Question

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1. According to the Law of Demand:

A more of a product will be demanded when buyers’ incomes increase.

B a decrease in a product’s price will cause the product’s demand curve to shift to the right.

C there is a direct relationship between a change in a product’s price and a change in the quantity demanded.

D there is an inverse relationship between a change in a product’s price and a change in the quantity demanded.

2. If the price of a good or service increases and all nonprice factors are held constant, quantity demanded will:

A increase.

B decrease.

C not change.

D change in a way that cannot be determined from the given information.

3. Which of the following is NOT an example of a market? A neighborhood lemonade stand B painting one’s house C ticket scalping D New York Stock Exchange 1 ECO101/MBA 520 Problem Set 2: Supply and Demand C. Garber 4. In economic markets, what “signals” information between buyers and sellers?

A the Internet

B transactions

C stock exchanges

D prices

4. In economic markets, what “signals” information between buyers and sellers?

A the Internet B transactions C stock exchanges D prices

5. Whenever you construct a demand curve, which of the following statements is TRUE?

A The price of all other goods must be held constant. B Income must be allowed to change. C The price of the good itself must be held constant. D Tastes and preferences are variable.

6. Which of the following would cause an increase in the supply of automobiles? A An increase in car prices. B A decrease in the cost of steel. C An increase in autoworkers’ wages. D A restriction on auto imports from overseas.

Answer 1

Question 1

Law of demand is an important micro-economic concept.

This law states that if all other factors influencing demand for a product are kept unchanged than an increase in the price of such product leads to increase in quantity demanded of such product and vice-versa.

So, in a manner, law of demand establishes an inverse relationship between price of a product and its quantity demanded.

Hence, the correct answer is the option (D).

Question 2

When price of a good or service increases while all factors other than price are kept constant then, in that case, quantity demanded of good or service decreases.

Hence, the correct answer is the option (B).