1. Which of the following would you expect to shift the supply curve for household paints? (Select one or more answers) (1) (a) An increase in housing market activity (b) An increased rate of economic growth (c) An increase in the oil price (oil being a raw material for many household paints) (d) Increased labour costs Cost changes will affect the firm's supply decision and therefore shift the supply curve. Changes in income or house prices will affect the demand curve and therefore only cause a move along the supply curve, not a shift in the whole curve. 2. In the diagram below (which represents the market for Mars Bars), the initial equilibrium is at the intersection of S1 and D1. Circle the new equilibrium if there is an increase in cocoa prices. Cocoa is a raw material for chocolate bars and so an increase in cocoa prices will increase costs of production and shift the supply curve to the left. 3. In the diagram below (which represents the market for Mars Bars), the initial equilibrium is at the intersection of S1 and D1. Circle the new equilibrium if there is rapid economic growth and the government also impose a tax on mars bars. The tax will shift the supply curve vertically upwards by the amount of the tax and the rapid economic growth will shift the demand curve to the right as people will have more disposable income. 4. In the diagram below (which represents the market for Mars Bars), the initial equilibrium is at the intersection of S1 and D1. Circle the new equilibrium if there is a health scare about the effect
mars bars may have. A health scare will reduce the demand for mars bars. A health scare will reduce the demand for mars bars 5. In the diagram below (which represents the market for Mars Bars), the initial equilibrium is at the intersection of S1 and D1. Circle the new equilibrium if there is an increase in productivity and at the same time a decrease in the price of snickers bars. The increase in productivity will shift the supply curve to the right and the decrease in the price of a substitute will shift the demand curve to the left. The new equilibrium will therefore be at the intersection of D2 and S3. 6. Which of the following would you expect to shift the demand curve for cars? (Select one or more answers) (a) A fall in the rate of economic growth (b) An increase in the cost of steel (c) A decrease in public transport prices (d) A subsidy given to car producers Subsidies and cost changes will affect the firm's supply decision and therefore shift the supply curve. This means a move along the demand curve and not a shift in it. Only a change in economic growth or a change in public transport prices will actually shift the whole demand curve.
7. In the table below, if the government set a minimum price of 6 and agreed to buy any resulting surplus to stockpile it, how much would they have to spend in the first year? The government will have to buy 400 tonnes in the first year at a price of 6 - the minimum price. This means they have to spend 2,400. 2,400 8. In the diagram below (which represents the market for Mars Bars), the initial equilibrium is at the intersection of S1 and D1. Assuming that mars bars are an inferior good, click on the new equilibrium if there is a recession and wages of workers producing them fall. (Circle the image to select your answer) Since mars bars are assumed to be inferior the recession will actually increase demand to D3 and the lower wages will help encourage supply - shifting the supply curve to the right to S3. The new equilibrium is therefore at the intersection of D3 and S3.
9. In the table below what will be the equilibrium market price? (a) 2 (b) 3 (c) 4 (d) 5 Equilibrium is where demand equals supply. This occurs at a price of 4 with demand equal to supply at an output of 700 units. 10. An increase (rightward shift) in the demand for a good will tend to cause (a) An increase in the equilibrium price and quantity (b) None of these answers (c) An increase in the equilibrium price and a decrease in the equilibrium quantity (d) A decrease in the equilibrium price and an increase in the equilibrium quantity (e) A decrease in the equilibrium price and quantity 11. Which of the following shifts the demand for watches to the right? (a) An increase in the price of watches (b) None of these answers (c) A decrease in the price of watch batteries if watch batteries and watches are complements (d) A decrease in consumer incomes if watches are a normal good (e) A decrease in the price of watches 12. All of the following are determinants of supply except: (a) Price (b) Income levels (c) Objectives of the firm (d) Level of technology
13. All of the following are determinants of demand except: (a) Price (b) Tastes (c) Supply (d) Price of other goods 14. If an increase in consumer incomes leads to a decrease in the demand for camping equipment, then camping equipment is (a) A normal good (b) An inferior good (c) A substitute good (d) A complementary good 15. The law of demand states that an increase in the price of a good (a) Increases the supply of that good (b) Decreases the quantity demanded for that good (c) Decreases the demand for that good (d) Increases the quantity supplied of that good (e) None of these answers 16. If an increase in the price of trainers leads to an increase in the demand for tennis shoes, then trainers and tennis shoes are (a) Complements (b) Inferior goods (c) Normal goods (d) None of these answers (e) Substitutes