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Quizzes > Business & Finance > Finance & Economics

Supply & Demand Quiz: Test Your Economics Knowledge

Ready for a market dynamics test? Dive in now!

Difficulty: Moderate
2-5mins
Learning OutcomesCheat Sheet
Paper art style supply and demand quiz graphic on golden yellow background with charts arrows and coins

Ready to challenge your understanding of market-driven forces? Our Ultimate Supply and Demand Quiz is the perfect free econ quiz to sharpen your skills and dive into heart of price shifts. You'll tackle real-world scenarios and key principles to master supply demand equilibrium. Whether you're brushing up for class or simply curious about demand curves in action this economics quiz covers everything from theory to practice. Test yourself with targeted supply and demand questions or take our microeconomics supply and demand quiz to explore deeper market dynamics. Click below to start your market dynamics test now - let's see how well you master the basics!

What does the law of demand state?
As price rises, quantity demanded rises.
Consumers will always buy more at higher prices.
Quantity demanded is independent of price.
As price rises, quantity demanded falls, ceteris paribus.
The law of demand indicates an inverse relationship between price and quantity demanded, holding other factors constant. As prices increase, consumers switch to substitutes or consume less due to reduced purchasing power. This downward-sloping demand curve reflects those substitution and income effects. Investopedia
According to the law of supply, how does quantity supplied respond to a price increase?
Quantity supplied decreases.
Quantity supplied is inversely related to price.
Quantity supplied increases, ceteris paribus.
Quantity supplied remains constant.
The law of supply states that, all else equal, producers will supply more of a good when its price rises because higher prices make production more profitable. This relationship is represented by an upward-sloping supply curve. It reflects incentives for firms to allocate resources to higher-value production. Investopedia
Which event causes a movement along the demand curve rather than a shift in the demand curve?
A change in the good's own price.
A change in consumer income.
A change in consumer tastes.
A change in the price of a related good.
A movement along the demand curve occurs when the price of the good itself changes, altering quantity demanded. Factors like income, tastes, or prices of related goods shift the entire demand curve. Movements along reflect price-induced quantity changes only. Khan Academy
Goods that are typically used together, such that a price rise in one reduces demand for the other, are called:
Inferior goods.
Giffen goods.
Substitutes.
Complements.
Complements are goods consumed together; if the price of one rises, demand for both falls. Substitutes serve similar purposes and see increased demand when one price rises. Inferior and Giffen goods relate to income effects, not joint consumption. Investopedia
Market equilibrium price is defined as the price at which:
Quantity demanded exceeds quantity supplied.
Quantity supplied exceeds quantity demanded.
Suppliers earn zero profit.
Quantity demanded equals quantity supplied.
Equilibrium price equates quantity demanded and quantity supplied in a market, ensuring no surplus or shortage. At that price, buyers and sellers are satisfied, and there is no inherent pressure for price movement. Investopedia
Why does a typical demand curve slope downward?
Constant marginal utility.
Law of supply.
Substitution effect, income effect, and diminishing marginal utility.
Increasing marginal utility.
Demand curves slope downward due to consumers substituting toward cheaper goods, reduced purchasing power (income effect), and the principle of diminishing marginal utility. Together they explain why higher prices lead to lower quantities demanded. Boundless Economics
If a market price is set above the equilibrium price, what is the resulting outcome?
A shortage of the good.
No effect; quantity adjusts automatically.
A surplus of the good.
Market equilibrium.
When price exceeds equilibrium, quantity supplied surpasses quantity demanded, creating a surplus. Sellers find unsold stock, pushing them to lower prices toward equilibrium. Investopedia
A legally imposed maximum price, often set below equilibrium, is known as a:
Quota.
Tariff.
Price floor.
Price ceiling.
A price ceiling is a government-imposed cap on prices, typically below equilibrium, causing shortages. Price floors set minimums above equilibrium, creating surpluses. Quotas and tariffs restrict quantities or impose taxes, respectively. Investopedia
How is the price elasticity of demand calculated?
Change in quantity demanded divided by change in price.
Percentage change in quantity demanded divided by percentage change in price.
Change in price divided by change in quantity demanded.
Percentage change in price divided by percentage change in quantity demanded.
Price elasticity of demand measures responsiveness of quantity demanded to price changes, computed as the percentage change in quantity over the percentage change in price. This unit?free measure allows comparisons across goods or markets. Investopedia
Which factor tends to make demand more elastic?
Small budget share spent on the good.
Few alternatives exist.
Availability of close substitutes.
Good is a necessity.
Demand is more elastic when consumers can easily switch to close substitutes if price rises. Necessities, few alternatives, and low budget share tend to reduce elasticity. Khan Academy
A technological improvement in production will cause:
A movement along the existing supply curve.
No change in supply.
The supply curve to shift leftward.
The supply curve to shift rightward.
Technological advances lower production costs, enabling firms to supply more at each price. This is represented by a rightward shift of the supply curve. Investopedia
