how markets work

Question 1

consumers act

Answer 1

consumers act rationally and do this by maximising their utility

Question 2

how do producers act rationally

Answer 2

producers are assumed to act rationally by selling goods and services to maximise profits

Question 3

governments act rationally by

Answer 3

governments act rationally by placing interests of people they serve first in order to maximise their welfare

Question 4

demand definition

Answer 4

demand is the amount of good or service that a consumer is willing and able to purchase at a given price in a given time period

Question 5

in demand curve, if price is the only factor that changes, then

Answer 5

if price is the only factor that changes, there will be a change shown by movement along the demand curve

Question 6

relationship between Qd and Price

Answer 6

price and Qd has an inverse relationship
when price rises, Qd falls
when Qd rises, price falls
so demand curve is always sloping downwards

Question 7

increase in advertisement equals to what

Answer 7

if a firm increases advertisement, there will be an increase in demand, so it will shift outwards

Question 8

supply definition

Answer 8

supply is the amount of good or service that a producer is willing and able to supply at a given price in a given time period

Question 9

supply curve slopes up or downwards

Answer 9

supply curve slops upwards