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Quizzes > Business & Finance > Finance & Economics

Eco 201 Module 2 Quiz: How Well Do You Know Supply & Demand?

Ready for the Econ 201 Exam 2? Tackle supply, demand & consumer surplus.

Difficulty: Moderate
2-5mins
Learning OutcomesCheat Sheet
Paper art illustration for Free Eco 201 Module 2 quiz on supply demand equilibrium concepts on teal background.

Curious how markets find balance? Take our eco 201 module 2 quiz to master supply, demand & equilibrium dynamics in minutes! This eco 201 module 2 quiz is tailored for students preparing for econ 201 exam 2 and ambitious learners hungry for deeper insights. You'll tackle questions like at a price of $200 consumer surplus is determined, interpret supply and demand equilibrium quiz charts, and solidify your command with a focused fundamental economic concepts quiz covering shifts, surplus analysis, and policy impacts. Ready to level up? Dive into the interactive economics unit 2 test and boost your score with our concise supply and demand quiz - start now and ace those concepts!

According to the law of demand, if the price of a good rises, what happens to the quantity demanded, all else equal?
It decreases.
It shifts rightward.
It increases.
It remains the same.
The law of demand states that, ceteris paribus, an increase in price leads to a decrease in quantity demanded because consumers buy less at higher prices. This inverse relationship is fundamental to demand analysis. For more details, see Investopedia: Law of Demand.
Which statement best describes the law of supply?
Lower prices lead to higher quantity supplied.
Higher prices lead to lower quantity supplied.
Higher prices lead to higher quantity supplied.
Supply is independent of price.
The law of supply indicates that producers are willing to supply more of a good at higher prices, reflecting a direct relationship between price and quantity supplied. This drives the upward slope of the supply curve. Read more at Investopedia: Law of Supply.
What condition defines market equilibrium?
Supply exceeds demand.
Quantity demanded equals quantity supplied.
Demand curve intersects the horizontal axis.
Price is at its minimum.
Market equilibrium occurs at the price where quantity demanded equals quantity supplied, meaning there is no tendency for price to change. This balance is the point where supply and demand intersect. More info at Khan Academy: Market Equilibrium.
A movement along the demand curve is caused by which of the following?
A change in the price of the good.
A change in tastes and preferences.
A change in the price of related goods.
A change in consumers' income.
A movement along the demand curve results solely from a change in the good's own price, reflecting a different quantity demanded at each price. Shifts of the demand curve are caused by non-price factors like income or tastes. See Boundless Economics: Movement vs Shift.
Which factor would shift the supply curve of a product to the right?
An increase in input costs.
A technological improvement in production.
A decrease in the number of sellers.
Higher taxes on producers.
Technological improvements reduce production costs and increase efficiency, enabling sellers to supply more at each price, thus shifting supply rightward. Higher input costs or taxes would shift the curve left. Learn more at EconEdLink: Supply Shifters.
If peanut butter and jelly are complements, what happens to the demand for jelly when the price of peanut butter increases?
Quantity supplied of jelly decreases.
Supply curve for jelly shifts right.
Demand for jelly increases.
Demand for jelly decreases.
For complement goods, a price rise in one reduces the demand for the other because they are used together. Here, higher peanut butter prices lower jelly demand. Details at CFI: Complement Goods.
Which scenario illustrates substitute goods?
An increase in coffee price raises demand for tea.
An increase in gasoline price decreases demand for cars.
A decrease in printers raises demand for ink.
A decrease in smartphones raises demand for cases.
Substitute goods are alternatives; when coffee's price rises, consumers switch to tea, increasing its demand. Complements or unrelated goods behave differently. More info at Investopedia: Substitute Good.
When consumer income rises, what typically happens to the demand for a normal good?
Supply shifts right.
Quantity demanded falls along the same curve.
Demand increases.
Demand decreases.
Normal goods see higher demand as income grows because consumers can afford more. This shifts the demand curve rightward. For inferior goods, demand would fall. Further reading at Khan Academy: Income Effects.
What characterizes an inferior good?
Supply falls as price rises.
Demand rises as income rises.
Demand falls as income rises.
Supply is independent of price.
Inferior goods have demand that decreases when consumers' incomes increase because buyers switch to higher-quality alternatives. This is the opposite of normal goods. See Investopedia: Inferior Good.
What is the effect of a binding price ceiling set below equilibrium price?
No effect on quantity demanded.
A surplus of the good.
A shortage of the good.
Market clears with no shortage.
A binding price ceiling below equilibrium makes the quantity demanded exceed quantity supplied, causing a shortage. This restricts market-clearing price. Read Khan Academy: Price Ceilings.
A binding price floor set above the equilibrium price will result in what?
A surplus of the good.
Increased consumer surplus.
A shortage of the good.
Market-clearing price.
A price floor above equilibrium prevents the price from falling to the market-clearing level, causing quantity supplied to exceed quantity demanded and resulting in a surplus. More at Investopedia: Price Floor.
How is price elasticity of demand defined?
