1. _____ Which of the following would NOT be a determinant of demand?

a. the price of related goods

b. income
c. tastes
d. the prices of the inputs used to produce the good

2. ____ If the price of a substitute to good X increases, then

a. the demand for good X will increase.
b. the market price of good X will decrease.
c. the demand for good X will decrease.
d. the demand for good X will not change.

3. ____ Suppose you like banana cream pie made with vanilla pudding. Assuming all
other things are constant, you notice that the price of bananas is higher. How would
your demand for vanilla pudding be affected by this?
a. It would decrease.
b. It would increase.
c. It would be unaffected.
d. There is insufficient information given to answer the question.

4. ____ higher price for batteries would tend to

a. increase the demand for flashlights.
b. decrease the demand for electricity.
c. increase the demand for electricity.
d. increase the demand for batteries.

5. ____ What will happen in the rice market if buyers are expecting higher prices in the
near future?
a. The demand for rice will increase.
b. The demand for rice will decrease.
c. The demand for rice will be unaffected.
d. None of the above

6. ___When the price of a good or service changes,

a. there is a movement along a stable demand curve.
b. demand shifts in the opposite direction.
c. demand shifts in the same direction.
d. supply shifts in the opposite direction.
7. ____ Other things equal, when the price of a good rises, the quantity supplied of the
good also rises. This is
a. the law of increasing costs.
b. the law of diminishing returns.
c. the law of supply.
d. the law of demand.

8. ____ Suppose that there is an increase in input prices. We would expect

a. supply to increase.
b. supply to decrease.
c. supply could increase or decrease.
d. supply to remain unchanged.

9. Suppose that a decrease in the price of X results in less of good Y sold. This would
mean that X and Y are
a. complementary goods.
b. substitute goods.
c. unrelated goods.
d. normal goods.

10. ____ Which of the following is a determinant of demand?

a. the price of a substitute good
b. the price of a complement good
c. the price of the good next month
d. all of the above

11. ____ The cross-price elasticity between ball pens and ink pens is 0. 45. Thus implies
that the two goods are:
a. Substitute
b. Complements
c. Inferior
d. None of the above

12. ____ When we move up or down a given demand curve,

a. only price is held constant.
b. all nonprice determinants of demand are assumed to be constant.
c. income and the price of the good are held constant.
d. all determinants of quantity demanded are held constant.

13. ____ Which of the following would NOT shift the demand curve for a good or
service?
 a. a change in income
b. a change in the price of a related good
c. a change in expectations about the price of the good or service
d. a change in the price of the good or service

14. ____ The downward-sloping demand curve reflects which of the following?
a. The price is positively related to quantity supplied.
b. There is an inverse relationship between price and quantity demanded.
c. There is a direct relationship between price and quantity demanded.
d. When the price falls, buyers willingly buy less.

15. ____ Holding the nonprice determinants of supply constant, a change in price would
a. result in a change in supply.
b. result in a movement along a stable supply curve.
c. result in a shift of demand.
d. have no effect on the quantity supplied.

16. ____ Wheat is the main input in the production of flour. If the price of wheat
increases, all else equal, we would expect
a. the supply of flour to be unaffected.
b. the supply of flour to decrease.
c. the supply of flour to increase.
d. the demand for flour to decrease.

17. ____ Suppose that the number of buyers in a market increases and a technological
advancement occurs also. What would we expect to happen in the market?
a. The equilibrium price would increase, but the impact on the amount sold in the
market would be indeterminate.
b. The equilibrium price would decrease, but the impact on the amount sold in the
market would be indeterminate.
c. Both equilibrium price and equilibrium quantity would increase.
d. Equilibrium quantity would increase, but the impact on equilibrium price
would be indeterminate.

18. The price elasticity of demand of milk for middle class households is 0.3. The milk
producers increase the supply of milk due to a new technology. Which of the below
situation prevails?
a. Price falls and revenue falls
b. Price rises and revenue rises
c. Price falls and revenue rises
d. Price rises and revenue falls.
19. In a market system, prices are determined by
a. corporate executives
b. government bureaucrats
c. supply and demand
d. total market demand

20. Procter & Gamble Co. is a major soap producer. All of the following, except one,
would shift its supply curve of liquid soap inward. Which is the exception?
a. an increase in the price of bar soap
b. an increase in the price of a key ingredient of liquid soap
c. environmental regulations force Procter & Gamble to use a more costly technology
to produce liquid soap
d. a decrease in the price of liquid soap

21. Based on scientific research, National Geographic Channel frequently broadcasts

documentaries highlighting the impact of non-vegetarianism on the planet. This is
aimed to:
a. Increase the demand for meat
b. Decrease the demand for meat
c. Increase the supply of meat
d. None of the above.

22. When an industry's raw material costs/ inputs increase, other things remaining the
same,
A) the supply curve shifts to the left.
B) the supply curve shifts to the right.
C) output increases regardless of the market price and the supply curve
shifts upward.
D) output decreases and the market price also decrease.

23. Assume that steak and potatoes are complements. When the price of steak goes up, the
demand curve for potatoes:
a. shifts to the left.
b. shifts to the right.
c. Remains constant
d. None of the above

24. If the price elasticity of demand for Cheer detergent is -3.0, then a
a. 12 percent drop in price leads to a 36 percent rise in the quantity demanded
b. 12 percent drop in price leads to a 4 percent rise in the quantity demanded
c. $1,000 drop in price leads to a 3,000-unit rise in the quantity demanded
d. $1,000 drop in price leads to a 333-unit rise in the quantity demanded
25. A local store noticed that when it increased the price of milk from $2.50 per gallon to
$3.50 per gallon, it sold the same amount of milk per week (165 gallons). Since
everything else remained the same, we would say the
a. demand for milk is perfectly elastic
b. demand for milk is elastic
c. demand for milk is perfectly inelastic
d. demand for milk is unitary elastic

26. Which of the following will NOT cause a rightward shift in the demand curve for
beer?
A) A change in the price of beer
B) A health study indicating positive health benefits of moderate beer consumption
C) An increase in the price of French wine (a substitute)
D) A decrease in the price of potato chips (a complement)

27. The cross-price elasticity of demand between India Oil gasoline and Bharat Petroleum
gasoline sold at the same road would be
a. positive
b. negative
c. 0
d. 10

28. The equilibrium quantity and price for wheat market in June was 1000 kg and INR
16/kg in the small town of Khanpur. The government decides to announce a Minimum
Support price of Rs. 20/kg for wheat July onwards. It will lead to :
a. Surplus
b. Shortage
c. New equilibrium with lower price and higher quantity
d. Can’t say

29. Suppose biochemists discover an enzyme that can double the amount of ethanol that
may be derived from a given amount of biomass. Based on this technological
development, we expect the:
A) supply curve for ethanol to shift leftward.
B) supply curve for ethanol to shift rightward.
C) demand curve for ethanol to shift leftward.
D) demand curve for ethanol to shift rightward

30. To protect the cod fishery off the northeast coast of the U.S., the federal government
may limit the amount of fish that each boat can catch in the fishery. The result of this
public policy is to:
A) shift the cod demand curve to the left.
B) shift the cod demand curve to the right.
C) shift the cod supply curve to the right.
D) shift the cod supply curve to the left.