Demand, supply and price

The law of demand says that, other things being equal, a rise in price:

• 1 Shifts the supply curve
• 2 Does not affect demand
• 3 Raises the quantity demanded
• 4 Lowers the quantity demanded

A rise in the price of tea is likely to:

• 1 Have no effect on coffee
• 2 Lower the demand for coffee
• 3 Lower the supply of coffee
• 4 Raise the demand for coffee

A fall in the price of a good itself causes:

• 1 A shift of the supply curve
• 2 A movement along the demand curve
• 3 A shift of the demand curve to the left
• 4 No change

The law of supply says that a higher price leads to:

• 1 A larger quantity supplied
• 2 A smaller quantity supplied
• 3 A lower cost
• 4 No change in supply

At the equilibrium price:

• 1 Quantity demanded equals quantity supplied
• 2 There is a shortage
• 3 The government fixes the price
• 4 There is a surplus

If the price is above the equilibrium price, there is a:

• 1 Surplus
• 2 Tax
• 3 Balance
• 4 Shortage

An increase in income raises the demand for a:

• 1 Free good
• 2 Normal good
• 3 Inferior good
• 4 Public good only

A subsidy to producers shifts the supply curve:

• 1 To the right
• 2 It does not shift
• 3 To the left
• 4 Downward only

Price elasticity of demand is calculated as:

• 1 % change in price / % change in quantity demanded
• 2 % change in quantity demanded / % change in price
• 3 Price x quantity
• 4 Change in income / change in price

If the price elasticity of demand is 0.5 in size, demand is:

• 1 Unitary elastic
• 2 Inelastic
• 3 Elastic
• 4 Perfectly elastic

Which of these usually has the most inelastic demand?

• 1 Salt
• 2 Luxury cars
• 3 Branded watches
• 4 Holiday tours

A tax on producers shifts the supply curve:

• 1 To the right
• 2 It does not shift
• 3 To the left
• 4 Upward only