2.1 Demand And Supply

Question 1

Demand

Answer 1

Ability and willingness to purchase a given good or service at each given price level, Ceteris paribus

Question 2

Quantity demanded

Answer 2

Quantity of good/service demanded at a particular price

Question 3

Supply

Answer 3

Ability and willingness to produce and sell a given G&S at each given price level, Ceteris Paribus

Question 4

Quantity supplied

Answer 4

Quantity of a G&S supplied at a particular price

Question 5

Market equilibrium

Answer 5

When quantity demanded= quantity supplied at particular price, such that there are no shortages, surplus and neither consumer nor produce have incentive to deviate from price/quantity demanded

Question 6

Price mechanism

Answer 6

Process through which change in price leads to a new market equilibrium

Question 7

Shortage

Answer 7

When quantity demanded is greater than quantity supplied

Question 8

Surplus

Answer 8

When quantity supplied is greater than quantity demanded

Question 9

Allocative efficiency

Answer 9

When combination of G&S represents what society desires most

Question 10

Productive efficiency

Answer 10

When lowest cost/resources used to produce G&S

Question 11

Social welfare

Answer 11

Well-being of consumers and produces, measured by sum of consumer and producer surplus

Question 12

Consumer surplus

Answer 12

Difference between maximum price consumers were willing to pay and the actual paid price, thus area above price level under demand curve

Question 13

Producer surplus

Answer 13

Difference between min price that producers are willing to sell at and the actual sold prices, thus area above supply curve below the price level