Supply and Demand PDF

1. If the price of non-dairy spreads rises, what is the likely effect on the butter market? ✅ a. Demand for butter decreases. b. Demand for butter increases. c. Supply of butter increases. d. Supply of butter decreases. Rationale: N...

1. If the price of non-dairy spreads rises, what is the likely effect on the butter market? ✅ a. Demand for butter decreases. b. Demand for butter increases. c. Supply of butter increases. d. Supply of butter decreases. Rationale: Non-dairy spreads are a substitute for butter. A rise in the price of substitutes generally leads to an increase in demand for the original product, as consumers switch to the relatively cheaper alternative—in this case, butter. 2. What happens to the demand curve for houses in Ealing if banks adopt stricter loan policies? ✅ a. It shifts left. b. It shifts right. c. It becomes vertical. d. It remains the same. Rationale: Stricter loan policies make it harder for people to afford loans, reducing the number of buyers in the housing market. This decrease in demand shifts the curve to the left. 3. Improvements to the A40 linking Ealing with Central London would likely: ✅ a. Increase supply. b. Increase demand. c. Decrease demand. d. Have no effect. Rationale: Improved transport links make commuting easier, increasing Ealing’s appeal as a residential area. More people are likely to buy homes there, shifting the demand curve to the right. 4. What happens to house prices if local authorities relax housing development restrictions? ✅ a. Prices increase. b. Prices decrease. c. Prices remain the same. d. Prices fluctuate without a trend. Rationale: Relaxed restrictions increase the supply of houses, shifting the supply curve to the right. With more houses available, prices decrease as supply exceeds previous levels of demand. 5. Which scenario is most likely to shift the wheat demand curve to the right? a. A drought in wheat-growing regions. ✅ b. Higher popularity of low-carb diets. c. Increased economic growth in Asia. d. Increased EU subsidies for wheat farmers. Rationale: Economic growth in Asia raises income levels, allowing more people to afford wheat-based products, which shifts demand to the right as more is purchased at each price level. 6. In a bumper crop season for strawberries, what happens to the supply curve? ✅ a. Shifts left. b. Shifts right. c. Remains unchanged. d. Becomes vertical. Rationale: A bumper crop increases the amount of strawberries available, shifting the supply curve to the right as producers supply more strawberries at each price level. 7. When the Monetary Policy Committee raises interest rates, what is the effect on the housing market? ✅ a. Demand shifts right. b. Demand shifts left. c. Supply shifts right. d. Supply shifts left. Rationale: Higher interest rates make mortgages more expensive, reducing demand for housing. This shift left indicates fewer people can afford to buy homes. 8. What could cause a leftward shift in the supply curve for wheat? a. Improved wheat-growing technology. ✅ b. EU subsidies to farmers. c. Global warming worsening climate for wheat. d. Reduced consumer demand. Rationale: Poor climate conditions reduce wheat yields, limiting supply. This decreases the quantity of wheat available at each price level, shifting the supply curve left. 9. What happens to the price of fresh vegetables when they are in season? ✅ a. Prices increase. b. Prices decrease. c. Prices remain constant. d. Prices fluctuate. Rationale: Seasonal supply increases due to greater harvests, creating a surplus. This drives prices down as farmers must sell higher quantities quickly. 10. If the demand for central heating oil rises, what occurs on the supply curve? a. Movement up along the supply curve. ✅ b. Movement down along the supply curve. c. Shift left in supply. d. Shift right in supply. Rationale: Increased demand raises the equilibrium price, causing suppliers to supply more at the higher price, which is represented by movement up along the curve. 11. An increase in the cost of building houses leads to: a. Leftward shift in supply. ✅ b. Rightward shift in supply. c. Leftward shift in demand. d. Rightward shift in demand. Rationale: Higher costs reduce the ability of builders to supply houses at each price level, shifting the supply curve to the left as less is produced. 