Supply and Demand Practice Questions

8 representative multiple-choice questions on supply and demand for AP Microeconomics, drawn from our 22-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.

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. At a price above the equilibrium, a competitive market will experience:

   • A. A shortage, because quantity demanded exceeds quantity supplied
   • B. A surplus, because quantity supplied exceeds quantity demanded
   • C. No change, because the market is always in equilibrium
   • D. An increase in demand to match the higher price
   Show answer

   Correct answer: B. A surplus, because quantity supplied exceeds quantity demanded

   When price is above equilibrium, sellers produce more than buyers want. Quantity supplied exceeds quantity demanded, and the unsold inventory is a surplus. That surplus puts downward pressure on price. (A) has it backwards, because shortages happen *below* equilibrium. (C) is wrong; markets tend toward equilibrium but they aren't always there, especially when price controls or shocks intervene. (D) gets the Law of Demand wrong; higher prices don't cause consumers to buy *more*.

3. 3. 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.

4. 4. A city imposes a price ceiling of $800/month on apartments in a market where the equilibrium rent is $1,200/month. At $800, quantity demanded is 15,000 units and quantity supplied is 9,000 units. Compared to the free-market equilibrium, the price ceiling creates:

   • A. A surplus of 6,000 units and no deadweight loss
   • B. A shortage of 6,000 units and deadweight loss from transactions that no longer occur
   • C. A shortage of 6,000 units but no deadweight loss because consumers pay less
   • D. No shortage because landlords will simply build more apartments
   Show answer

   Correct answer: B. A shortage of 6,000 units and deadweight loss from transactions that no longer occur

   At $800, quantity demanded (15,000) exceeds quantity supplied (9,000), producing a 6,000-unit shortage. Deadweight loss exists because apartments between the 9,000th unit and the equilibrium quantity would have been rented at prices both landlord and tenant found acceptable, but the ceiling blocks those transactions. (A) has the wrong type of imbalance; ceilings below equilibrium create shortages, not surpluses. (C) ignores that the blocked transactions represent real welfare losses even though remaining renters pay less. (D) gets the incentive backwards, because artificially low rent *discourages* new construction.

5. 5. 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.

6. 6. Consumers expect that the price of a popular gaming console will drop by 30% next month due to the release of a newer model. What is the most likely immediate effect in today's market for the current console?

   • A. Supply shifts left because sellers anticipate lower future prices
   • B. Demand shifts left today because consumers postpone purchases, reducing today's price and quantity
   • C. Demand shifts right today because consumers want to buy before the price drop
   • D. No effect until the actual price change occurs next month
   Show answer

   Correct answer: B. Demand shifts left today because consumers postpone purchases, reducing today's price and quantity

   When consumers expect a future price drop, they hold off on buying. Why pay full price today when it'll be 30% cheaper in four weeks? That reduces current demand, shifting the demand curve left and lowering both today's equilibrium price and quantity. (A) focuses on the wrong side; the primary effect here is on buyers delaying purchases. (C) gets the incentive backwards: expecting a *lower* future price means waiting, not rushing to buy now. (D) is wrong because expectations are a demand shifter that operates immediately; the anticipation itself changes current buying behavior before the actual event happens.

7. 7. Two goods are complements in consumption. If the price of Good A rises, what happens in the market for Good B?

   • A. Demand for Good B shifts right, raising Good B's equilibrium price and quantity
   • B. Demand for Good B shifts left, lowering Good B's equilibrium price and quantity
   • C. Supply of Good B shifts right, lowering Good B's equilibrium price and raising quantity
   • D. There is no effect on Good B because only Good A's own price changed
   Show answer

   Correct answer: B. Demand for Good B shifts left, lowering Good B's equilibrium price and quantity

   Complements are goods used together (e.g., printers and ink). When the price of Good A rises, quantity demanded of A falls — and because consumers buy A and B together, their willingness to buy B falls too. Demand for B shifts left, lowering B's price and quantity. (A) is the correct pattern for substitutes, not complements. (C) incorrectly moves the supply curve — the change is on the demand side because it's about how consumers pair goods. (D) ignores the definition of complements entirely.

8. 8. Which of the following would cause both the equilibrium price and quantity in the market for airplane tickets to fall?

   • A. A decrease in fuel prices
   • B. A rise in consumer income (air travel is a normal good)
   • C. A leftward shift in demand because of a new pandemic
   • D. An increase in the number of airlines serving the market
   Show answer

   Correct answer: C. A leftward shift in demand because of a new pandemic

   For both price AND quantity to fall together, demand must shift left. A pandemic reduces travel demand, pushing the demand curve left and dragging both price and quantity down. (A) is a supply shift right: price down, quantity UP. (B) is a demand shift right: both up. (D) is a supply shift right: price down, quantity up. Only a leftward demand shift moves price and quantity in the same downward direction.