Chapter 4/5 - Supply & Demand

Question 1

What are markets?

Answer 1

anyplace where buyers and sellers meet to exchange goods and services

Question 2

What is demand?

Answer 2

combination of quantities that someone would be willing and able to buy over a range of possible prices at a given moment (a consumers willingness and ability to consume a given good).

Question 3

Holding that all factors remain constant what is true about demand?

Answer 3

an increase in the price of a good or service will generally decrease quantity demanded.

Question 4

What is the Law of Demand?

Answer 4

More will be demanded at lower prices and less at higher prices.

Question 5

What are the 5 factors that influence the demand of goods?

Answer 5

1. Tastes and preferences of the consumer (fashions in clothes)
2. Income of people.
3. Change in prices of related products
4. Advertisement expenditures: ads greatly influence consumers.
5. The number of consumers in the market: the greater the number the higher the demand.

Question 6

What is supply?

Answer 6

the amount of a product a producer or seller would be willing to offer for sale at all possible price in a market at a given point of time. (the quantity or amount needed or available).

Question 7

What is the law of supply?

Answer 7

the principal that more will be offered for sale at higher prices than at lower prices.

Question 8

What are the 5 factors that influence the supply of goods?

Answer 8

1. Price (if price of product increases, supply increases)
2. Cost of production : higher = lower supply
3. Natural conditions: drought = lower supply
4. Technology: better tech = higher supply
5. Government policies: higher taxes = lower supply

Question 9

What is the key to marketing?

Answer 9

voluntary exchange

Question 10

What is elasticity?

Answer 10

the ability to change or adapt

Question 11

What is the elasticity of supply?

Answer 11

the responsiveness of quantity supplied to a change in price.

Question 12

What are the two major types of supply elasticity?

Answer 12

1. Elastic supply: a slight change in price will lead to a drastic change in demand/quantity
   - wants/luxuries- caribbean cruise
2. Inelastic supply: a change in price will have little to no effect on demand quantity.
   - needs/necessities

Question 13

What is supply and demand?

Answer 13

the price of a good or service is determined by its supply and demand. Increase in demand = increase in price. Increase in supply = decrease in price. in the long run, the market reaches an equilibrium price where supply = demands.

Question 14

What is incentive?

Answer 14

something that motivates.

Question 15

What is subsidy?

Answer 15

a government payment to encourage or protect a certain economic activity. (food, gas, milk industries, etc.) Best interest of the public.

Question 16

What are fixed costs?

Answer 16

costs of production that do not change when output changes.

Question 17

What are variable costs?

Answer 17

production costs that vary as output changes; sometimes called (overhead)

Question 18

What is overhead?

Answer 18

a broad category of variable costs that include interests, rent, taxes, and executive salaries.

Question 19

What is total cost?

Answer 19

the sum of variable and fixed costs - all cases

Question 20

What is marginal cost?

Answer 20

extra cost of producing one additional unit of production

Question 21

What is average revenue?

Answer 21

average price that every unit of output sells for

Question 22

What is total revenue?

Answer 22

the total amount earned from sale of all products

Question 23

What is marginal revenue?

Answer 23

Extra revenue from the sale of one additional unit of output.

Question 24

What is the break even point?

Answer 24

production level where total cost = total revenue