Microeconomics Demand and Supply Practice Test

11/14/24, 3:24 PM Microeconomics Demand and Supply Practice Test
Microeconomics Demand and Supply Name
Practice Test Score / 106
1. What is the definition of demand in microeconomics?
Demand is the total quantity of goods available for sale at a given

price.
Demand is the amount of a product that consumers are willing to

purchase at a given price.
Demand is the relationship between the price of a product and the

quantity supplied.
Demand is the amount of a product that suppliers will offer to the

market at a given price.
2. According to Engel's Law, how does the consumption of food change as

income increases?
It increases proportionately with income.
It decreases as income increases.
It remains constant regardless of income.
It increases at a decreasing rate.
3. Explain how the presence of substitutes in a market can affect consumer

behavior and pricing.
Consumers will always choose the more expensive substitute.
The availability of substitutes leads to increased consumer choice and

can drive prices down.
Substitutes have no impact on consumer behavior.
Consumers prefer to buy only one type of good regardless of

substitutes.
https://quizlet.com/practice-test/practice-test-a3d3c03e-c08d-49db-a098-592e6ed34be9 1/32
4. What does price elasticity of demand do?
Indicates how sensitive or responsive customers are to changes in

price
Measures how price changes over time
Helps bounce back after a recession
Helps create better products
5. What is the definition of superior goods in microeconomics?
Goods that are always in demand regardless of income
Goods that are preferred when income increases
Goods that have a fixed price
Goods that are considered inferior when income rises
6. What is the definition of inferior goods in microeconomics?
Goods that are purchased more when income levels are high
Goods that have a constant demand regardless of income changes
Goods that are purchased more when income levels are low
Goods that are considered luxury items
7. ______ is the amount by which the quantity supplied exceeds the quantity
demanded at a given price.
Supply and demand
Market shortage
Market equilibrium
Market surplus
8. Complements are goods that can be consumed jointly.
An increase in the price of one good leads to a decrease in the

demand for its
complement.
Ex. cereals and milk; coffee and cream; CD and CD player
9. What does the law of demand state?
As the price increases, quantity demanded increases.
As the price decreases, quantity demanded decreases.
As the price increases, quantity demanded decreases.
As the price increases, quantity demanded remains constant.
10. We say that goods are substitutes when they:
are related goods that are consumed together, so that purchasing one
will make a consumer more likely to purchase the other.
can replace something consumers typically purchase at a significantly

lower price.
change a consumer's preferences.
serve similar-enough purposes that a consumer might purchase one in

place of the other.
11. What does Engel's Law indicate about the relationship between income
levels and food consumption?
Food consumption increases at a higher rate than income.
Food consumption remains constant regardless of income changes.
Food is considered a luxury good with high income elasticity.
Food is a necessity with low income elasticity.
12. Engels law states that:
As income rises, the proportion of income spent on food increases,

even if actual expenditure on food declines
As food consumption rises, the proportion of income spent on food

falls, even if actual expenditure on food rises
As income rises, the proportion of income spent on food increases,

even if actual expenditure on food rises
As income rises, the proportion of income spent on food falls, even if

actual expenditure on food rises
None of the above
13. Point elasticity is the price elasticity of demand at a specific point on the
demand curve instead of over a range of the demand curve.
True.
False.
Uncertain.
14. What is demand?
Supply of a certain product
A benefit of the product
A desire for a product
Assignment of a value
15. When household incomes go down and the quantity of a product

demanded goes up, the product is:
a Veblen good.
a normal good.
an inferior good.
16. What is the primary focus of Engel's Law in microeconomics?
The relationship between supply and demand
How spending on food changes with income levels
The impact of price controls on market equilibrium
The calculation of elasticity in demand
17. Substitute goods are ones in which an increase in the
price of one good leads to an increase in the demand for the other
good.
price of one good leads to a decrease in the demand for the other
good.
income of consumers leads to an increase in the demand of both

goods.
income of consumers leads to a decrease in the demand of both

goods.
18. Which of the following best defines normal goods in microeconomics?
Goods that are always in demand regardless of income changes
Goods for which demand increases when income rises and decreases
when income falls
Goods that have a fixed price regardless of market conditions

