Basic Economics Quiz For Beginners!

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  • 1/8 Questions

    When the demand for good X equals the supply of good X, the market for good X is said to be in equilibrium

    • True
    • False
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About This Quiz

Are you a beginner when it comes to economics? Have you just covered chapters one to five in ECO 401 class? If your answer was a yes, then the quiz below is designed to test out just how much information you have when it comes to the said chapters. Take it up and remember to share your results in the comment section.

Economics Quizzes & Trivia

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  • 2. 

    _______  is a signaling and rationing device which prompts consumers and producers toadjust their demand and supply

    • Trade Balance

    • Price Mechanism:

    • Assumption

    • Market dynamics

    Correct Answer
    A. Price Mechanism:
    Explanation
    Price mechanism is a signaling and rationing device that prompts consumers and producers to adjust their demand and supply. It works by adjusting prices based on the interaction of demand and supply in the market. When demand exceeds supply, prices increase, signaling consumers to reduce their demand and producers to increase their supply. On the other hand, when supply exceeds demand, prices decrease, signaling consumers to increase their demand and producers to reduce their supply. This constant adjustment of prices helps to balance the market and allocate resources efficiently.

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  • 3. 

    When price of any good increases, consumer’s real income falls and itspurchasing power also decreases. This is __________

    • Income effect

    • Price effect:

    • Substitution effect

    Correct Answer
    A. Income effect
    Explanation
    Income effect:
    It is also one of two reasons for the law of demand and the negative slope of the market demand curve.
    The income effect results because a change in price gives buyers more real income, or the purchasing
    power of the income, even though money or nominal income remains the same. This causes changes in
    the quantity demanded of the good.
    Or more simply we can say that when price of any good increases, consumer’s real income falls and its
    purchasing power also decreases. This is income effect.

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  • 4. 

    A situation in which no firm or consumer is big enough to affect the market price.

    • Perfect competition

    • Fair competition

    • Monoply

    • Market efficiency

    Correct Answer
    A. Perfect competition
    Explanation
    Perfect competition refers to a market structure where there are numerous small firms and consumers, none of which have enough market power to influence the price. In a perfectly competitive market, all firms are price takers, meaning they have no control over the market price and must accept the prevailing price set by market forces of supply and demand. This ensures fair competition and prevents any single firm or consumer from having significant market power or monopolistic control. Therefore, the given answer of Perfect competition accurately describes a situation where no firm or consumer is big enough to affect the market price.

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  • 5. 

    Which is not correct for product Market

    • Goods purchased by the household sector

    • Goods purchased by government and foreign sectors

    • Exchange of raw materials

    • Exchange consumer goods

    Correct Answer
    A. Exchange of raw materials
    Explanation
    Goods/product/commodity markets:
    Markets used to exchange final good or service. Product markets exchange consumer goods purchased
    by the household sector, capital investment goods purchased by the business sector, and goods
    purchased by government and foreign sectors. A product market, however, does NOT include the
    exchange of raw materials, scarce resources, factors of production, or any type of intermediate goods.
    The total value of goods exchanged in product markets each year is measured by gross domestic
    product. The demand side of product markets includes consumption expenditures, investment
    expenditures, government purchases, and net exports. The supply side of product markets is production
    of the business sector.

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  • 6. 

    Which is not correct for Factor market maket.

    • Termed as termed resource market

    • The value of the services exchanged through factor markets each year is measured as national income.

    • Buying and selling of the worker and their services take place through factor markets

    • The labor services of workers are exchanged through factor markets

    Correct Answer
    A. Buying and selling of the worker and their services take place through factor markets
    Explanation
    Factors markets:
    Markets used to exchange the services of a factor of production: labor, capital, land, and
    entrepreneurship. Factor markets, also termed resource markets, exchange the services of factors, NOT
    the factors themselves. For example, the labor services of workers are exchanged through factor markets
    NOT the actual workers. Buying and selling the actual workers are not only slavery (which is illegal) it's
    also the type of exchange that would take place through product markets, not factor markets. More
    realistically, capital and land are two resources and are legally exchanged through product markets. The
    services of these resources, however, are exchanged through factor markets. The value of the services
    exchanged through factor markets each year is measured as national income.

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  • 7. 

    An increase in the price of_________  results in an increase in the quantity demanded.

    • Normal goods

    • Inferior goods

    • Giffen goods

    • Substitution goods

    Correct Answer
    A. Giffen goods
    Explanation
    Giffen goods are a special type of inferior goods where an increase in price leads to an increase in quantity demanded. This is because Giffen goods are considered to be essential goods with no close substitutes. As the price of a Giffen good increases, consumers' purchasing power decreases, making them unable to afford other goods. Therefore, they are forced to continue purchasing the Giffen good, resulting in an increase in quantity demanded despite the increase in price.

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  • 8. 

    Equilibrium can shift if ________ (mark all correct option)

    • Demand Curve Shifts.

    • Supply Curve Shifts

    • Quantity demand equals Quantity Supply

    • Both Demand and Supply curves shift

    Correct Answer(s)
    A. Demand Curve Shifts.
    A. Supply Curve Shifts
    A. Both Demand and Supply curves shift
    Explanation
    Equilibrium can shift if the demand curve shifts because a change in demand will lead to a change in the quantity demanded at a given price, causing a shift in the equilibrium point. Similarly, if the supply curve shifts, it will result in a change in the quantity supplied at a given price, leading to a shift in the equilibrium point. Finally, if both the demand and supply curves shift, it will cause a simultaneous change in both the quantity demanded and supplied, resulting in a shift in the equilibrium point.

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  • Apr 03, 2024
    Quiz Edited by
    ProProfs Editorial Team
  • Oct 04, 2009
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    Zubair
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