12. When consumers switch to gas-fired heating as gas prices fall, what happens in the central heating oil market? ✅ a. Movement up along the supply curve. b. Movement down along the supply curve. c. Shift left in demand. d. Shift right in demand. Rationale: As consumers switch, demand for oil falls, leading to a lower price and causing movement down along the existing supply curve. 13. A tax on butter production will likely: ✅ a. Increase supply. b. Decrease supply. c. Increase demand. d. Decrease demand. Rationale: Taxes raise production costs, reducing the quantity of butter producers are willing to supply at each price level, resulting in a leftward shift of the supply curve. 14. If new technology decreases oil refining costs, what is the supply effect? ✅ a. Leftward shift in supply. b. Rightward shift in supply. c. Leftward shift in demand. d. Rightward shift in demand. Rationale: Lower production costs make it easier to supply oil, shifting the supply curve right as more oil can be offered at each price level. 15. A poor wheat harvest leading to decreased bread supply would: ✅ a. Shift supply left. b. Shift supply right. c. Shift demand left. d. Shift demand right. Rationale: Less wheat means less bread can be produced, shifting the bread supply curve left, increasing prices and reducing quantity sold. 16. If the price of bread rises, what likely happens to the demand for butter? a. Demand decreases. ✅ b. Demand increases. c. Supply decreases. d. Supply increases. Rationale: Bread and butter are complementary goods. A rise in bread prices reduces bread purchases, which in turn reduces demand for butter. 17. An expected future rise in butter prices may cause: a. Immediate increase in demand. ✅ b. Immediate decrease in demand.  c. Immediate increase in supply. d. Immediate decrease in supply. Rationale: Anticipating higher future prices, consumers might buy more butter now, shifting current demand to the right. 18. Poor weather at home likely affects holiday demand by: ✅ a. Increasing it. b. Decreasing it. c. Leaving it unchanged. d. Increasing supply. Rationale: Unfavourable weather boosts demand for foreign holidays as people seek better climates, shifting the demand curve for holidays to the right. 19. The invention of cholesterol-free butter likely affects demand by: ✅ a. Increasing it. b. Decreasing it. c. Leaving it unchanged. d. Decreasing supply. Rationale: Healthier options attract more consumers, shifting demand for cholesterol-free butter to the right. 20. Higher exchange rates increasing holiday costs impacts: a. Supply by increasing costs.✅ b. Demand by increasing desire. c. Supply by decreasing costs. d. Demand by reducing desire. Rationale: Higher costs abroad from exchange rate changes increase operational expenses for tour operators, which affects supply by reducing availability. 21. A rise in rice prices might: a. Increase demand for bread. ✅ b. Decrease demand for bread. c. Decrease supply of bread. d. Increase supply of bread. Rationale: Rice and bread are substitutes. When rice prices increase, people may buy more bread instead, shifting bread demand right. 22. Rising yoghurt demand affects butter prices by: ✅ a. Decreasing them. b. Increasing them. c. Leaving them unchanged. d. Decreasing demand. Rationale: Butter and yoghurt are joint products. Higher yoghurt demand leads to more butter supply, increasing availability and reducing prices. 23. If house prices rise in nearby Wembley, Ealing house prices might: a. Increase as demand rises. ✅ b. Decrease as demand falls. c. Remain unchanged. d. Shift left in demand. Rationale: High Wembley prices push buyers toward Ealing, increasing demand there, which raises prices. 24. Loss of wheat supply globally might: ✅ a. Decrease wheat prices. b. Increase wheat prices. c. Decrease demand. d. Decrease rice prices. Rationale: Lower supply causes a shortage, leading to higher prices as demand outstrips available wheat. 25. Subsidies for farmers would most likely: a. Increase supply.✅ b. Decrease supply. c. Shift demand left. d. Shift demand right. Rationale: Subsidies lower production costs for farmers, making it easier to produce and supply more, shifting the supply curve right.