Goods that are considered luxury items only
19. Which phrase defines complementary goods?
goods used in combination with other products
goods given free of cost with the purchase of other items
goods distributed as product samples among customers
goods sold at a discounted price during sale season
20. If the government imposes a price ceiling on a product below the market
equilibrium price, what is the likely outcome in terms of supply and
demand?
There will be a surplus of the product.
There will be no change in the market.
There will be a shortage of the product.
The market will reach a new equilibrium.
Demand will decrease significantly.
21. What does the term 'elasticity' specifically refer to in the context of
microeconomics?
The stability of market prices over time
The responsiveness of quantity demanded or supplied to a change in

price
The total revenue generated from sales
The relationship between income levels and consumption
22. If the average income in a community rises significantly, which of the

following scenarios best illustrates the impact on normal goods?
Consumers buy less of a normal good like organic vegetables.
Consumers continue to buy the same amount of a normal good like

clothing.
Consumers increase their purchases of a normal good like

electronics.
Consumers switch to inferior goods instead of normal goods.
23. Explain why the supply curve is typically upward sloping in a market
economy.
It reflects the increasing costs of production as output rises.
It indicates that consumers are willing to pay more for higher

quantities.
It shows that suppliers can produce more at lower prices.
It demonstrates that demand decreases as supply increases.
24. The market equilibrium is the point where
quantity demanded does not change.
price does not change.
the demand curve intersects the supply curve.
price equals quantity.
25. What are normal goods?
Goods for which demand increases as income increases.
Goods for which demand decreases as income increases
Luxury goods only.
Goods that are essential for daily living.
26. A price ceiling is
a legal maximum on the price at which a good can be sold.
is a legal minimum on the quantity of a good that can be sold.
a legal maximum on the quantity of a good that can be sold.
a legal minimum on the price at which a good can be sold.
27. Explain the significance of the coefficients 'a' and 'b' in the supply formula
Qs = a + bP.
They determine the market equilibrium.
They represent fixed costs and variable costs.
They indicate the relationship between price and quantity supplied.
They are irrelevant to the supply function.
28. Explain how Engel's Law relates to consumer behavior in terms of income
changes.
It indicates that all goods are purchased equally regardless of

income.
It suggests that as income increases, the proportion of income spent

on food decreases.
It shows that food prices remain constant regardless of income levels.
It implies that consumers will always spend more on luxury goods

than necessities.
29. Which of the following represents "how much consumers are willing and
able to buy at a particular price during a particular period of time?"
Demand
Quantity demanded
Supply
Quantity supplied
30. Explain how the demand for inferior goods changes as consumer income
increases.
Demand for inferior goods remains unchanged as income increases.
Demand for inferior goods increases as income increases.
Demand for inferior goods decreases as income increases.
Demand for inferior goods fluctuates randomly with income changes.
31. What is the definition of complementary goods?
Goods that are used independently of each other.
Products that are used together, where an increase in demand for one
increases the demand for the other.
Items that are substitutes for one another in consumption.
Goods that have no relationship in terms of demand.
32. Explain why the demand curve is typically downward sloping in

microeconomic theory.
As prices increase, consumers are willing to buy more.
As prices decrease, consumers are willing to buy more.
The demand curve reflects consumer income levels.

The demand curve is influenced by government regulations.
33. Measures how much Qd responds to a change in P
Price elasticity of demand
Price elasticity of supply
Elasticity
Perfectly elastic demand
34. If a consumer's income increases significantly, which of the following

scenarios best illustrates the concept of normal goods?
The consumer buys more fast food and less organic produce.
The consumer continues to buy the same amount of basic necessities.
The consumer starts purchasing more high-end electronics and

dining out more frequently.
The consumer reduces their overall spending on all types of goods.
35. Complements are goods or services that
are never used together.
are similar to one another from the consumer s perspective. ʹ

compete with each other in the market place.
consumers use together in some way.
build up the user s self-esteem. ʹ

