Demand and Supply

Question 2

A change in the price of the good results in what?

Answer 2

A movement ALONG the supply curve

Buyers and sellers do not have to meet face to face.

Question 3

A change in non price factors results in what?

Answer 3

A movement OF the supply curve

Price is a crucial concept in determining market dynamics.

Question 4

An increase in income results in what?

Answer 4

An increase in demand.

This reflects subjective preferences and trade-offs.

Question 5

What does ‘Ceteris Paribus’ mean?

Answer 5

All OTHER things remain constant

It is a fundamental assumption in economic analysis.

Question 6

Define Demand

Answer 6

The willingness and ability to pay a particular price to obtain a particular good or service over a particular period of time

Demand is influenced by various factors including consumer preferences and income.

Question 7

What happens to demand as the craze for fashionable items increases?

Answer 7

The demand for such goods and services will increase

Trends and fads can significantly affect consumer behavior.

Question 8

What is the relationship between price and quantity demanded?

Answer 8

There is an inverse relationship between price and quantity demanded

As price increases, the quantity demanded generally decreases.

Question 9

If consumers expect that the price of a certain good or service will increase in the future. What will occur?

Answer 9

The demand for this product will rise in the present period.

Question 10

What is a substitute good?

Answer 10

Substitute goods are those that goods that in direct competition with each other.

Question 11

Define the term ‘supply.’

Question 12

What is the market supply curve?

Question 13

When the price of a good or service increases, what happens?

Answer 13

The quantity demanded tends to decrease.

Question 14

Law of Demand

Answer 14

As price increases, quantity demanded decreases.
(Inverse relationship)

Question 15

Law of Supply

Answer 15

As price increases, quantity supplied increases.
(Direct relationship)

Question 16

There is neither a surplus nor a shortage of goods at what price?

Answer 16

Equilibrium price

Question 17

When does a surplus occur?

Answer 17

Surplus happens when the price is too high, and suppliers produce more than consumers want to buy.

Question 18

When does a shortage occur?

Answer 18

Shortage occurs when the price is too low, and consumers want to buy more than suppliers are willing to sell.

Question 19

What is equilibrium?

Answer 19

Equilibrium is when the amount of goods consumers want to buy equals the amount producers want to sell at a particular price.

Question 20

If demand increases, what happens to the demand curve?

Answer 20

The demand curve shifts rightward

Question 21

If demand decreases, what happens to the demand curve?

Answer 21

The demand curve shifts leftward

Question 22

If supply increases, what happens to the supply curve?

Answer 22

The supply curve shifts rightward

Question 23

If supply decreases, what happens to the supply curve?

Answer 23

The supply curve shifts leftward.

Question 24

Increase in demand + Increase in supply

Answer 24

Price may remain unchanged, but quantity will
increase.

Question 25

Increase in demand + Decrease in supply

Answer 25

Price will increase, and the effect on quantity will depend on the magnitude of the shifts.

Question 26

Decrease in demand + Increase in supply

Answer 26

Price will decrease, and the effect on quantity will depend on the magnitude of the shifts.

Question 27

Decrease in demand + Decrease in supply

Answer 27

Price may remain unchanged, but quantity will decrease.

Question 28

Price Ceiling

Answer 28

A price ceiling is a government-imposed limit on how high the price of a good or service can be. It is set below the market equilibrium price to make goods more affordable for consumers.

Question 29

Purpose for a Price Ceiling?

Answer 29

Purpose: To protect consumers from high prices, particularly for essential goods and services.

Question 30

What two things can Price Ceilings lead to?

Answer 30

Can lead to shortages because the quantity demanded exceeds the quantity supplied at the price ceiling. Producers may be less willing to supply goods at the lower price, leading to inefficiency.

Question 31

Price Floor

Answer 31

A price floor is a government-imposed minimum price that can be charged for a good or service. It is set above the market equilibrium price to ensure producers receive a fair price.

Question 32

Purpose of the Price Floor

Answer 32

To ensure producers or workers earn a minimum income, or to support the price of certain goods.

Question 33

What two things can Price Floors lead to?

Answer 33

Can lead to surpluses because the quantity supplied exceeds the quantity demanded at the price floor.

Question 34

Prevents prices from going above a certain level

Answer 34

Price Ceiling

Question 35

Total revenue (TR) is calculated by?

Answer 35

P x Q

Question 35

Prevent prices from going below a certain level

Answer 35

Price Floor

Question 36

Elastic Demand

Answer 36

PED more than 1 BUT PED less than infinity

Question 37

Inelastic demand

Answer 37

PED more than 0 BUT PED less than 1

Question 38

Unitary Elastic Demand

Answer 38

PED = 1

Question 39

PED > 1 means demand is ?

Answer 39

ELASTIC

Question 40

If price and quantity demanded change proportionately

Answer 40

PED = 1 → unitary elasticity

Question 41

With many substitutes, consumers easily switch resulting in what?

Answer 41

Elastic Demand

Question 42

Price Elasticity of Supply

Answer 42

Degree of responsiveness of QS to a change in the price of the good

Question 43

The higher the coefficient =

Answer 43

The more responsive supply is to changes in price

Question 43

Elastic Supply

Answer 43

PES more than 1 BUT PES less than infinity

Question 44

Inelastic Supply

Answer 44

PES more than 0 BUT PES less than 1

Question 45

In the long run, supply is more ________ than in the short run.

Answer 45

ELASTIC

Question 46

Secondary Sector

Answer 46

The secondary sector is also known as the industrial sector, and it involves the processing and manufacturing of raw materials into finished products.

Question 47

Primary Sector

Answer 47

The primary sector is the foundational sector of an economy, primarily focused on natural resource extraction and agriculture.

Question 48

Tertiary Sector

Answer 48

The tertiary sector is the service sector, which deals with providing various services rather than producing physical goods.

Question 49

Consumer sovereignty

Answer 49

Consumers, through their choices and spending, determine what goods and services are produced in a market economy.

Question 50

What are the two characteristics of public goods?

Answer 50

non excludable and non rivalrous

Question 51

Name two factors that affect price elasticity of supply (PES).

Answer 51

Availability of Resources and Time?

Question 52

What does a price ceiling lead to in a market?

Answer 52

Shortage

Question 53

In a command economy, who controls the allocation of resources?

Answer 53

Government

Question 54

In a mixed economy, who is responsible for resource allocation?

Answer 54

Government and the consumers

Question 55

Public Goods

Answer 55

Public goods are goods and services provided by the government that are non-excludable and non-rivalrous.

Question 56

What are private goods?

Answer 56

Private goods are owned by individuals or companies, and only the person who pays can use them.

Question 56

What is Supply?

Answer 56

Supply is the quantity of goods and services that producers are willing and able to offer for sale at different prices over a period of time.

Question 57

In the short run, Supply is often ______?

Answer 57

Inelastic

Question 58

In a monopoly, how many firms control the market?

Answer 58

One firm