1. Test Review: See what you know!
Supply & Demand
Test Review: See what you know!

2. SD Unit Test Study Guide on Website due Wed. Gov’t Price Controls
Mandatory for all students
Gov’t Price Controls
Price Floors & Price Ceilings
Supply & Demand Curve Shifts
TIPSE & TIN
Inelastic & Elastic Demand Curves
Total revenue

3. Why is a demand curve downward sloping?
The Law of Diminishing Marginal Utility
Because as price falls you buy more
The substitution effect
Both A & C
None listed

4. A price ceiling causes a:
shortage of supply above market equilibrium
shortage of supply below market equilibrium
surplus of supply above market equilibrium
surplus of supply below market equilibrium

5. A price floor of $12 in the graph below will:
Increase quantity sold (more than 200)
Decrease quantity sold (less than 200)
Have no effect on quantity sold
“it depends” on elasticity
Cannot determine

6. Which will not shift demand to the right?
An increase in tastes
An increase in income
An decrease in substitute price
An decrease in complement price
All listed are true

7. Which will not shift supply to the right?
New firms enter the soda market
New technology for soda production
A fall in the price of soda cans
All listed shift supply right
None listed shift supply right

8. Cotton prices fall 35%. How will this effect the cotton T-shirt market
It would cause an decrease in supply
It would cause an increase in quantity demanded
It would cause an increase in demand
It would cause an increase in quantity supplied
None listed are true

9. Which could explain the price of T-shirts rising
The tastes for T-shirts decreased
The price of a complement decreased
The price of an input to T-shirts decreased
Some T-shirt makers exit the industry
Both B & D

10. If demand for a product is elastic, then
Increasing price by 10% will lead to quantity demanded falling by less than 10%
Increasing price by 10% will lead to quantity demanded falling by more than 10%
Increasing price by 10% will lead to quantity demanded falling by exactly 10%
None listed are true

11. Which is true of inelastic goods
They have many substitutes
They tend to be a luxury
The proportion of income is large
All listed are true (A, B, C)
None listed are true

12. Which is true of Total Revenue
It will increase when prices rise on elastic goods
It will increase when prices rise on inelastic goods
It will increase when prices fall on elastic goods
Both B & C are true
None listed are true

13. 4 Main Topics Price Ceilings & Floors Shifts in Demand (TIPSE)
Shifts in Supply
(TIN)
Elasticity