36. Which of the following is a determinant of price elasticity of demand?
the existence of close substitutes
whether a good is a necessity or a luxury
the share of budget spent on the good
all of the above
37. Many economists consider medical care a superior good. Which of the
following statements is true regarding a superior good?
A superior good has an income elasticity of demand less than one.
Superior goods are considered necessities.
When the price of a superior good increases, consumers demand

more of it.
As consumer income increases, consumers spend more on superior

goods.
Consumers want more of a superior good regardless of its price.
38. What does the law of supply state regarding the relationship between
price and quantity supplied?
As price increases, quantity supplied decreases.
As price decreases, quantity supplied increases.
As price increases, quantity supplied increases.
As price remains constant, quantity supplied varies.
39. What does the law of demand state in microeconomics?
As the price of a product increases, the quantity demanded

decreases.
As the price of a product increases, the quantity demanded increases.
The quantity demanded remains constant regardless of price

changes.
Demand is independent of consumer preferences.
40. Complement goods are ____________.
Superior replacements for a good.
Polite expressions of praise or admiration.
Goods that are purchased and used in combination with another

good.
Goods that improve one's performance or appearance in the labor

market.
41. Explain how Engel's Law illustrates the relationship between household
income and food expenditure.
It shows that higher income leads to decreased spending on food.
It indicates that food spending remains constant regardless of income.
It demonstrates that as income increases, the proportion of income

spent on food decreases.
It suggests that food spending is unrelated to income levels.
42. Explain how Engel's Law reflects consumer behavior regarding essential
goods as income changes.
Consumers will always buy more of essential goods as income rises.
Consumers tend to allocate a smaller portion of their income to

essential goods as income increases.
Consumers will stop purchasing essential goods when their income

decreases.
Consumers will prioritize luxury goods over essential goods as

income rises.
43. If a family's income increases significantly, according to Engel's Law, what

is likely to happen to their spending on food compared to their total
income?
Their spending on food will increase at a higher rate than their total
income.
Their spending on food will decrease as a percentage of their total

income.
Their spending on food will remain unchanged regardless of income

changes.
Their spending on food will become the largest portion of their

budget.
44. Printers and ink cartridges are:
complementary goods.
substitute goods.
independent goods.
inferior goods.
45. What does the term 'price elasticity' specifically measure in

microeconomics?
The total revenue generated from sales
The change in quantity demanded due to a change in price
The overall market equilibrium price
The relationship between supply and demand
46. In your own words, explain what arc elasticity measures and why it is
important in microeconomics.
It measures the total quantity of goods supplied at different prices.
It measures the responsiveness of demand to changes in price over a

specific range.
It measures the total revenue generated from sales at various price

points.
It measures the relationship between income levels and spending on

luxury goods.
47. The Law of Supply states
as price increases, the quantity supplied increases.
as price increases, supply increases.
as price increases, the quantity supplied decreases.
as price increases, supply decreases
48. Explain how the availability of substitutes affects the price elasticity of
demand for a product.
It makes demand more elastic because consumers can easily switch

to alternatives.
It makes demand less elastic because consumers become loyal to a

brand.
It has no effect on price elasticity as consumers will always buy the

same amount.
It only affects luxury goods and not necessities.
49. Explain the relationship between income levels and the demand for
inferior goods.
As income increases, the demand for inferior goods remains

unchanged.
As income increases, the demand for inferior goods decreases.
As income decreases, the demand for inferior goods increases.
Both A and C are correct.
50. Which of the following best describes inferior goods?
Goods for which demand increases when income rises
Goods for which demand decreases when income rises
Goods that are considered luxury items
51. What is the definition of normal goods in microeconomics?
Goods for which demand decreases as income increases
Goods for which demand increases as income increases
Goods that are considered luxury items only
52. Suppliers recognize there is a shortage in the market for their product
when they notice that:
the quantity supplies exceeds the quantity demanded
the quantity demanded is falling
inventories are falling
production exceeds new orders for the product
53. The higher the price the more suppliers are willing and able to supply.
What does this tell us about the shape of the supply curve?
It is upward sloping
It is vertical
It is downward sloping
It is flat
54. What is the definition of substitute goods in microeconomics?
Goods that are used together in consumption
Goods that can be used in place of each other
Goods that have no close alternatives
Goods that are produced by the same company
55. If a country experiences a significant increase in average income, how

