Economics CBA #2

What is the law of supply and demand?

• The price of a good or service is determined by the supply and demand for it in the market.

• The law of supply and demand only applies to certain industries

• The law of supply and demand is based on government regulations

• Supply and demand have no impact on the price of goods and services

Define market equilibrium.

• A state where the supply of goods exceeds the demand for those goods, resulting in a decrease in price.

• A state where the supply of goods matches the demand for those goods, resulting in a stable price.

• A state where the demand for goods exceeds the supply of those goods, resulting in an increase in price.

• A state where the market is in chaos and unable to determine a stable price.

What are the characteristics of perfect competition?

• Medium number of buyers and sellers, similar products, partial information, moderate entry and exit, and some market power

• Huge number of buyers and sellers, unique products, no information, impossible entry and exit, and complete market power

• Large number of buyers and sellers, identical products, perfect information, ease of entry and exit, and no market power

• Small number of buyers and sellers, different products, imperfect information, difficult entry and exit, and market power

Explain the concept of monopoly in the market.

• Multiple companies share control over a particular product or service

• A single company or entity has complete control over a particular product or service

• The market is regulated by the government to prevent any single company from having control

• Monopoly refers to a situation where consumers have the power to dictate prices and production

What is an oligopoly and how does it affect the market?

• An oligopoly is a market structure with a small number of firms having insignificant market power, leading to a highly competitive market.

• An oligopoly is a market structure with a small number of firms having significant market power, affecting the market through limited competition and potential collusion.

• An oligopoly is a market structure with no firms having market power, resulting in a perfectly competitive market.

• An oligopoly is a market structure with a large number of firms having equal market power, leading to intense competition and low prices.

What happens to the price of a product when there is excess supply?

• Price decreases

• Price fluctuates

• Price remains the same

• Price increases

How does a shortage in supply affect the market price?

• Market price tends to increase

• Market price becomes unpredictable

• Market price tends to decrease

• Market price remains the same

What factors can shift the demand curve?

• Changes in producer income

• Weather conditions

• Government regulations

• Changes in consumer income, prices of related goods, consumer preferences, population demographics, and consumer expectations

What factors can shift the supply curve?

• Changes in consumer preferences

• Weather conditions

• Currency exchange rates

• Changes in production costs, technology, government policies, and expectations of future prices

Explain the concept of price elasticity of demand.

• Price elasticity of demand measures the responsiveness of quantity demanded to a change in price.

• Price elasticity of demand measures the availability of substitute products in the market.

• Price elasticity of demand measures the impact of advertising on consumer demand.

• Price elasticity of demand measures the responsiveness of quantity supplied to a change in price.