Basic concepts of supply and demand

What does the law of demand state?

• As prices decrease, quantity demanded increases.

• As prices increase, quantity demanded decreases.

• Prices and quantity demanded are unrelated.

What is the law of supply?

• As prices decrease, quantity supplied decreases.

• As prices increase, quantity supplied decreases.

• As prices increase, quantity supplied increases.

What happens when there is excess demand in a market?

• Prices rise.

• Prices fall.

• Prices remain the same.

How does a surplus affect prices?

• Prices rise.

• Prices fall

• Prices remain the same.

What is equilibrium in the context of supply and demand?

• When supply exceeds demand.

• When demand exceeds supply.

• When supply equals demand.

Define elasticity of demand.

• The measure of how much quantity demanded responds to a change in price.

• The measure of how much quantity supplied responds to a change in price.

• The measure of how much consumers want a product.

Which factor does NOT influence demand?

• Price of the product.

• Consumer preferences.

• Production costs.

What is a subsidy in economics?

• A payment made by the government to producers.

• A tax imposed on consumers.

• The total revenue from selling a product.