Demand & Supply

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Demand & Supply - Quiz

This quiz covers the basics of demand & supply. All questions come from your Introduction to Demand, Introduction to Supply, and Determining Price Notes. You will have 1 minute to answer each question.


Questions and Answers
  • 1. 

    Which of the following is not a component of demand?

    • A.

      Desire

    • B.

      Surplus

    • C.

      Ability

    • D.

      Willingness

    Correct Answer
    B. Surplus
    Explanation
    Surplus is not a component of demand because it refers to an excess or extra quantity of a good or service beyond what is needed or desired. In the context of demand, surplus would imply that there is more demand than necessary, which contradicts the concept of demand. Demand is typically determined by desire, ability, and willingness to pay for a good or service.

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  • 2. 

    The law of demand states that there is what type of relationship between price and quantity demanded?

    Correct Answer
    inverse, inversely, opposite
    Explanation
    The law of demand states that there is an inverse relationship between price and quantity demanded. This means that as the price of a good or service increases, the quantity demanded decreases, and vice versa. In other words, when the price goes up, people tend to buy less of the product, and when the price goes down, people tend to buy more. This relationship is often referred to as "inverse," "inversely," or "opposite" because the direction of change in price and quantity demanded is opposite to each other.

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  • 3. 

    The demand curve slopes in which direction?

    • A.

      Down

    • B.

      Up

    Correct Answer
    A. Down
    Explanation
    The demand curve slopes down because as the price of a good or service increases, the quantity demanded by consumers decreases. This is because consumers are generally willing to purchase less of a good or service at higher prices. Conversely, as the price of a good or service decreases, the quantity demanded by consumers increases. This inverse relationship between price and quantity demanded is represented by a downward-sloping demand curve.

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  • 4. 

    When each additional unit of a product gives you less utility it is know as what?

    • A.

      Marginal analysis

    • B.

      Downward demand

    • C.

      Diminishing marginal utility

    • D.

      Decreasing desire

    Correct Answer
    C. Diminishing marginal utility
    Explanation
    Diminishing marginal utility refers to the concept that as you consume more units of a product, the additional satisfaction or utility you derive from each unit decreases. In other words, the more you have of something, the less value each additional unit provides. This concept is important in economics as it helps explain consumer behavior and the law of demand, which states that as the price of a product increases, the quantity demanded decreases.

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  • 5. 

    The law of supply states there is what type of relationship between price and quantity supplied?

    Correct Answer
    direct
    directly
    same
    Explanation
    The law of supply states that there is a direct relationship between price and quantity supplied. This means that as the price of a good or service increases, the quantity supplied by producers also increases. Similarly, as the price decreases, the quantity supplied decreases. Therefore, the price and quantity supplied move in the same direction, hence the terms "direct," "directly," and "same" are all correct in describing this relationship.

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  • 6. 

    The supply curve always slopes in what direction?

    • A.

      Down

    • B.

      Up

    Correct Answer
    B. Up
    Explanation
    The supply curve always slopes up because as the price of a good or service increases, suppliers are willing to produce and sell more of it. This is because higher prices incentivize suppliers to allocate more resources towards producing the good or service, resulting in an increase in quantity supplied. Conversely, as the price decreases, suppliers are less willing to produce and sell the good or service, leading to a decrease in quantity supplied. Therefore, the supply curve has a positive slope, indicating a direct relationship between price and quantity supplied.

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  • 7. 

    The ideal price level is known as what?

    Correct Answer
    Equilibrium
    equilibrium
    Explanation
    The ideal price level is known as equilibrium. Equilibrium refers to a state of balance or stability in the market where the demand for a product or service matches its supply. It is the point at which the quantity demanded equals the quantity supplied, resulting in no shortage or surplus. In terms of price, equilibrium represents the price at which buyers are willing to pay and sellers are willing to sell, ensuring that the market is in a state of balance.

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  • 8. 

    A surplus will occur for a product when the price is

    • A.

      Too high.

    • B.

      Too low.

    Correct Answer
    A. Too high.
    Explanation
    A surplus occurs for a product when the price is too high because at that price, the quantity supplied exceeds the quantity demanded. This means that producers are willing to supply more of the product than consumers are willing to buy. As a result, there is excess supply in the market, leading to a surplus. To eliminate the surplus, producers may have to lower the price to stimulate demand and encourage consumers to purchase more of the product.

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  • 9. 

    When there is a shortage what should be done?

    • A.

      Increase supply

    • B.

      Decrease price

    • C.

      Decrease price

    • D.

      Increase demand

    Correct Answer
    A. Increase supply
    Explanation
    When there is a shortage, increasing the supply is the appropriate action to take. This is because a shortage occurs when the demand for a product or service exceeds the available supply. By increasing the supply, more of the product or service will be available, helping to meet the demand and alleviate the shortage. This can be done by increasing production, expanding distribution channels, or sourcing from alternate suppliers. Decreasing the price or increasing the demand may not directly address the shortage issue and may not be feasible or effective in resolving the problem.

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  • 10. 

    When graphing supply and demand, price is always on which axis?

    • A.

      Horizontal

    • B.

      Vertical

    Correct Answer
    B. Vertical
    Explanation
    When graphing supply and demand, price is always on the vertical axis. This is because price is typically represented on the y-axis, while quantity is represented on the x-axis. The vertical axis is used to measure and display the price levels, while the horizontal axis is used to measure and display the quantity levels. By placing price on the vertical axis, it allows for a clear representation of how price changes as demand and supply fluctuate.

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