The Allocation of Resources — Practice Questions

Question 1

As the price of a good rises, the quantity demanded usually:

Accepted Answer

falls — Higher price → lower demand.

Question 2

As the price of a good rises, the quantity supplied usually:

Accepted Answer

rises — Higher price → higher supply.

Question 3

The price where demand equals supply is the:

Accepted Answer

equilibrium price — Where demand meets supply is the equilibrium price.

Question 4

In a market economy, resources are mainly allocated by:

Accepted Answer

prices — Prices act as signals that allocate resources.

Question 5

Demand is the amount consumers are willing and able to:

Accepted Answer

buy — Demand is what consumers will buy.

Question 6

Supply is the amount producers are willing to:

Accepted Answer

sell — Supply is what producers will sell.