Demand, Supply and Elasticity MCQs 2026

An improvement in technology typically

1. A shifts supply left ✓
2. B shifts the supply curve to the right ✓
3. C shifts demand left always ✓
4. D eliminates scarcity ✓

Market equilibrium occurs where

1. A demand is zero ✓
2. B supply is infinite ✓
3. C price is zero ✓
4. D quantity demanded equals quantity supplied ✓

The law of demand states that, ceteris paribus

1. A quantity demanded falls as price rises ✓
2. B quantity demanded rises as price rises ✓
3. C demand is independent of price ✓
4. D supply equals demand always ✓

A movement along the demand curve is caused by

1. A a change in the good's own price ✓
2. B a change in income only ✓
3. C a change in tastes only ✓
4. D a change in related goods' prices only ✓

A rightward shift of the demand curve means

1. A less is demanded at each price ✓
2. B more is demanded at each price ✓
3. C supply has increased ✓
4. D price ceiling is imposed ✓

An increase in consumer income typically shifts demand for a normal good

1. A to the left ✓
2. B vertically only ✓
3. C not at all ✓
4. D to the right ✓

For an inferior good, a rise in income tends to

1. A increase demand always ✓
2. B decrease demand ✓
3. C leave demand unchanged always ✓
4. D make supply vertical ✓

Complementary goods are those for which

1. A a rise in one's price reduces demand for the other ✓
2. B a rise in one's price raises demand for the other ✓
3. C they are unrelated ✓
4. D they are always inferior ✓

Substitute goods are those for which

1. A they must be consumed jointly ✓
2. B a rise in one's price raises demand for the other ✓
3. C cross elasticity is always negative ✓
4. D they have zero prices ✓

The law of supply states that, ceteris paribus

1. A quantity supplied rises as price rises ✓
2. B quantity supplied falls as price rises ✓
3. C supply is fixed always ✓
4. D demand creates its own supply always ✓

A leftward shift of the supply curve indicates

1. A a decrease in supply ✓
2. B an increase in supply ✓
3. C a fall in demand only ✓
4. D market clearing always ✓

A surplus exists when

1. A demand exceeds supply ✓
2. B price is at equilibrium ✓
3. C quantity supplied exceeds quantity demanded at the prevailing price ✓
4. D elasticity is one ✓

A shortage exists when

1. A quantity demanded exceeds quantity supplied at the prevailing price ✓
2. B supply exceeds demand ✓
3. C markets always clear ✓
4. D PPF shifts out ✓

An increase in demand with supply fixed raises

1. A price only, quantity falls ✓
2. B equilibrium price and quantity ✓
3. C quantity only, price falls ✓
4. D neither price nor quantity ✓

An increase in supply with demand fixed tends to

1. A raise price and lower quantity ✓
2. B lower equilibrium price and raise quantity ✓
3. C raise both always ✓
4. D lower both always ✓

Price elasticity of demand measures

1. A responsiveness of quantity demanded to a change in price ✓
2. B only income changes ✓
3. C only supply shifts ✓
4. D only money supply ✓

Demand is elastic when

1. A PED equals zero ✓
2. B PED is less than one in absolute value ✓
3. C the absolute value of PED is greater than one ✓
4. D PED is undefined always ✓

Demand is inelastic when

1. A |PED| > 1 ✓
2. B |PED| = infinity always ✓
3. C PED is always negative infinity ✓
4. D |PED| is less than one ✓

Unit elastic demand means

1. A PED equals zero ✓
2. B PED equals infinity ✓
3. C |PED| equals one ✓
4. D supply is fixed ✓

Perfectly inelastic demand is shown by

1. A a horizontal demand curve ✓
2. B an upward-sloping demand ✓
3. C a supply curve only ✓
4. D a vertical demand curve ✓

Perfectly elastic demand is shown by

1. A a horizontal demand curve ✓
2. B a vertical demand curve ✓
3. C a positively sloped demand ✓
4. D a rectangular hyperbola only ✓

Total revenue rises when price rises if demand is

1. A elastic ✓
2. B perfectly elastic ✓
3. C inelastic ✓
4. D unit elastic with TR falling always ✓

Total revenue falls when price rises if demand is

1. A inelastic ✓
2. B perfectly inelastic ✓
3. C zero elastic ✓
4. D elastic ✓

A major determinant of PED is

1. A only the colour of packaging ✓
2. B only the firm's logo ✓
3. C only the day of the week always ✓
4. D availability of close substitutes ✓

Necessities tend to have

1. A perfectly elastic demand ✓
2. B infinite elasticity always ✓
3. C relatively inelastic demand ✓
4. D zero income elasticity always ✓

Income elasticity of demand measures

1. A only price changes ✓
2. B only supply elasticity ✓
3. C responsiveness of demand to income changes ✓
4. D only cross effects ✓

A normal good has

1. A negative income elasticity ✓
2. B positive income elasticity ✓
3. C zero cross elasticity always ✓
4. D infinite PED always ✓

An inferior good has

1. A positive income elasticity ✓
2. B unit PED always ✓
3. C negative income elasticity ✓
4. D vertical supply ✓

A luxury good typically has

1. A negative income elasticity ✓
2. B income elasticity greater than one ✓
3. C zero income elasticity ✓
4. D infinite price only ✓

Cross elasticity of demand measures

1. A only own-price elasticity ✓
2. B only income effects ✓
3. C only supply shocks ✓
4. D responsiveness of demand for one good to price of another ✓

