(PAPER 1) 1.2.3 markets

Question 1

equilibrium price definition

Answer 1

the price where supply and demand are equal

Question 2

excess supply definition

Answer 2

position where supply is greater than demand at a given price and there are unsold goods in the market

Question 3

excess demand definition

Answer 3

position where demand is greater than supply at a given price and there are shortages in the market

Question 4

increase in demand=

decrease in demand=

Answer 4

increase in quantity decrease in price

decrease in quantity increase in supply

Question 5

increase in supply=

decrease in supply=

Answer 5

increase in quantity decrease in price

decrease in quantity increase in price

Question 6

increase in supply and demand=

Answer 6

increase in quantity
(when BOTH demand and supply increase or decrease price stays the same because they have increased or decreased by the same amount)

Question 7

decrease in supply and demand=

Answer 7

decrease in quantity
(when BOTH demand and supply increase or decrease price stays the same because they have increased or decreased by the same amount)

Question 8

things that affect supply:

Answer 8

• changes in cost of production
• indirect taxes
• introduction of new technology
• external stock
• government subsidies

Question 9

things that affect demand:

Answer 9

• changes in prices of substitutes and complimentary goods
• demographics
• advertising and branding
• changes in consumer income
• fashion tastes and preferences
• seasonality

Question 10

the graph

Answer 10

supply = /
demand = \
equilibrium price is the point where they meet
inc in supply= / > / P1&Q1 > P2&Q2
dec in supply= / < / 

price
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I\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Quantity