would Engel's Law predict the change in demand for basic food items
compared to luxury food items?
Demand for basic food items will increase at a rate equal to income
growth, while luxury food items will see a slower increase.
Demand for basic food items will increase at a slower rate than
income growth, while luxury food items will see a faster increase.
Demand for both basic and luxury food items will increase at the
same rate as income growth.
Demand for basic food items will decrease, while luxury food items
will see a significant increase.
56. Demand is defined as the quantity of products that consumers are willing
to buy at different prices.
the number of consumers in a market.
the quantity of products that consumers are willing to buy at different

prices.
number of products demanded stays the same.
the amount of products produced.
57. Which of the following are consistent with Engel's Law?
Total expenditures on food in aggregate decrease as income

increases
The share of income spent on food in aggregate decreases as income

increases
The share of income spent on luxury goods falls as income increases
The percentage of daily calories coming from meat consumption has

expanded rapidly in developing countries in the last 20 years
Both (b) and (c)
58. Explain how elasticity can affect consumer behavior in response to price
changes.
Elasticity has no effect on consumer behavior.
Consumers will always buy the same quantity regardless of price

changes.
Higher elasticity indicates that consumers are more likely to change

their purchasing habits when prices fluctuate.
Lower elasticity means consumers will increase their purchases when

prices rise.
59. Engel's Law states that
The income elasticity of demand for food is greater than 1.
Demand for food falls as income rises.
Demand for food falls as the price of food rises.
The share of spending devoted to food falls as spending rises.
60. Engel's Law states that
as a household's income rises, it tends to spend less on food.
as a household's income rises, it substitutes toward more processed

food.
as a household's income rises, it spends a smaller fraction of its

budget on food.
all of the above.
61. Explain how the law of demand affects consumer behavior in a market
economy.
Consumers will buy more of a good when its price rises.
Consumers will buy less of a good when its price rises.
Consumers are indifferent to price changes.
Consumers will always buy the same quantity regardless of price.
62. Substitutes are goods that:
Can be used one instead of the other;
Are used together
We consume more of when incomes increase
We consume less of when incomes increase
63. How does an increase in consumer income typically influence the

demand for superior goods?
Demand decreases as consumers prefer cheaper alternatives
Demand remains unchanged regardless of income changes
Demand increases as consumers have more disposable income
Demand fluctuates based on market trends
64. Explain how Engel's Law illustrates the relationship between income
levels and spending on different types of goods.
As income increases, spending on all goods increases proportionally.
Higher income leads to a decrease in spending on luxury goods.
Engel's Law shows that spending on necessities remains unchanged

regardless of income.
As income rises, the share of income spent on necessities decreases

while spending on luxury goods increases.
65. What is the primary assertion of Engel's Law regarding household income
and food spending?
As income increases, food expenditure remains constant.
As income increases, the percentage of income spent on food

increases.
As income increases, the percentage of income allocated for food

decreases.
As income decreases, food expenditure increases.
66. Which of the following is NOT a determinant of price elasticity of

demand?
Necessity vs. luxury distinction
Availability of substitutes
Consumer preferences
Relative price to income
67. Explain the relationship between demand and supply that leads to a
shortage in the market.
A shortage occurs when prices are set too high, leading to decreased
demand.
A shortage occurs when the quantity demanded is greater than the

quantity supplied at a given price.
A shortage is a result of government intervention in the market.
A shortage happens when consumers have too much income to

spend.
68. If a household's income increases from $50,000 to $75,000, and their

food expenditure rises from $5,000 to $6,000, how does this scenario
illustrate Engel's Law?
The percentage of income spent on food has increased,

contradicting Engel's Law.
The percentage of income spent on food has decreased, supporting

