Demand and Supply

Question 1

Competitive Market

Answer 1

Freely competitive markets encourage sellers to meet consumers’ needs and wants through the quality and price of their wide variety of goods. It is the opposite of market power

Question 2

Demand

Answer 2

The quantity of a good or service that consumers are willing and able to purchase at various prices during a specific time period, ceteris paribus.

Question 3

Law of Demand

Answer 3

The principle that as the price of a product decreases, the quantity demanded of it will increase, ceteris paribus.

Question 4

Non price determinants of demand (4)

Answer 4

Factors affecting demand other than price; they cause shift.
1. Income
2. Price of related goods
3. Tastes and preferences
4. Future price expectations

Question 5

Normal good

Answer 5

Goods whose demand increases as people’s incomes increase.

Question 6

Inferior good

Answer 6

Goods whose demand decreases as people’s incomes increase.

Question 7

Substitute good

Answer 7

Goods that have similar characteristics and uses to consumers.

Question 8

Complementary good

Answer 8

Goods that are consumed together.

Question 9

What happens when the price of Coca-cola shifts to the demand curve of Pepsi

Answer 9

1. Identify subsitute
2. Demand shifts inward

Question 10

What happens when there is a decrease in price of xbox consols to the quantity of xbox video games

Answer 10

1. identify complementary goods
2. Demand curve shifts oitward

Question 11

Tastes and preferences

Answer 11

when goods become more or less popular because of
fashion, current events or promotion campaigns,
demand is affected and the demand curve may shift to the right or to the left.

Question 12

future price expectations

Answer 12

If people expect prices of goods and services to increase in the near future, they may decide to purchase more of the good now, in the hope of avoiding higher prices later.
Produces would want tp increase price to increase profits

Question 13

Expectations about economys future

Answer 13

Expect to do well
consumers: more income –> increased spending
producers: increase production to earn higher profits

Question 14

Demographic changes

Answer 14

Changes in size, structure, and distribution. Significant on the numer and type of goods demanded

Question 15

producers

Answer 15

the people, companies, or countries that make, grow, or supply goods, services or resources in a market.

Question 16

Supply

Answer 16

the quantity of a good or service that producers are willing and able to offer at various prices during a specific time period,

Question 17

Law of diminisging marginal returns

Answer 17

The principle that adding more of one factor of production (input), while holding at least one other factor of production constant, will at some point yield lower marginal returns (output/product).

Question 18

Marginal return

Answer 18

The additional returns (output/product) gained from adding an additional factor of production (input).

Question 19

Marginal cost

Answer 19

The cost of producing one more unit of a good.

Question 20

What happens in the short run for marginal costs

Answer 20

Marginal costs for a firm and for an industry increase as output increases and marginal returns decrease.

Question 21

When do total returns decline

Answer 21

When the marginal returns are NEGATIVE

Question 22

Non price determinants of supply

Answer 22

1. costs of production
2. technological changes
3. future price expecattions
4. number of firms in the market
5. Government intervention

Question 23

Increase in a cost of factor of production shifts the supply curve …

Answer 23

left

Question 24

Technological improvemnet

Answer 24

increase the supply of a good or service by increasing productivity – the quantity of output per unit of input.

Question 25

Future price expecations (supply)

Answer 25

Hoadering some part of their stock from the market in order to sell it higher in the future if they expect their prices to increase

Question 26

Expecations about the economys future (supply)

Answer 26

If economy does well, people have more money and there will be more demand. More will be supplied to meet it

Question 27

Number of firms in the market (supply)

Answer 27

Market supply shifts outward when all the number of firms that offer the same good increases

Question 28

Joint supply

Answer 28

When two or more goods are derived from the same product so that it is not possible to produce more of one without producing more of the other.

Question 29

Competitive Supply

Answer 29

When the production of two goods use similar resources and processes; if a supplier produces more of one good, it means producing less of the other.

Question 30

Indirect tax

Answer 30

SHIFTS INWARD
A tax imposed on a good or service; it is typically paid to the government by the producer or supplier and is considered a cost of production.

Question 31

Subsidy

Answer 31

SHIFTS OUTWARD
An amount of money granted by the government to a firm or industry; it reduces the firm’s costs of production, increasing the supply of the good or service.

Question 32

Non price determinants of demand supply recap

Answer 32

Question 33

An increase in demand graph explained

Answer 33

Question 34

An increase in supply to new equilibrium explained

Answer 34