4.1.3.5 The determination of equilibrium market prices Quiz: AQA Economics, Unit 1

The 20 questions

1. The equilibrium market price is the price at which:

   • the government sets the price of the good.
   • quantity demanded is at its maximum.
   • quantity supplied is at its minimum.
   • quantity demanded equals quantity supplied.

2. Demand is Qd = 120 - P and supply is Qs = 2P - 30. What is the equilibrium price?

   • P = 70.
   • P = 40.
   • P = 50.
   • P = 60.

3. With demand Qd = 120 - P and supply Qs = 2P - 30, what is the equilibrium quantity?

   • Q = 70.
   • Q = 50.
   • Q = 80.
   • Q = 60.

4. Using Qd = 120 - P and Qs = 2P - 30, what is the level of excess demand at a price of £40?

   • Excess demand of 30.
   • Excess supply of 30.
   • Excess demand of 50.
   • Excess demand of 10.

5. With demand Qd = 120 - P and supply Qs = 2P - 30, what is the level of excess supply at a price of £60?

   • Excess demand of 30.
   • Excess supply of 30.
   • Excess supply of 10.
   • Excess supply of 60.

6. Which of the following best describes the effect of excess demand in a market with a price below equilibrium?

   • Shortages put upward pressure on price as buyers compete for the available goods.
   • Quantity supplied rises to meet demand, so the market clears.
   • Surpluses put downward pressure on price as sellers compete to sell.
   • Price automatically remains unchanged because quantity supplied equals quantity demanded.

7. Which of the following describes excess supply in a market?

   • Quantity supplied is greater than quantity demanded at the current price.
   • Quantity supplied is zero at the current price.
   • Quantity demanded is greater than quantity supplied at the current price.
   • Quantity demanded and quantity supplied are equal at the current price.

8. Why does excess supply lead to a fall in price?

   • Because consumers demand more at higher prices.
   • Because supply shifts to the right automatically.
   • Because firms reduce prices to attract buyers, as unsold stock builds up.
   • Because the government requires firms to cut prices.

9. Which statement best distinguishes equilibrium from disequilibrium?

   • Equilibrium occurs only when demand is perfectly elastic.
   • Equilibrium is a state where there is no pressure for price to change; disequilibrium means quantity demanded and supplied differ.
   • Equilibrium means no goods are traded; disequilibrium means all goods are traded.
   • Equilibrium means the price is set by government; disequilibrium means it is set by the market.

10. A market is in equilibrium at a price of £10. Demand rises. What is the immediate effect at £10?

    • No change occurs, because equilibrium is fixed.
    • The price falls automatically to zero.
    • Excess demand appears at £10, because quantity demanded now exceeds quantity supplied.
    • Excess supply appears at £10.

11. A rise in the price of a key input shifts the supply curve to the left. What is the likely effect on the equilibrium price and quantity?

    • Price and quantity both fall.
    • Price falls and quantity rises.
    • Price rises and quantity falls.
    • Price and quantity both rise.

12. A rise in demand and a rise in supply both occur in the same market. Which outcome is certain?

    • Equilibrium quantity falls.
    • Equilibrium price falls.
    • Equilibrium price rises.
    • Equilibrium quantity rises.

13. A fall in demand combined with a fall in supply leaves equilibrium price unchanged. What must be true about the relative size of the shifts?

    • The supply shift must be zero.
    • The shifts must be exactly equal in size and direction.
    • Price is always unchanged after any pair of shifts.
    • The demand shift must be exactly equal in size to the supply shift, so that the price effects offset each other.

14. Which of the following is a real-world example of a market adjusting towards equilibrium through price changes?

    • A product is withdrawn from sale by a manufacturer after a recall.
    • A government fixes the price of bread and queues form.
    • Shops stop selling a product because a tax is announced.
    • Concert tickets sold out quickly, so the promoter raises the price for later sales.

15. Which of the following is an assumption of the basic model of demand and supply?

    • Consumers and firms are price takers, and other things remain constant.
    • Governments always intervene to set equilibrium prices.
    • Firms can set any price they wish without losing customers.
    • Demand and supply curves are never affected by changes in other goods.

16. Why is it important to be aware of the assumptions underlying the demand and supply model?

    • Because assumptions make the model always accurate.
    • Because the model's conclusions depend on assumptions that may not hold in all real markets.
    • Because assumptions are irrelevant to economic analysis.
    • Because assumptions prove that markets never change.

17. Which of the following correctly describes how a market responds to excess demand when price is held below equilibrium by a binding maximum price?

    • The shortage disappears, because the maximum price increases supply.
    • The shortage persists, because price is prevented from rising to clear the market.
    • The market reaches equilibrium at the maximum price.
    • Excess supply appears, because the maximum price reduces demand.

18. A market for a good has demand shifting right and supply shifting left by equal amounts. What is the likely effect on equilibrium price?

    • Price rises, because both shifts push price up.
    • Price rises, because the supply shift reduces supply and demand shift raises demand, so price increases.
    • Price falls, because the demand shift is weaker.
    • Price is unchanged, because the two shifts offset each other.

19. Evaluate: a government says prices will always return to equilibrium quickly after a shock. Which response is most appropriate?

    • The claim is wrong because prices never change in markets.
    • The claim is correct only for markets with fixed prices.
    • The claim is always correct because markets adjust instantly.
    • The claim is overstated, because adjustment depends on price flexibility, information and time, and may be prevented by regulation.

20. At a market price of £8, quantity demanded is 60 units and quantity supplied is 90 units. What will happen to the price?

    • The price will rise to £9, since sellers always raise price when the quantity supplied is greater than the quantity demanded in any market.
    • The price will rise, because there is excess demand at £8 and buyers will compete for the goods that are on offer in the market.
    • The price will stay at £8, because the market is in equilibrium at this level of quantity demanded and quantity supplied together.
    • The price will fall, because there is excess supply of 30 units at £8, and sellers will cut price to clear the surplus.

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