Demand and supply curves: Practice Questions

Which of the following would cause a movement along the demand curve for good X?

A government decides to remove a specific indirect tax on a good. Ceteris paribus, what is the most likely effect on the market equilibrium for that good?

Beef and leather are products in joint supply. If there is a significant increase in the consumer demand for beef, what is the most likely outcome in the market for leather?

Which of the following factors would cause the supply curve for a manufactured product to shift to the left?

In a market diagram, the initial equilibrium for a product is established at point E. If there is a successful advertising campaign for the product and, at the same time, the government removes a production subsidy, what will be the position of the new equilibrium relative to E?

State one factor that could cause the demand curve for a normal good to shift to the right.

Explain why a significant increase in the productivity of labor would cause a shift in the supply curve for a manufactured good.

Analyze the combined effect on the equilibrium price and quantity in the market for coffee if there is a simultaneous severe frost in major growing regions and a successful global advertising campaign for tea (a substitute). Identify which variable has an indeterminate outcome.

The market for Electric Vehicles (EVs) is influenced by technological changes and the prices of related goods. Assume that EVs are a substitute for petrol-powered cars.

(a) Explain, with the aid of a demand and supply diagram, how a simultaneous decrease in the cost of lithium-ion batteries and a sharp increase in the price of petrol would affect the equilibrium price and quantity of EVs. [4]

(b) Discuss how the rationing and signalling functions of the price mechanism would respond to a shortage of EVs caused by an unexpected surge in demand. [2]

(c) Evaluate whether the consumer surplus in the EV market will necessarily increase following the changes described in part (a). [2]

Consider the market for high-efficiency air conditioning units, which are considered a normal good. Suppose that two events occur simultaneously: there is a period of unusually hot weather, and there is a significant reduction in the cost of raw materials used in the production of these units.

(a) Explain, with the aid of a demand and supply diagram, how each of these events would independently shift the curves in the market for air conditioning units. [4]
(b) Discuss the combined effect of these two shifts on the equilibrium price and equilibrium quantity. Explain why one of these variables has an uncertain outcome. [3]