Question 1
If the market price is below equilibrium then
◦ there in excess demand.
◦ the demand curve will shift to the right.
◦ the supply curve will shift to the right.
◦ there is excess supply.
Question 2
The following diagram shows the market for a particular product.
Which of the following statements is TRUE?
◦ If both supply and demand reduce by 5 million litres per day, the equilibrium price will be £80 per litre.
◦ Equilibrium price is 30.
◦ If price is currently at £110 per litre, there is a surplus of 5 million litres per day.
◦ If supply increases by 5 million litres per day at all prices, the new equilibrium price will be £50 per litre.