Microeconomics: Market Equilibrium

Topics in this chapter

• Demand and Supply Curves
• Curve Movements and Shifts
• Equilibrium Price and Quantity
• Market Disequilibrium and Adjustment
• Equilibrium Changes and Simultaneous Shifts
• Price Controls and Rationing

Cheat sheet

Practice questions

1. Question 1Q-F92DD8

   In a market, the demand and supply functions are Qd = 100 - 2P and Qs = 20 + 2P, where P is price. What are the equilibrium price and quantity?

   1. A.Price = 10 and quantity = 80
   2. B.Price = 20 and quantity = 60
   3. C.Price = 30 and quantity = 40
   4. D.Price = 40 and quantity = 20
   See the answer and solution
2. Question 2Q-73A050

   If the government fixes a maximum price below the equilibrium price of a commodity, what is the most likely result in the market?

   1. A.Excess supply, because producers offer more than consumers demand
   2. B.Excess demand, because consumers demand more than producers offer
   3. C.No change in quantity demanded or supplied
   4. D.Equilibrium price rises automatically above the fixed price
   See the answer and solution
3. Question 3Q-8F7649

   Suppose consumer preferences increase the demand for a good, while improved technology increases its supply. Assuming the changes are significant, what can be concluded about the new equilibrium?

   1. A.Equilibrium quantity definitely increases, but the change in equilibrium price is uncertain
   2. B.Equilibrium price definitely increases, but the change in equilibrium quantity is uncertain
   3. C.Both equilibrium price and quantity definitely increase
   4. D.Both equilibrium price and quantity definitely decrease
   See the answer and solution
4. Question 4Q-4C9219

   What happens to market price when there is excess demand for a commodity, assuming prices are free to adjust?

   See the answer and solution
5. Question 5Q-126DD7

   In a competitive market, market equilibrium is reached when:

   1. A.The quantity demanded is greater than the quantity supplied
   2. B.The quantity supplied is greater than the quantity demanded
   3. C.The quantity demanded equals the quantity supplied
   4. D.The government fixes the market price
   See the answer and solution