What is the effect of a per-unit subsidy granted to producers?
Supply curve shifts leftward by the subsidy amount.
Supply curve shifts rightward by the subsidy amount.
Demand curve shifts rightward.
A movement down the supply curve occurs.
A per-unit subsidy reduces production cost, leading suppliers to offer more at each price. Graphically, this shifts the supply curve rightward by the subsidy amount. Khan Academy
Consumer surplus is best described as:
The area below the supply curve and above price.
Total revenue minus total cost.
The amount consumers actually pay.
The difference between willingness to pay and the market price.
Consumer surplus measures the benefit consumers receive when they pay less than their maximum willingness to pay. It is graphically the area under the demand curve above the market price. Investopedia
Producer surplus represents:
Total revenue minus total cost.
The consumer's benefit from market exchange.
The difference between market price and the minimum price sellers would accept.
Average revenue minus average cost.
Producer surplus is the benefit producers get when they sell at a market price higher than their minimum acceptable price, represented by the area above the supply curve and below the market price. Investopedia
A decrease in consumer income will shift the demand curve for a normal good:
Rightward, indicating higher demand at each price.
Downward along the curve.
Leftward, indicating lower demand at each price.
Upward along the curve.
For normal goods, demand increases when income rises and decreases when income falls. A reduction in income shifts the demand curve leftward, showing less quantity demanded at any given price. Investopedia
If a per-unit tax is imposed on sellers, what happens to the supply curve?
It shifts downward (rightward) by the amount of the tax.
There is a movement along the supply curve.
It shifts upward (leftward) by the amount of the tax.
No change in the supply curve.
A per-unit tax on sellers effectively raises their cost of production by the tax amount. This causes the supply curve to shift upward or leftward by the tax, reducing quantity supplied at each price. Khan Academy
A positive cross-price elasticity of demand indicates the two goods are:
Complements.
Independent goods.
Substitutes.
Inferior goods.
Cross-price elasticity measures how quantity demanded of one good responds to a price change in another. A positive value means demand for one rises when the other's price rises, indicating substitution. Investopedia
If a good has a negative income elasticity of demand, it is classified as:
Luxury.
Substitute.
Inferior.
Normal.
Income elasticity of demand measures responsiveness of demand to income changes. A negative value shows demand falls as income rises, characteristic of inferior goods. Investopedia
Deadweight loss is best described as:
The loss of total surplus due to market distortion.
The sum of consumer and producer surplus.
The difference between price floor and ceiling.
Revenue collected by the government from taxes.
Deadweight loss represents the reduction in total welfare (consumer plus producer surplus) when a market is not in competitive equilibrium, often due to taxes or price controls. It measures inefficiency. Investopedia
Which type of price discrimination involves charging different prices based on quantity purchased?
Third-degree price discrimination.
First-degree price discrimination.
Second-degree price discrimination.
Perfect price discrimination.
Second-degree price discrimination offers price schedules based on quantity consumed or product version, such as bulk discounts. First-degree charges each consumer their maximum willingness to pay, and third-degree segments by group characteristics. Investopedia
A government-imposed import quota directly results in:
Limiting the quantity of a good that can be imported.
Reducing domestic production.
Shifting the demand curve inward.
Raising revenue per unit imported.
An import quota sets a maximum quantity of a foreign good that may enter a country, constraining supply and often raising domestic prices. Tariffs, by contrast, impose taxes on imports. Investopedia
Compared to the short-run, the long-run market supply curve in perfect competition is generally:
More elastic.
Downward sloping.
Perfectly inelastic.
Less elastic.
In the long run, firms can adjust all inputs and enter or exit the market, making supply more responsive to price changes. Short-run supply is less elastic due to fixed factors. Khan Academy
For a good with perfectly inelastic supply, who bears the burden of a per-unit tax?
Producers bear the entire tax burden.
Tax burden is shared equally.
There is no tax burden due to inelastic supply.
Consumers bear the entire tax burden.
With perfectly inelastic supply, quantity is fixed and cannot adjust. A per-unit tax shifts the supply curve vertically, causing the full tax to be passed onto consumers via higher prices. Producers receive the same net price. Khan Academy
In first-degree (perfect) price discrimination, what happens to consumer surplus?
It equals producer surplus.
It doubles.
It is reduced to zero.
It remains unchanged.
First-degree price discrimination charges each consumer their maximum willingness to pay, capturing the entire consumer surplus as additional producer revenue. This leaves no consumer surplus in the market. Investopedia
If both demand and supply are highly elastic, the deadweight loss from a given per-unit tax will be:
Larger than if they were inelastic.
Smaller than if they were inelastic.
Zero, because markets adjust.
Unaffected by elasticities.
Deadweight loss rises with elasticity because more quantity is displaced when price changes. Highly elastic supply and demand mean small taxes cause large output distortions, increasing welfare loss. Investopedia
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Study Outcomes

