Question 1 A shortage creates a situation that forces prices to-----------while

Question

Question 1

A shortage creates a situation that forces prices to-----------while a surplus creates a situation that forces prices to------------- __________.

decrease; increase

decrease; decrease

increase; decrease

increase; increase

Question 2

The new equilibrium quantity is the same as the old but price is higher now. We know that

demand and supply both increased.

demand increased and supply decreased.

demand decreased and supply increased.

demand and supply both decreased.

Question 3

An increase in demand can be caused by

a decrease in the price of a substitute good.

a reduction in income if the good is a normal good.

a decrease in the price of a complement good.

a fall in the price of the good itself.

Question 4

Four points on a demand schedule are given: $8, 3 units; $10, 1 unit; $5, 5 units; and $12, 2 units. Which combination is inconsistent with the law of demand?

$8 and 3 units

$10 and 1 unit

$5 and 5 units

$12 and 2 units

Explanation / Answer

Ans 1

C) increase , decrease

Ans 2

B) demand increased and supply increased

Ans 3

C and d both are correct

Ans 4

D) $ 12 and 2 units

Because demand is 1 at $ 10 , so when price increases to 12 , demand can't increase to 2 . As according to law of demand, demand decreases as price increases. So this point is inconsistent with law of demand

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