Supply and Demand: Practice Questions with AnswersCurriculum: Supply and DemandGrades: 9–12Questions: 12Mode: Practice These are the real questions from this STEPCAI practice lesson. Read each question, pick your answer, then open Show the answer to check yourself and read why it is right. On STEPCAI the same lesson runs interactively: you click an answer and get instant feedback, and a free account keeps your scores. 1. What does 'demand' mean in economics?- The desire to own a good regardless of ability to pay
- The price a seller wants for a good
- The willingness and ability of consumers to buy a good at various prices
- The total amount of a good produced by a country
Show the answerAnswer: C. The willingness and ability of consumers to buy a good at various prices
Demand refers to both willingness and ability to pay for a good at different prices, not simple desire. 2. What does the 'law of demand' state?- Price and quantity demanded are unrelated
- As price rises, quantity demanded rises
- As income rises, demand always falls
- As price rises, quantity demanded falls, all else equal
Show the answerAnswer: D. As price rises, quantity demanded falls, all else equal
The law of demand states an inverse relationship between price and quantity demanded, holding other factors constant. 3. What does 'supply' mean in economics?- The highest price the government allows sellers to charge
- The total amount of money circulating in a country's economy
- The amount of a good that consumers want to buy at each possible price level
- The willingness and ability of producers to sell a good at various prices
Show the answerAnswer: D. The willingness and ability of producers to sell a good at various prices
Supply describes how much of a good producers are willing and able to offer for sale at different prices. 4. What does the 'law of supply' state?- Quantity supplied is fixed regardless of price
- Supply always equals demand
- As price rises, quantity supplied falls
- As price rises, quantity supplied rises, all else equal
Show the answerAnswer: D. As price rises, quantity supplied rises, all else equal
The law of supply states a direct relationship between price and quantity supplied - higher prices encourage producers to sell more. 5. On a standard supply and demand graph, which axis usually shows price?- Vertical (y) axis
- Horizontal (x) axis
- Both axes equally
- Price is not shown on the graph
Show the answerAnswer: A. Vertical (y) axis
By convention, price is plotted on the vertical axis and quantity on the horizontal axis. 6. What is 'market equilibrium'?- The government-set price
- The price where quantity demanded equals quantity supplied
- The point where supply is zero
- The highest possible price for a good
Show the answerAnswer: B. The price where quantity demanded equals quantity supplied
Equilibrium is where the demand and supply curves intersect, meaning the quantity buyers want equals the quantity sellers offer. 7. What happens when there is a 'surplus' in a market?- The market is in equilibrium
- Quantity demanded exceeds quantity supplied
- Price is below equilibrium
- Quantity supplied exceeds quantity demanded
Show the answerAnswer: D. Quantity supplied exceeds quantity demanded
A surplus occurs when producers offer more of a good than consumers want to buy at the current price, often because price is above equilibrium. 8. What happens when there is a 'shortage' in a market?- The market is in equilibrium
- Price is above equilibrium
- Quantity supplied exceeds quantity demanded
- Quantity demanded exceeds quantity supplied
Show the answerAnswer: D. Quantity demanded exceeds quantity supplied
A shortage happens when consumers want to buy more of a good than producers are offering at the current price, usually because price is below equilibrium. 9. What does 'ceteris paribus' mean, and why is it used in supply and demand analysis?- It means 'prices rising,' used to describe inflation
- It means 'free trade,' used to describe international markets
- It means 'government control,' used to describe regulation
- It means 'all else equal,' used to isolate the effect of one variable at a time
Show the answerAnswer: D. It means 'all else equal,' used to isolate the effect of one variable at a time
Economists hold other factors constant (ceteris paribus) so they can study how one variable, like price, affects behavior without other changes interfering. 10. Which of the following would most likely increase demand for umbrellas?- Consumer income falls sharply
- A rainy season begins
- Umbrella factories close
- The price of umbrellas rises
Show the answerAnswer: B. A rainy season begins
A change in weather that increases the usefulness of umbrellas shifts consumer preferences, increasing demand at every price level. 11. If the price of a good increases and nothing else changes, what happens to quantity supplied?- It stays exactly the same
- It decreases
- It becomes impossible to determine
- It increases
Show the answerAnswer: D. It increases
By the law of supply, a higher price gives producers an incentive to supply more, so quantity supplied rises. 12. Which best describes the 'demand curve'?- A vertical line showing a fixed price that stays the same no matter what quantity is sold
- A line showing the relationship between price and quantity demanded, sloping downward
- A line showing how government price controls limit the highest prices that sellers may charge
- A line showing the quantity supplied by producers at each possible price, sloping upward
Show the answerAnswer: B. A line showing the relationship between price and quantity demanded, sloping downward
The demand curve slopes downward because, as price falls, quantity demanded rises, illustrating the law of demand. More free high school sample lessonsSee all free sample lessons »
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