Engel's Law.
The total expenditure on food has increased, which is irrelevant to

Engel's Law.
The household's income has no impact on food expenditure

according to Engel's Law.
69. Explain why understanding price elasticity is crucial for businesses when
setting prices for their products.
It helps businesses determine the best advertising strategy.
It allows businesses to predict how changes in price will affect their

sales.
It provides insights into consumer preferences.
It indicates the level of competition in the market.
70. Which of the following does NOT describe why the arc elasticity formula
may be judged as superior to the point elasticity formula?
The arc elasticity is suitable for determining the effects of average

changes over a range of values for the variables.
The arc elasticity isolates the effects of instantaneous changes in the

variables.
The decision maker may be either unfamiliar with calculus or deem

the point elasticity as inferior.
It is easily calculated and may yield an adequate measure for the

current set of circumstances.
71. What is meant by surplus?
When at the existing price, quantity supplied exceeds the quantity

demanded.
At the existing price, the quantity demanded exceeds the quantity

supplied.
When a change in some economic factor related to demand causes a

different quantity to be demanded at every price.
The total number of units of a good or service purchased at a certain

price.
72. What is the definition of complementary goods in microeconomics?
Goods that can serve as replacements for one another
Goods that are consumed together
Goods that have no relationship to each other
Goods that are produced using the same resources
73. If the supply formula for a product is given as Qs = 10 + 3P, what would be
the quantity supplied when the price is $5?
25
15
10
74. Explain the significance of market equilibrium in the context of supply and
demand.
It indicates a stable market where prices are set by consumer

preferences.
It represents a temporary state of imbalance in the market.
It shows the maximum price consumers are willing to pay for goods.
It highlights the inefficiencies in the market.
75. Explain how Engel's Law illustrates the relationship between income
levels and consumer spending on food.
It shows that higher income leads to lower total food expenditure.
It indicates that consumers prioritize food spending regardless of

income changes.
It suggests that as income rises, consumers allocate a smaller

percentage of their income to food.
It demonstrates that food becomes a luxury good as income

increases.
76. Explain the significance of point elasticity in microeconomics and how it

differs from arc elasticity.
Point elasticity measures total demand over a range of prices, while

arc elasticity measures responsiveness at a single price point.
Point elasticity measures responsiveness at a specific price point,

while arc elasticity measures responsiveness over a range of prices.
Point elasticity is used for goods with constant demand, while arc
elasticity is used for goods with variable demand.
Point elasticity is only applicable to luxury goods, while arc elasticity

applies to all goods.
77. Luxury goods are:
price inelastic.
income inelastic.
income elastic.
goods with negative income elasticity.
goods with positive price elasticity.
78. What is a shortage?
When you have more supply than your demanded
When the supply is lower than the demand of your product
When the supply doesn't affect anything
79. Suppose that initially, supply is given by the equation Qs = 4P − 16. If, as a
result of lower production costs, the quantity supplied increases by 4 at
every price, the new supply equation would be:
Qs = 8P − 16.
Qs = P − 16.
Qs = 4P − 20.
Qs = 4P − 12.
80. What is the primary assertion of Engel's Law concerning consumer

behavior?
As income increases, total spending on food decreases.
As income increases, the proportion of income spent on food

decreases.
As income decreases, the proportion of income spent on food

increases.
As income remains constant, spending on food fluctuates.
81. Computation of Elasticity at a Point. Point elasticity:
Is a measurement of demand elasticity calculated at a point on a

demand curve rather than over an interval.
Calculating price elasticity at a point on demand.
Elasticity depends on whether demand is linear or curvilinear.
82. The arc elasticity formula is used to estimate elasticity when
the product is thought to be inelastic.

the product is thought to be elastic.
the demand function is known.
there are two observations of price and quantity.
none of the above.
83. If a country experiences a significant increase in average income, what

impact would Engel's Law predict on the consumption patterns of food
compared to luxury goods?
Food consumption will increase at the same rate as luxury goods.
Food consumption will increase, but at a slower rate than luxury

goods.
Food consumption will decrease as people prefer luxury goods.
Food consumption will remain unchanged regardless of luxury goods

consumption.
84. Explain how the law of supply can affect market behavior when prices
fluctuate.
Higher prices lead to lower supply, resulting in shortages.
Lower prices lead to higher supply, resulting in surpluses.
Higher prices incentivize producers to supply more, while lower