  1. Understand Market Equilibrium -

    Identify how supply and demand curves intersect to determine equilibrium price and quantity in a market.

  2. Analyze Curve Shifts -

    Examine factors that cause shifts in supply and demand curves and predict their impact on market dynamics and price changes.

  3. Interpret Supply and Demand Graphs -

    Read and interpret graphical representations of supply and demand to draw conclusions about market behavior.

  4. Apply Equilibrium Concepts -

    Use supply and demand equilibrium principles to solve real-world problems and case studies introduced in the quiz.

  5. Evaluate Price Fluctuations -

    Assess how changes in external factors like taxes or consumer preferences influence price movements and market stability.

  6. Assess Market Dynamics -

    Critically evaluate scenarios in the free econ quiz to reinforce understanding of supply-demand equilibrium and market adjustments.

Cheat Sheet

  1. Law of Demand -

    The law of demand states that higher prices lead to lower quantities demanded, forming a downward-sloping demand curve (Mankiw, 2018). Recall "DIME" as a mnemonic: Demand Inverse - price ↑ causes demand ↓, and vice versa. Try plotting P=$10 to $7 and observing Qd changes to reinforce the concept (Khan Academy).

  2. Law of Supply -

    According to the law of supply, producers offer more goods at higher prices, resulting in an upward-sloping supply curve (Investopedia, 2020). Use "SPUD" (Supply Positive Upward Direction) to remember that price ↑ leads to quantity supplied ↑. For example, simulate P from $2 to $4 in a basic supply schedule to see Qs rise from 50 to 120 units.

  3. Market Equilibrium -

    Equilibrium occurs where quantity supplied equals quantity demanded, determining the market-clearing price and quantity (University of Illinois, 2019). Solve algebraically by setting Qd = a - bP and Qs = c+dP to find P* and Q* (e.g., 100 - 2P = 20+3P yields P* = 16, Q* = 68). Graph both curves to visualize how excess supply or demand moves the price toward equilibrium.

  4. Shifts vs. Movements -

    Recognize that price changes cause movements along curves, while non-price factors (income, tastes, input costs) shift the entire demand or supply curve (CORE Econ, 2021). For instance, an income rise shifts normal goods' demand curve to the right, increasing Qd at every price. Create flashcards of major shifters - TRIBE for demand (Tastes, Related goods, Income, Buyers, Expectations).

  5. Price Elasticity of Demand -

    Elasticity measures responsiveness: PED = |%ΔQd / %ΔP|, with elastic (PED > 1) or inelastic (PED < 1) demand (NBER Working Paper, 2017). Practice the midpoint formula: ((Q2 - Q1)/[(Q2+Q1)/2]) / ((P2 - P1)/[(P2+P1)/2]) to avoid bias. Remember "Elastic East Bound" to recall that elastic demand curves are flatter.

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