Positive cross elasticity indicates

1. A substitute goods ✓
2. B complementary goods ✓
3. C unrelated goods always ✓
4. D inferior goods only ✓

Negative cross elasticity indicates

1. A substitute goods ✓
2. B Giffen goods only ✓
3. C public goods only ✓
4. D complementary goods ✓

Price elasticity of supply measures

1. A responsiveness of quantity supplied to price ✓
2. B only demand shifts ✓
3. C only income ✓
4. D only tastes ✓

Supply tends to be more elastic in the

1. A short run than long run always ✓
2. B immediate market period always ✓
3. C never ✓
4. D long run than in the short run ✓

Consumer surplus is

1. A producer profit only ✓
2. B government tax revenue only ✓
3. C total variable cost ✓
4. D the difference between willingness to pay and price actually paid ✓

Producer surplus is

1. A consumer willingness to pay only ✓
2. B deadweight loss only ✓
3. C the difference between price received and minimum acceptable price ✓
4. D average fixed cost ✓

A binding price ceiling set below equilibrium causes

1. A a shortage ✓
2. B a surplus ✓
3. C no effect ✓
4. D excess supply only ✓

A binding price floor set above equilibrium causes

1. A a shortage ✓
2. B a surplus ✓
3. C equilibrium unchanged ✓
4. D zero quantity ✓

An excise tax typically

1. A raises the price buyers pay and lowers the net price sellers receive ✓
2. B lowers both prices always ✓
3. C has no incidence ✓
4. D shifts only demand right ✓

Tax incidence falls more on the side that is

1. A more elastic ✓
2. B less elastic ✓
3. C perfectly elastic always ✓
4. D undefined ✓

Giffen goods are a rare case where

1. A demand is always elastic ✓
2. B the demand curve slopes upward because the income effect dominates ✓
3. C supply is vertical always ✓
4. D PED is always one ✓

Veblen goods are associated with

1. A conspicuous consumption where higher price may raise demand ✓
2. B perfectly inelastic supply only ✓
3. C zero utility ✓
4. D public goods ✓

Market demand is obtained by

1. A horizontal summation of individual demand curves ✓
2. B vertical summation of utilities only ✓
3. C averaging prices only ✓
4. D ignoring all buyers ✓

An expectation of future price rise tends to

1. A decrease current demand always ✓
2. B increase current demand ✓
3. C shift supply right always ✓
4. D eliminate scarcity ✓

A fall in input prices tends to

1. A decrease supply ✓
2. B shift demand left ✓
3. C create shortage always ✓
4. D increase supply ✓

Number of sellers increasing in a competitive market tends to

1. A decrease supply ✓
2. B raise demand only ✓
3. C fix prices of substitutes only ✓
4. D increase market supply ✓

Arc elasticity uses

1. A only point derivatives always ✓
2. B average price and quantity in the elasticity formula ✓
3. C only income ✓
4. D only cross prices ✓

Point elasticity of demand uses

1. A only total revenue tests without slopes ✓
2. B only supply shifts ✓
3. C calculus or infinitesimal percentage changes at a point ✓
4. D only tax rates ✓

On a linear demand curve, elasticity

1. A is constant everywhere ✓
2. B varies along the curve; higher at upper points ✓
3. C is always zero ✓
4. D equals supply elasticity always ✓

If demand is perfectly inelastic, a per-unit tax is borne

1. A entirely by sellers ✓
2. B equally always ✓
3. C by foreigners only ✓
4. D entirely by buyers ✓

If supply is perfectly inelastic, a per-unit tax is borne

1. A entirely by buyers ✓
2. B by nobody ✓
3. C entirely by sellers ✓
4. D only by government ✓

Deadweight loss from a tax is

1. A always zero ✓
2. B equal to consumer surplus only ✓
3. C the loss of total surplus not transferred to government ✓
4. D equal to tax revenue ✓

In the short run, agricultural supply is often

1. A relatively inelastic ✓
2. B perfectly elastic ✓
3. C infinitely elastic ✓
4. D negatively sloped ✓

Speculative demand for a good rises when buyers expect

1. A permanent free supply ✓
2. B falling utility always ✓
3. C zero income ✓
4. D future scarcity or higher prices ✓

Derived demand refers to demand for

1. A only luxury goods ✓
2. B only inferior goods ✓
3. C inputs based on demand for the final product ✓
4. D only public goods ✓

Joint supply occurs when

1. A goods are pure substitutes only ✓
2. B demand is zero ✓
3. C production of one good automatically yields another ✓
4. D elasticity is undefined ✓

Composite demand means a good is demanded for

1. A only one use always ✓
2. B only export ✓
3. C only government ✓
4. D several different uses ✓

The slope of the demand curve is not the same as

1. A the inverse price–quantity relation conceptually ✓
2. B willingness to pay ranking ✓
3. C price elasticity of demand ✓
4. D ceteris paribus assumption ✓

A simultaneous increase in demand and supply

1. A always raises price ✓
2. B raises equilibrium quantity; price effect is ambiguous ✓
3. C always lowers quantity ✓
4. D leaves quantity unchanged always ✓

A simultaneous decrease in demand and supply

1. A always raises quantity ✓
2. B always clears with higher Q ✓
3. C lowers equilibrium quantity; price effect is ambiguous ✓
4. D eliminates markets ✓