prices discourage supply.
Price changes have no effect on the quantity supplied.
85. What does the variable 'Qd' represent in the demand formula Qd = a -
bP?
Quantity demanded
Price
Income level
Supply quantity
86. Which of the following statements best defines supply?
Supply is the relationship between the quantities supplied of a good

or service at various prices over a certain time period.
Supply is the relationship between quantities demanded and the level

of interest of the supply available.
Supply is the relationship between the quantities demanded of a

good or service at various prices over a certain time period.
Supply is the relationship between the quantities supplied of a good

or service and the quantities demanded by consumers.
87. Explain how the demand for normal goods is affected by a rise in
consumer income.
Demand for normal goods remains unchanged with income increases.
Demand for normal goods decreases as income rises.
Demand for normal goods increases as income rises.
Demand for normal goods fluctuates randomly with income changes.
88. If the price of a popular smartphone decreases significantly, what would

you expect to happen to the quantity demanded for that smartphone,
according to the law of demand?
The quantity demanded will remain unchanged.
The quantity demanded will decrease.
The quantity demanded will increase.

The quantity demanded will fluctuate unpredictably.
89. Explain how Engel's Law illustrates the relationship between income levels
and food consumption patterns.
It shows that higher income leads to a greater absolute amount spent

on food.
It indicates that food becomes a luxury good as income rises.
It demonstrates that as income rises, households prioritize other

goods over food.
It suggests that food expenditure is unaffected by changes in income.
90. A price floor is:
A. A minimum legal price at which a good, service, or resource can

be sold
The lowest historical price of a good, service, or resource
A maximum legal price at which a good, service, or resource can be

sold
The lowest equilibrium price in the market
91. What does the variable 'P' represent in the supply formula Qs = a + bP?
Quantity supplied
Price
Demand
Income
92. Explain the relationship between surplus and market equilibrium in terms
of supply and demand.
A surplus indicates that prices are too low, leading to excess demand.
A surplus occurs when supply is equal to demand, resulting in stable

prices.
A surplus arises when the quantity supplied is greater than the

quantity demanded, causing prices to fall.
A surplus means that consumers are willing to pay more than the
market price.
93. If the price of a particular good rises significantly due to increased

demand, what would you expect to happen to the quantity supplied in
the market according to the law of supply?
The quantity supplied will decrease due to higher production costs.
The quantity supplied will remain unchanged regardless of price.
The quantity supplied will increase as producers respond to the

higher price.
The quantity supplied will decrease as consumers buy less.
94. Explain why Engel's Law classifies food as a necessity good rather than a
luxury good.
Because food consumption is essential for survival and does not rise
significantly with income.
Because food is always available regardless of income levels.
Because food prices are regulated by the government.
Because luxury goods are defined by their high prices.
95. What is the primary purpose of implementing a price floor in a market?
To increase the quantity of goods supplied
To ensure that prices do not fall below a certain level
To decrease consumer demand for a product
To eliminate market competition
96. Explain how the demand for normal goods is affected by changes in
consumer income.
Demand for normal goods remains constant regardless of income

changes.
Demand for normal goods decreases as income increases.
Demand for normal goods increases when income rises and

decreases when income falls.
Demand for normal goods is unrelated to income levels.
97. Explain how a price floor can lead to a surplus in the market.
By increasing consumer demand beyond supply
By setting a minimum price above the equilibrium price, leading to

excess supply
By reducing production costs for suppliers
By encouraging more consumers to enter the market
98. Explain how a price ceiling can lead to a shortage in the market.
A price ceiling raises the price of goods, leading to increased supply.
A price ceiling prevents prices from rising, which can increase

demand while limiting supply.
A price ceiling has no effect on market equilibrium.
A price ceiling allows producers to charge higher prices, thus

increasing supply.
99. What defines the point of market equilibrium in microeconomics?
The point where demand exceeds supply
The point where supply exceeds demand
The point where the demand curve and the supply curve intersect
The point where consumer surplus is maximized
100. What is the definition of a price floor?
A price floor is a legal minimum price that can be charged for a

