Supply and Demand Practice Questions

8 representative multiple-choice questions on supply and demand for AP Microeconomics, drawn from our 46-question bank for this module. Work through each one, then open “Show answer” for the correct choice and an explanation. For scored, timed practice across the full bank, take a full practice test.

Prefer to read? The same questions, with answers

1. 1. When the price of a good rises, what does the Law of Demand predict will happen?

   • A. Quantity demanded will increase
   • B. Quantity demanded will decrease
   • C. The demand curve will shift to the left
   • D. The supply curve will shift to the right
   Show answer

   Correct answer: B. Quantity demanded will decrease

   Price goes up, quantity demanded goes down. That is the Law of Demand in one sentence. (A) reverses the relationship entirely. (C) confuses a movement along the curve with a shift. When the good's own price changes, you slide along the existing demand curve; only non-price factors like income, tastes, or substitute prices shift the curve. (D) involves supply and has nothing to do with the demand side of the question.

2. 2. Coffee and tea are substitutes. If the price of coffee rises sharply, what happens in the market for tea?

   • A. The supply of tea increases
   • B. The demand for tea increases, raising tea prices
   • C. The demand for tea decreases
   • D. Nothing, because the tea market is independent
   Show answer

   Correct answer: B. The demand for tea increases, raising tea prices

   Coffee getting more expensive drives some coffee drinkers to switch to tea. Tea demand shifts right, which raises both the price and quantity of tea sold. That positive cross-price effect is the hallmark of substitutes. (A) is wrong because nothing about coffee's price changes the cost of *producing* tea, so tea supply stays put. (C) has the direction exactly backwards. (D) ignores how related goods markets connect through consumer choice; substitutes are linked, not independent.

3. 3. After a market is disturbed by a leftward shift in supply, which sequence correctly describes the adjustment back toward the new equilibrium?

   • A. Shortage appears → price rises → quantity demanded decreases and quantity supplied increases → new equilibrium
   • B. Surplus appears → price falls → quantity demanded increases → new equilibrium
   • C. Price immediately jumps to the new equilibrium with no transitional shortage or surplus
   • D. Demand shifts right to compensate for the supply decrease
   Show answer

   Correct answer: A. Shortage appears → price rises → quantity demanded decreases and quantity supplied increases → new equilibrium

   When supply shifts left, at the original price there's excess demand (a shortage) because quantity supplied has dropped while quantity demanded at the old price hasn't changed yet. That shortage puts upward pressure on price. As price rises, quantity demanded falls (movement along the demand curve) and quantity supplied increases (movement along the new supply curve) until a new equilibrium is reached. (B) describes what happens after a supply *increase*, not decrease. (C) skips the mechanism entirely. The shortage is what drives the price adjustment. (D) is wrong because a supply shift doesn't cause demand to shift. The demand curve stays put while the market adjusts along it.

4. 4. In the market for apples, the equilibrium price is $2 per pound. If a non-binding price floor of $1.50 is imposed, what will happen?

   • A. A persistent surplus of apples will develop
   • B. A persistent shortage of apples will develop
   • C. The market will remain at the $2 equilibrium
   • D. Price will fall to $1.50 and quantity will rise
   Show answer

   Correct answer: C. The market will remain at the $2 equilibrium

   A price floor is only binding if it's set ABOVE the equilibrium price. At $1.50, the floor sits below the $2 equilibrium, so it does not constrain the market — the equilibrium price of $2 is already legal. The floor might as well not exist. (A) would be the answer if the floor were above equilibrium. (B) confuses floors with ceilings. (D) incorrectly assumes the floor forces the price down; floors can't do that. Only binding floors (above equilibrium) create surpluses.

5. 5. With demand Qd = 100 - 2P and supply Qs = 20 + 2P, what is the equilibrium quantity?

   • A. 50
   • B. 60
   • C. 80
   • D. 40
   Show answer

   Correct answer: B. 60

   Equilibrium price is 20, found by setting the two equations equal. Substitute into either curve: demand gives 100 - 2(20) = 60, and supply gives 20 + 2(20) = 60. Getting the same number from both is the check that the price was right, and it costs nothing to do.

6. 6. In the same market, Qd = 120 - 3P and Qs = 3P with equilibrium at P = $20 and Q = 60, what is total surplus?

   • A. $600
   • B. $900
   • C. $1,200
   • D. $1,800
   Show answer

   Correct answer: C. $1,200

   Supply passes through the origin, so producer surplus is the triangle below the price line and above supply: 0.5 x 60 x 20 = $600. Consumer surplus is the matching triangle above the price line, also $600. Total surplus is the sum, $1,200. Total surplus is maximised at the competitive equilibrium, which is the benchmark every intervention in this unit is measured against.

7. 7. A binding price ceiling on rent is imposed. Which outcome is MOST likely in the long run?

   • A. The shortage grows, because supply is more elastic over time
   • B. The shortage disappears once the market adjusts
   • C. Rents rise above the ceiling legally
   • D. The housing shortage shrinks as builders respond to the controlled price
   Show answer

   Correct answer: A. The shortage grows, because supply is more elastic over time

   Both curves get more elastic with time. Landlords convert or stop maintaining units and few new ones are built, so quantity supplied keeps falling; tenants have more time to seek out the cheap controlled housing, so quantity demanded keeps rising. The gap widens. This is the standard long-run result on rent control and the reason economists treat it as a shortage that deepens rather than one that clears.

8. 8. A binding price ceiling creates deadweight loss because:

   • A. The government collects revenue that leaves the market
   • B. Producers are forced to sell below cost
   • C. Mutually beneficial trades above the controlled quantity no longer happen
   • D. Consumers pay more than they otherwise would
   Show answer

   Correct answer: C. Mutually beneficial trades above the controlled quantity no longer happen

   Below the ceiling, quantity supplied falls short of the free-market quantity. Every unit between the two would have had a buyer willing to pay more than it cost to make, so each one was a gain that no longer occurs. That lost surplus is the deadweight triangle. A ceiling collects no government revenue, and consumers who do get the good pay LESS, not more, which is why the loss is about the trades that vanish rather than the price.