Change in price divided by change in quantity supplied.
Percentage change in price divided by percentage change in quantity demanded.
Change in quantity demanded divided by change in price.
Percentage change in quantity demanded divided by percentage change in price.
Price elasticity of demand measures responsiveness: it's the percent change in quantity demanded over the percent change in price. This standard formula helps compare how sensitive buyers are across goods. See Investopedia: Price Elasticity.
If the price elasticity of demand for a product is -2, and the price increases by 5%, quantity demanded will change by what percentage?
Increase by 2.5%.
Decrease by 10%.
Decrease by 2.5%.
Increase by 10%.
With elasticity -2, a 1% price increase cuts quantity demanded by 2%. Thus, a 5% increase leads to a 10% decrease in quantity demanded. For calculations, consult Khan Academy: Elasticity.
Given the demand function Qd=100?2P and supply function Qs=P, what is the equilibrium price?
33.33
66.67
50
25
Set Qd=Qs: 100?2P = P ? 100 = 3P ? P = 33.33. This is the price where quantity demanded equals quantity supplied. More details at Boundless Economics: Equilibrium.
A $2 per-unit tax is imposed on buyers. If supply is perfectly elastic at price $5, what price will buyers pay after tax, and what price do sellers receive?
Buyers pay $5; sellers receive $3.
Buyers pay $7; sellers receive $5.
Buyers pay $7; sellers receive $3.
Buyers pay $6; sellers receive $4.
With perfectly elastic supply at $5, sellers accept only $5. A $2 tax on buyers shifts their demand down; buyers pay $7 (including tax) while sellers receive $5. Learn more at Khan Academy: Tax Incidence.
What happens to equilibrium quantity when a $1 per-unit subsidy is given to producers?
Equilibrium quantity decreases.
It depends on income elasticity.
It remains unchanged.
Equilibrium quantity increases.
A subsidy lowers producers' costs, shifting the supply curve rightward, leading to a lower equilibrium price and higher equilibrium quantity. The exact change depends on slopes of curves. Further reading at Investopedia: Subsidy.
Consumer surplus is defined as:
Government revenue from taxes.
Total revenue minus total cost.
The area below the demand curve and above the price.
The area above the supply curve and below the price.
Consumer surplus is the difference between what consumers are willing to pay and what they actually pay. It is graphically represented by the area below the demand curve and above the market price. It measures the benefit consumers receive when they pay less than their maximum willingness to pay. More at Khan Academy: Consumer Surplus.
Producer surplus is:
The area below the demand curve and above the price.
Total profit earned by firms.
The area above the supply curve and below the price.
Government revenue net of subsidies.
Producer surplus measures the difference between the market price and the minimum price at which producers are willing to sell. It is graphically the area above the supply curve and below the market price. It represents the benefit sellers receive by selling at higher prices than their marginal cost. Further explanation at Investopedia: Producer Surplus.
Under what condition does a per-unit tax create zero deadweight loss?
If the market is not competitive.
If the tax is rebated to consumers.
If supply and demand are both elastic.
If supply or demand is perfectly inelastic.
A tax creates deadweight loss when quantity traded falls. If either supply or demand is perfectly inelastic, quantity does not change, so there is no efficiency loss. For more, see Khan Academy: Taxes and Deadweight Loss.
Which elasticity measures responsiveness of quantity supplied to price changes?
Income elasticity of demand.
Price elasticity of demand.
Cross-price elasticity.
Price elasticity of supply.
Price elasticity of supply quantifies how much quantity supplied responds to a change in price. It is calculated as the percentage change in quantity supplied divided by percentage change in price. This elasticity helps understand firms' responsiveness to price changes. See Investopedia: Price Elasticity of Supply.
Which of the following events shifts the demand curve to the right without shifting supply?
A drop in producer taxes.
Technological improvement.
An increase in consumer income for a normal good.
A decrease in input costs.
An increase in income for a normal good increases consumers' willingness to pay at every price, shifting demand right. Changes in input costs or taxes affect supply, not demand. See Coursera: Demand Shifters.
When demand is inelastic, who bears a larger share of a per-unit tax?
The government bears the burden.
Consumers bear more of the tax burden.
Producers bear more of the tax burden.
It depends on tax revenue.
Tax incidence depends on elasticities: the side of the market with lower elasticity (more inelastic) bears more burden. If demand is relatively inelastic compared to supply, consumers pay more of the tax. Further reading at Khan Academy: Tax Incidence.
On a linear demand curve, elasticity varies along the curve. At which point is the elasticity unitary?
At the intercept with the price axis.
At the intercept with the quantity axis.
At the midpoint of the demand curve.
At any point where price equals zero.
On a straight-line demand curve, unitary elasticity (elasticity = 1) occurs exactly at the midpoint. Above the midpoint demand is elastic; below, inelastic. See Investopedia: Unitary Elasticity.
If supply is more elastic than demand, who will bear the greater burden of a specific tax?
Producers.
Consumers.
Exports.
Government.
The tax burden falls more heavily on the less elastic side. If demand is relatively inelastic compared to supply, consumers bear more of the tax. Learn more at Khan Academy: Tax Incidence.
