H1 Price Mechanism (Demand and Supply)

What is the main function of the price mechanism in a free-market model?

• Determine market equilibrium

• Control government intervention

• Allocate resources based on demand and supply

• Regulate market competition

What does the law of demand state?

• Direct relationship between price and demand

• Direct relationship between price and quantity demanded

• Inverse relationship between price and demand

• Inverse relationship between price and quantity demanded

What is the law of diminishing marginal utility?

• As more units of a good are consumed, the additional utility decreases

• Consumers aim to maximize utility by consuming more

• Total utility increases with each additional unit consumed

• Consumers are willing to pay any price for satisfaction

What does the demand curve illustrate?

• Relationship between supply and demand

• Impact of government policies on demand

• Relationship between price and quantity demanded

• Effect of technology on demand

What is individual demand?

• Demand of all consumers in the market

• Demand determined by market equilibrium

• Demand of a single consumer for a good or service

• Demand influenced by government policies

Which of the following is/are non-price determinant(s) of demand?

• Taste and preference of consumers

• Proportion of income

• Government regulations

• Income of households

What is the law of supply?

• Direct relationship between price and quantity supplied

• Inverse relationship between price and quantity supplied

• Supply is constant regardless of price

• Supply is determined by consumers

What does the supply curve illustrate?

• Impact of technology on supply

• Effect of government subsidies on supply

• Relationship between price and quantity supplied

• Relationship between demand and supply

Which of the following is/are non-price determinant(s) of supply?

• Size of the industry

• Prices of substitutes and complements

• Cost of production

• Government taxes

What happens to the equilibrium price when demand rises?

• Decreases

• Fluctuates randomly

• Remains constant

• Increases