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Economic Theory

ASSIGNMENTS

Review Questions

1. What determines the level of prices in a market?

2. Will demand curves have the same exact shape in all markets? If
not, how will they differ?

3. How can you locate the equilibrium point on a demand and supply
graph?
4. What is the difference between the demand and the quantity
demanded of a product?

5. Name some factors that can cause a shift in the supply curve in
markets for goods and services.
6. If the price is above the equilibrium level, would you predict a

surplus or a shortage? If the price is below the equilibrium level, would
you predict a surplus or a shortage? Why?
7. What is the formula for calculating elasticity?
8. How does the number of available substitutes determine the price

elasticity of demand?
9. What causes a movement along the demand curve? What causes a
movement along the supply curve?

10. If a good is considered to be a luxury good, does it mean that the
law of demand does not hold?

Multiple-Choice Questions

1. The law of demand states:
a) as the price of a good decreases, consumers generally purchase
more of that good;

b) the demand for a good increases with the number of consumers
in the market;
c) as income increases, people consume more of all goods;

d) the supply of a good increases in proportion to the demand for
it.

2. The supply schedule shows the relationship between which two

elements?
a) the price of a good and the quantity of that good a company is
willing to produce at that price;

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