A per-unit tax reduces quantity traded from 100 to 80 units and the tax equals $4 per unit. What is the deadweight loss?
$20
$40
$80
$160
Deadweight loss is the loss in total surplus not captured by tax revenue, equal to ½ * change in quantity * tax. Here ½ * 20 * 4 = $40. More at Khan Academy: Taxes and Deadweight Loss.
Simultaneous increase in both supply and demand curves will definitely lead to:
Quantity rises, price ambiguous.
Both price and quantity rise.
Both price and quantity fall.
Price rises, quantity ambiguous.
When supply and demand shift right, quantity increases for sure, but price depends on the relative magnitudes of each shift. Thus price change is ambiguous. See Saylor Academy: Simultaneous Shifts.
If the government places a price floor and simultaneously offers a subsidy, the net effect on quantity is:
Quantity must decrease.
Quantity must increase.
Indeterminate without details of shifts.
Quantity stays the same.
A price floor (above equilibrium) reduces quantity demanded while a subsidy shifts supply right increasing quantity. Net effect depends on relative sizes of each shift, so indeterminate without specifics. More at Lumen Learning: Subsidies.
What is the effect of a binding price floor on market efficiency?
Has no effect on total surplus.
Only reduces consumer surplus, leaving producer surplus same.
Increases total surplus.
Creates deadweight loss, reducing total surplus.
A binding price floor leads to a surplus and prevents the market from clearing, generating deadweight loss and reducing total surplus (sum of consumer and producer surplus). More at Khan Academy: Price Floors and Efficiency.
When demand is perfectly inelastic and a per-unit tax is imposed on buyers, what is the deadweight loss?
Equal to tax revenue.
Positive and large.
Cannot be determined.
Zero.
Perfectly inelastic demand implies quantity doesn't change when taxed, so no trades are lost and deadweight loss is zero. Tax revenue equals full burden. See Khan Academy: Taxes and Deadweight Loss.
For a good with constant elasticity of demand equal to -1, a price increase leads to:
Increase in total revenue.
Change depending on supply elasticity.
Decrease in total revenue.
No change in total revenue.
Unit elastic demand (elasticity = -1) means total revenue is unchanged by price changes; the percent change in price offsets the percent change in quantity demanded. More at Investopedia: Unitary Elasticity.
In a market with a specific tax, the government revenue is represented by:
Difference between consumer and producer surplus.
Area of deadweight loss triangle.
Tax per unit times quantity before tax.
Tax per unit times quantity sold after tax.
Government revenue from a per-unit tax equals the tax amount per unit multiplied by the post-tax quantity sold, as the tax applies to each traded unit. See Khan Academy: Tax Incidence and Revenue.
Which condition will minimize deadweight loss from a per-unit tax?
Both supply and demand are highly elastic.
Both supply and demand are highly inelastic.
Market is perfectly competitive.
Tax is paid by producers.
Deadweight loss arises when quantity traded falls; the more inelastic both supply and demand, the smaller the reduction in quantity, hence smaller deadweight loss. Details at Investopedia: Deadweight Loss.
Consider two goods A and B with cross-price elasticities 0.5 and -1.2 respectively. If the price of good A rises by 10%, what happens to demand for B?
Demand for B decreases by 12%.
Demand for B increases by 5%.
Demand for B decreases by 5%.
Demand for B increases by 12%.
Cross-price elasticity for B is -1.2 with respect to price of A; a 10% rise in price of A leads to a 12% decrease in demand for B. Negative elasticity indicates complements. For further detail, see Investopedia: Cross-Price Elasticity.
In a linear market with symmetric supply and demand curves, a per-unit tax of $20 is introduced. How is the tax burden shared between consumers and producers?
Consumers pay $20; producers pay $0.
Consumers pay $15; producers pay $5.
Consumers pay $0; producers pay $20.
Equally divided: $10 each.
When demand and supply are linear and symmetric, a tax splits incidence equally: consumers' price rises by half the tax and producers' net price falls by half. This results in an equal division. See Investopedia: Tax Incidence.
If a subsidy is provided per unit, explain how consumer surplus, producer surplus, and government expenditure change. Which of the following is correct?
Consumer and producer surplus increase; government expenditure causes deadweight loss.
Only consumer surplus increases; producers unaffected.
Producer surplus increases; consumer surplus decreases.
Government expenditure equals change in total surplus, no deadweight loss.
A per-unit subsidy lowers the price consumers pay and raises the price producers receive, thereby expanding the traded quantity. Consumer and producer surplus both increase due to the effective price differences. Meanwhile, government must finance the subsidy, and if the increase in surplus is less than the subsidy cost, a deadweight loss arises. Learn more at Khan Academy: Subsidies.
In a two-market economy, if a price control in market 1 leads to excess supply, how might this affect equilibrium in market 2?
Only price in market 1 is affected; market 2 remains unchanged.
Supply from market 1 may be diverted, shifting supply in market 2 rightward.
Equilibrium in market 2 only depends on its own factors.
Demand in market 2 will shift left regardless.
A surplus indicates unsold output in market 1. Producers or resources may shift to alternative markets, supplying more there and shifting the supply curve in market 2 rightward. Inter-market linkages illustrate how price controls in one market can affect another. See Economics Discussion: Inter-market Equilibrium.
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Study Outcomes