good.
A price floor is a legal maximum price that can be charged for a

good.
A price floor is the average price of a good in the market.
A price floor is the price at which demand equals supply.
101. Explain the significance of the coefficients 'a' and 'b' in the demand
formula Qd = a - bP.
'a' represents the maximum quantity demanded at zero price, while 'b'
indicates the rate at which demand decreases as price increases.
'a' is the price elasticity of demand, and 'b' is the quantity supplied.
'a' is the total market supply, and 'b' is the market equilibrium price.
'a' indicates consumer income, while 'b' shows the relationship

between demand and supply.
102. What is the primary factor that Engel's Law identifies as influencing the
allocation of household income to food?
Price of food
Household income
Consumer preferences
Availability of goods
103. Inferior goods are:
Any items for which demand decreases when income increases
Any items for which demand increases when income increases
Things like off-brand goods and Ramen noodles
Both A and C
104. In economics, elasticity means _____
responsiveness to price changes.
shifts in demand.
shifts in supply.
how many goods money can buy.
how corporations maximize their revenue.
105. If a country's average income rises significantly, what would you expect
to happen to the demand for superior goods, and why?
Demand for superior goods would decrease due to increased prices
Demand for superior goods would increase as consumers can afford

more expensive items
Demand for superior goods would remain the same as income has
no effect
Demand for superior goods would become elastic and fluctuate

wildly
106. What does the law of supply indicate about the relationship between
price and quantity supplied?
As price increases, quantity supplied decreases.
As price decreases, quantity supplied remains constant.
As price increases, quantity supplied increases.
As price and quantity supplied are unrelated.

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11/14/24, 3:24 PM Microeconomics Demand and Supply Practice Test

Microeconomics Demand and Supply Name

Practice Test Score / 106

1. What is the definition of demand in microeconomics?

Demand is the total quantity of goods available for sale at a given

Demand is the amount of a product that consumers are willing to

Demand is the relationship between the price of a product and the

Demand is the amount of a product that suppliers will offer to the

2. According to Engel's Law, how does the consumption of food change as

It increases proportionately with income.

It decreases as income increases.

It remains constant regardless of income.

It increases at a decreasing rate.

3. Explain how the presence of substitutes in a market can affect consumer

Consumers will always choose the more expensive substitute.

The availability of substitutes leads to increased consumer choice and

Substitutes have no impact on consumer behavior.

Consumers prefer to buy only one type of good regardless of

4. What does price elasticity of demand do?

Indicates how sensitive or responsive customers are to changes in

Measures how price changes over time

Helps bounce back after a recession

Helps create better products

5. What is the definition of superior goods in microeconomics?

Goods that are always in demand regardless of income

Goods that are preferred when income increases

Goods that have a fixed price

Goods that are considered inferior when income rises

6. What is the definition of inferior goods in microeconomics?

Goods that have a constant demand regardless of income changes

Goods that are considered luxury items

Supply and demand

8. Complements are goods that can be consumed jointly.

An increase in the price of one good leads to a decrease in the

Ex. cereals and milk; coffee and cream; CD and CD player

9. What does the law of demand state?

As the price increases, quantity demanded increases.

As the price decreases, quantity demanded decreases.

As the price increases, quantity demanded decreases.

As the price increases, quantity demanded remains constant.

10. We say that goods are substitutes when they:

can replace something consumers typically purchase at a significantly

change a consumer's preferences.

serve similar-enough purposes that a consumer might purchase one in

Food consumption increases at a higher rate than income.

Food consumption remains constant regardless of income changes.

Food is considered a luxury good with high income elasticity.

Food is a necessity with low income elasticity.

12. Engels law states that:

As income rises, the proportion of income spent on food increases,

As food consumption rises, the proportion of income spent on food

As income rises, the proportion of income spent on food increases,

As income rises, the proportion of income spent on food falls, even if

None of the above

14. What is demand?

Supply of a certain product

A benefit of the product

A desire for a product

15. When household incomes go down and the quantity of a product

16. What is the primary focus of Engel's Law in microeconomics?