Market Mechanism – Equilibrium Price Quiz - ICSE Class 12 Economics
Free practice quiz: Market Mechanism – Equilibrium Price (ICSE Class 12 Economics). 38 multiple-choice questions with answers and explanations. Play online, no sign-up needed.
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When the market demand for a good increases due to a rise in consumer income, while the market supply remains unchanged, what is the immediate impact on the equilibrium price and quantity?
- Equilibrium price decreases, equilibrium quantity increases.
- Equilibrium price increases, equilibrium quantity decreases.
- Equilibrium price increases, equilibrium quantity increases.
- Equilibrium price decreases, equilibrium quantity decreases.
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Answer: C. Equilibrium price increases, equilibrium quantity increases.
An increase in market demand, with supply constant, leads to a rightward shift of the demand curve. This shift causes both the equilibrium price and quantity to rise as consumers are willing to pay more for a larger quantity.
In a market for a good that is considered a Veblen good, what is the expected impact on the equilibrium price and quantity if there is a decrease in consumer income, assuming the good is not inferior?
- Equilibrium price increases, equilibrium quantity increases.
- Equilibrium price decreases, equilibrium quantity decreases.
- Equilibrium price decreases, equilibrium quantity increases.
- Equilibrium price increases, equilibrium quantity decreases.
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Answer: B. Equilibrium price decreases, equilibrium quantity decreases.
A Veblen good is characterized by demand that increases as the price increases due to its exclusivity or status symbol value. A decrease in consumer income, assuming it's not an inferior good (where demand rises with income), will reduce the purchasing power for luxury or status goods. This would likely lead to a decrease in demand for the Veblen good, causing both equilibrium price and quantity to fall.
Consider a market where the demand curve is perfectly elastic and the supply curve is upward sloping. If a government policy increases the price that consumers are willing to pay for the good, what will be the impact on the equilibrium price and quantity?
- Equilibrium price increases, equilibrium quantity increases.
- Equilibrium price remains unchanged, equilibrium quantity increases.
- Equilibrium price increases, equilibrium quantity remains unchanged.
- Equilibrium price decreases, equilibrium quantity decreases.
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Answer: A. Equilibrium price increases, equilibrium quantity increases.
A perfectly elastic demand curve means consumers are willing to buy an infinite quantity at a specific price. An increase in the price consumers are willing to pay effectively shifts the demand curve upwards. With an upward-sloping supply curve, this upward shift in demand will lead to a higher equilibrium price and a higher equilibrium quantity.
Consider a situation where the demand for a good is perfectly inelastic, and the supply curve is perfectly elastic. If there is an increase in input prices for producers, what will happen to the equilibrium price and quantity?
- Equilibrium price increases, equilibrium quantity remains unchanged.
- Equilibrium price remains unchanged, equilibrium quantity decreases.
- Equilibrium price increases, equilibrium quantity decreases.
- Equilibrium price decreases, equilibrium quantity increases.
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Answer: A. Equilibrium price increases, equilibrium quantity remains unchanged.
A perfectly inelastic demand means the quantity demanded is fixed. An increase in input prices for producers will shift the supply curve upwards. With a fixed quantity demanded, this upward shift in supply will lead to a higher equilibrium price, but the equilibrium quantity will remain unchanged.
Consider a market for a good with an upward-sloping demand curve (rare, but possible in some theoretical contexts) and a downward-sloping supply curve. If there is a significant increase in consumer income, and the good is normal, what is the likely effect on the equilibrium price and quantity?
- Equilibrium price increases, equilibrium quantity increases.
- Equilibrium price decreases, equilibrium quantity decreases.
- Equilibrium price increases, equilibrium quantity decreases.
- Equilibrium price decreases, equilibrium quantity increases.
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Answer: A. Equilibrium price increases, equilibrium quantity increases.
An increase in consumer income for a normal good shifts the demand curve to the right. With an upward-sloping demand curve, this rightward shift means that at any given price, consumers will demand more. Combined with a downward-sloping supply curve, this leads to both a higher equilibrium price and a higher equilibrium quantity.