve?

A. Changes in input prices.
B. Changes in technology.
C. Changes in the price of the good itself.
D. Changes in the number of sellers.

Question No. 6 Marks +1 -0 Time

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Market equilibrium occurs at the point where:

A. Quantity demanded exceeds quantity supplied.
B. Quantity supplied exceeds quantity demanded.
C. Quantity demanded equals quantity supplied.
D. The supply curve is perfectly elastic.

Question No. 7 Marks +1 -0 Time

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If the market price is above the equilibrium price, what will result?

A. A shortage, leading to a rise in price.
B. A surplus, leading to a fall in price.
C. A shortage, leading to a fall in price.
D. A surplus, leading to a rise in price.

Question No. 8 Marks +1 -0 Time

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An increase in consumer income, for a normal good, would typically lead to:

A. A leftward shift in the demand curve.
B. A rightward shift in the demand curve.
C. A movement down along the demand curve.
D. No change in the demand curve.

Question No. 9 Marks +1 -0 Time

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If the cost of inputs used to produce a good increases, ceteris paribus, what effect will this have on the supply curve?

A. It will shift to the right.
B. It will shift to the left.
C. There will be a movement down along the curve.
D. It will become flatter.

Question No. 10 Marks +1 -0 Time

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Complementary goods are those where a decrease in the price of one leads to:

A. A decrease in the demand for the other.
B. An increase in the demand for the other.
C. No change in the demand for the other.
D. A decrease in the supply of the other.

Question No. 11 Marks +1 -0 Time

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What is the primary assumption underlying the ceteris paribus condition in the Law of Demand and Supply?

A. That prices are fixed.
B. That all non-price determinants of demand and supply remain constant.
C. That the market is perfectly competitive.
D. That consumers have perfect information.

Question No. 12 Marks +1 -0 Time

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When quantity demanded exceeds quantity supplied at a given price, it leads to a:

A. Surplus, causing price to fall.
B. Shortage, causing price to fall.
C. Surplus, causing price to rise.
D. Shortage, causing price to rise.

Question No. 13 Marks +1 -0 Time

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Which of the following is NOT a determinant of demand?

A. Consumer income.
B. Price of related goods.
C. Technology of production.
D. Consumer expectations.

Question No. 14 Marks +1 -0 Time

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If producers expect the future price of their product to increase significantly, how might they react in the present?

A. Increase current supply to capitalize on anticipated higher prices.
B. Decrease current supply to hold inventory for anticipated higher prices.
C. Increase current demand for their inputs.
D. Shift the supply curve to the right.

Question No. 15 Marks +1 -0 Time

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For an inferior good, an increase in consumer income will result in:

A. An increase in demand.
B. A decrease in demand.
C. No change in demand.
D. An increase in quantity demanded.

Question No. 16 Marks +1 -0 Time

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A technological advancement in the production of smartphones would most likely lead to:

A. A decrease in the supply of smartphones.
B. An increase in the demand for smartphones.
C. A decrease in the demand for smartphones.
D. An increase in the supply of smartphones.

Question No. 17 Marks +1 -0 Time

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When both the demand for a product and its supply increase simultaneously, the equilibrium quantity will:

A. Increase.
B. Decrease.
C. Remain unchanged.
D. Be indeterminate.

Question No. 18 Marks +1 -0 Time

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If the number of sellers in a market increases, ceteris paribus, what will happen to the market supply curve?

A. It will shift to the left.
B. It will shift to the right.
C. There will be a movement upward along the curve.
D. It will become steeper.

Question No. 19 Marks +1 -0 Time

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A Giffen good is a rare type of inferior good for which:

A. The income effect reinforces the substitution effect.
B. The demand curve slopes upwards.
C. The demand curve shifts to the right with a price increase.
D. It has many close substitutes.

Question No. 20 Marks +1 -0 Time

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Which of the following describes a 'change in demand'?

A. Consumers buy more of a product because its price falls.
B. Producers offer more of a product because its price rises.
C. Consumers buy more of a product because their income increases.
D. Producers offer less of a product because input costs rise.

Question No. 21 Marks +1 -0 Time

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If the price of a good is below the equilibrium price, market forces will generally lead to:

A. An increase in quantity supplied and a decrease in quantity demanded.
B. A decrease in quantity supplied and an increase in quantity demanded.
C. A decrease in both quantity supplied and quantity demanded.
D. An increase in both quantity supplied and quantity demanded.

Question No. 22 Marks +1 -0 Time

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Veblen goods are characterized by:

A. A positive income elasticity of demand.
B. A demand that increases as their price increases, due to their status symbol appeal.
C. Being consumed more by lower-income households.
D. Being highly inelastic in demand.

Question No. 23 Marks +1 -0 Time

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If both the demand curve and the supply curve for a product shift to the left, what is the effect on equilibrium quantity?

A. Equilibrium quantity will increase.
B. Equilibrium quantity will decrease.
C. Equilibrium quantity will remain unchanged.
D. The effect on equilibrium quantity is indeterminate.

Question No. 24 Marks +1 -0 Time

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What happens to the equilibrium price if the demand for a product decreases and the supply for the product increases simultaneously?

A. It will definitely increase.
B. It will definitely decrease.
C. It will remain unchanged.
D. The effect on equilibrium price is indeterminate.

Question No. 25 Marks +1 -0 Time

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Which of the following scenarios would lead to an increase in equilibrium price and an indeterminate effect on equilibrium quantity?

A. Demand increases and supply decreases.
B. Demand decreases and supply increases.
C. Both demand and supply increase.
D. Both demand and supply decrease.

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