This is the final exam for Supply & Demand. It pulls the whole course together: the two curves and the laws that bend them — demand sloping down, supply sloping up, both rooted in opportunity cost — the difference between a curve and a point on it, the equilibrium where the two meet and the surplus or shortage that appears when price strays from it, the all-important split between a movement along a curve and a shift of the whole thing, the demand and supply shifters that cause those shifts, elasticity and its revenue twist, price ceilings and floors, and finally the idea that a price is compressed information. Reason each question through — several look easy until you spot the trap: calling a shift a movement, assuming a price cap makes things cheaply available, or thinking a price rise always raises revenue.
How this exam works
Read carefully — this exam is final. Each question appears one at a time. Once you submit an answer it is locked for good: there’s no going back, no retry, and no restart. Your score is hidden until the end, where you’ll see a pass/fail verdict. The pass mark is 70%. A few questions ask you to select all that apply.
The law of demand says that, all else equal, as the price of a good falls, the quantity demanded:
Select an answer to continue.
Course Recap
Big picture
Supply & demand, in one picture
- Supply & Demand
- The two curves
- Demand slopes down, supply slopes up — both rooted in opportunity cost; the curve is the whole relationship, a point on it is the quantity at one price
- Equilibrium
- Where the curves cross, the market clears ($3, 60); below it a shortage, above it a surplus — and price self-corrects back, set by no one
- Shifts vs movements
- Own price → movement ALONG the curve; any other factor (income, tastes, inputs, tech, expectations, numbers) → SHIFT of the whole curve
- Elasticity
- E_d = |%ΔQ / %ΔP|: >1 elastic, <1 inelastic. The revenue twist — raise price on inelastic to earn more, on elastic to earn less
- Price controls & the signal
- Ceiling below → shortage, floor above → surplus; a control sets the tag but jams the signal, so pressure leaks out as queues and resale
- The two curves
Key takeaways
Supply and demand is two curves and the story of where they meet. Demand slopes down and supply slopes up — both because of opportunity cost — and the whole curve (the relationship across all prices) is never the same thing as a single point on it (the quantity at one price). Where the curves cross is equilibrium (on our strawberries, $3 and 60 punnets): below it a shortage that pushes price up, above it a surplus that pushes price down, all self-correcting toward a clearing price no one sets. The master skill is telling a movement along a curve (caused by the good’s own price) from a shift of the whole curve (caused by anything else — income, tastes, substitutes and complements, input costs, technology, expectations, the number of buyers or sellers, taxes and subsidies). Elasticity measures how responsive quantity is — |%ΔQ / %ΔP|, elastic above 1, inelastic below — and carries the revenue twist: raise the price on an inelastic good and revenue rises, do it on an elastic good and revenue falls. Finally, a price is compressed information that coordinates strangers; a ceiling below equilibrium makes things scarcer (a shortage, not a bargain), a floor above makes them pile up (a surplus), and either way the control jams the signal so the pressure just leaks out elsewhere. Where do the curves cross, and what just moved one of them? is the whole course in one question.