1.1.3 Demand, Supply and Market Equilibrium

Question 1

What is demand?

Answer 1

The willingness of consumers to buy a certain product.

Question 2

What can be seen in demand curves?

Answer 2

Shift left → Decrease in Demand

Shift Right → Increase in Demand

Movement along curve → Changes in Price

Question 3

What causes a shift in the demand curve?

Answer 3

1. Advertising
2. Changes in Income
3. Price of substitute goods
4. price of complementary goods
5. demographic changes
6. changes in fashion and tatstes

Question 4

What is Supply?

Answer 4

Supply is the willingness of producers to create a product.

Question 5

What can be seen in a supply curve?

Answer 5

Shift left → Decrease in Supply

Shift Right → Increase in Supply

Movement along curve → Changes in Price

Question 6

What causes a shift in the supply curve?

Answer 6

1. Costs of factors of production
2. advancement in technology
3. subsidies
4. indirect taxes
5. natural disasters

Question 7

What is Market Equilibrium?

Answer 7

Market equilibrium can determine the equilibrium price and quantity demanded. This is the point in which demand and supply are equal.

Question 8

What happens in disequilibrium?

Answer 8

This is where there is excess demand and supply, from this point, the market forces will push the disequilibrium back to equilibrium.