  1. Understand Supply and Demand Basics -

    Grasp how supply and demand determine market prices using scenarios from the eco 201 module 2 quiz.

  2. Analyze Market Equilibrium -

    Interpret shifts in curves and predict equilibrium outcomes with examples from the supply and demand equilibrium quiz.

  3. Calculate Consumer Surplus -

    Determine at a price of $200 consumer surplus is and practice computing surplus in varied market situations.

  4. Apply Core Economic Theories -

    Use fundamental economic concepts quiz questions to reinforce principles of scarcity, efficiency, and welfare.

  5. Prepare for Econ 201 Exam 2 -

    Practice targeted questions similar to those on your econ 201 exam 2 to build confidence and test readiness.

  6. Predict Market Responses -

    Evaluate how real-world events can shift supply and demand curves and forecast the resulting price and quantity changes.

Cheat Sheet

  1. Law of Demand -

    The demand curve slopes downward, showing an inverse relationship between price and quantity demanded (Mankiw, Principles of Economics). For example, with D(P)=100−2P, a price rise from $20 to $30 cuts Q from 60 to 40. Mnemonic: "Higher Price, Lower Purchase."

  2. Law of Supply -

    The supply curve slopes upward, reflecting that producers offer more at higher prices (University of California, Econ 101). If S(P)=10+3P, raising P from $10 to $20 boosts Q from 40 to 70. Think "Supply Soars with Steeper Sticker."

  3. Market Equilibrium -

    Equilibrium occurs where QD=QS, setting demand equal to supply yields P* and Q* (Khan Academy). For example, solving 100−2P=10+3P gives P*=18 and Q*=64. Always diagram your supply and demand curves to visualize shifts.

  4. Consumer Surplus at $200 -

    Consumer surplus is the area between the demand curve and market price (At a price of $200 consumer surplus is a triangle area). If Pmax=500−2Q, then Q=150 at P=$200 and CS=½×(300)×150=$22,500. This key concept often appears on the Eco 201 module 2 quiz.

  5. Shifts & Elasticity -

    Non”price factors (income, tastes, input costs) shift supply or demand, moving equilibrium (Investopedia). Price elasticity (Ed=%ΔQ/%ΔP) measures responsiveness; e.g., Ed=−2 means a 1% price rise cuts Q by 2%. Remember "Shift First, Then Adjust Price!"

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