Economics B 1.3.3

What is the market equilibrium point in the context of supply and demand?

• The point where the supply curve intersects the demand curve.

• The point where the price of the good is highest.

• The point where the quantity supplied is zero.

• The point where the demand curve intersects the price axis.

What happens to the supply curve when there is a drought?

• It shifts inwards.

• It shifts outwards.

• It remains unchanged.

• It intersects the demand curve at a higher point.

What is the result of a price cap on energy prices according to the excess demand section?

• The quantity supplied at the price cap is greater than the quantity demanded.

• The quantity demanded at the price cap is greater than the quantity supplied.

• The price cap has no effect on the quantity supplied or demanded.

• The price cap ensures that the market equilibrium is maintained.

What would likely happen if the price for a good was lower than the price consumers were willing to pay?

• The quantity supplied would decrease.

• The price would increase back to equilibrium.

• There would be an excess of supply.

• The demand curve would shift inwards.

Explain, with reference to supply and demand curves, how a good that is oversupplied will decrease in price.

• The price will decrease because the quantity demanded at the current price is less than the quantity supplied, creating a surplus that pressures sellers to lower prices to attract buyers.

• The price will increase because the quantity demanded at the current price is more than the quantity supplied, creating a shortage that pressures sellers to raise prices.

• The price will remain the same because the quantity demanded equals the quantity supplied, which means there is no pressure to change prices.

• The price will decrease because the quantity demanded at the current price is more than the quantity supplied, creating a surplus that pressures buyers to offer higher prices.

What is meant by the term 'ceteris paribus' and why is this important in economics?

• It means "all other things being equal," and it is important because it allows economists to isolate the effects of one variable by holding other factors constant in their models.

• It means "changing all variables," and it is important because it allows economists to understand the dynamic nature of markets.

• It means "according to the market," and it is important because it helps economists predict how markets will react to changes in supply and demand.

• It means "with all due respect," and it is important because it signifies the respect economists have for the complexity of market systems.

How does an increase in consumer income affect the demand curve for a normal good?

• It shifts the demand curve inwards.

• It shifts the demand curve outwards.

• It has no effect on the demand curve.

• It makes the demand curve more elastic.

What effect does the introduction of a subsidy for producers have on the supply curve?

• It shifts the supply curve inwards.

• It shifts the supply curve outwards.

• It has no effect on the supply curve.

• It makes the supply curve more inelastic.

What is the likely outcome in the market if the government sets a price floor above the equilibrium price?

• A surplus of the good.

• A shortage of the good.

• No effect on the market equilibrium.

• A decrease in consumer demand.