QUIZ!

True or False. Write TRUE if the statement is correct and FALSE if it is incorrect.

1. The higher the quantity demanded, the higher the market price.
2. A shift in supply always causes a change in the market price.
3. Inelastic demand means consumers are completely unresponsive to price
changes.
4. Price discrimination is an example of using knowledge of elasticity to set optimal
prices.
5. Government intervention always improves market efficiency.
6. Technological advancements can both increase supply and decrease production
costs.
7. Non-equilibrium markets are always inefficient and harmful.
8. Coffee is generally considered a luxury good with high price elasticity.
9. Streaming services typically have more elastic demand than physical movie
rentals.
10. Understanding demand and supply analysis is only useful for large corporations.

Multiple Choice: Choose the best answer.

1. When supply exceeds demand, what happens to the equilibrium price?

a) It increases significantly.

b) It remains unchanged.

c) It decreases gradually.

d) It becomes unpredictable.

2. A product with highly elastic demand is most likely:

a) Bread b) Jewelry c) Medicine d) Public transportation

3. Which factor is LEAST likely to cause a shift in the demand curve for a good?

a) Changes in consumer income

b) Introduction of a new substitute good

c) Fluctuations in the price of complementary goods

d) Technological advancements in production

4. Which statement is TRUE about non-equilibrium markets?

a) They occur only due to government intervention.

b) They can exist due to limited information or strategic behavior.

c) They are always caused by price controls.

d) They cannot be analyzed using economic models.

5. An effective pricing strategy for a product with inelastic demand would be:

a) Frequent price promotions and discounts

b) Bundling with other complementary products

c) Charging a lower price than competitors

d) Highlighting unique features and benefits

6. What type of elasticity measures the responsiveness of demand for one good to
a price change in another related good?

a) Price elasticity b) Income elasticity c) Cross-price elasticity d) Own-price

elasticity

7. Which of the following can cause both a shift in the supply curve and a change in
the equilibrium price?

a) Changes in consumer preferences

b) Introduction of a new tax on the good

c) Fluctuations in the cost of raw materials

d) Increase in advertising and marketing efforts

 8. Why is understanding income elasticity important for businesses?

a) It helps predict changes in consumer spending habits.

b) It informs decisions about target market demographics.

c) It calculates the maximum price consumers are willing to pay.

d) It determines the optimal production capacity for a product.

9. A strategic pricing strategy based on elasticity knowledge could involve:

a) Offering lower prices during peak season to attract more customers.

b) Charging different prices for different versions of the same product.

c) Providing discounts to students and senior citizens.

d) All of the above

10. What is the main benefit of studying demand and supply analysis?

a) It guarantees success in any business venture.

b) It provides a complete picture of future market trends.

c) It helps make informed decisions based on market dynamics.

d) It allows businesses to manipulate market forces for their benefit.

Essay:

1. Discuss what is price elasticity.

2. Discuss the factors affecting supply.
3. Discuss the factors affecting demand.