Understanding Supply and Demand

What does supply represent in economic terms?

• The total production capacity of a market

• The amount of goods sellers have in stock

• The relationship between the price of a good and how much sellers are willing to bring to the market

• The desire of sellers to produce more goods

What does demand represent in economic terms?

• The quantity of a good that consumers purchase at a high price

• The relationship between the price of a good and how much of that good people are willing to buy

• The constant need for a product regardless of price

• The total amount of a good that consumers want

What happens to the demand for a product if its price significantly increases?

• It remains unchanged

• It fluctuates unpredictably

• It decreases

• It increases

Who was the first to put the concept of supply and demand in print?

• James Steuart

• John Locke

• John Stuart Mill

• Adam Smith

What is the equilibrium price?

• The highest price a consumer is willing to pay

• The price at which the quantity demanded by consumers is equal to the quantity supplied by producers

• The price set by the government for a product

• The average cost of producing a good

What did Alfred Marshall contribute to the study of supply and demand?

• The concept of natural price

• The first printed mention of supply and demand

• Supply and demand curves

• The idea of market equilibrium

What can cause the supply and demand curves to change?

• Government regulations only

• Changes in consumer preferences only

• Evolving relationships between the price and quantity of a good

• Fixed production costs

What was a consequence of the US federal government's price controls on natural gas in the 1960s and '70s?

• Increased profitability for gas producers

• Natural gas shortages, especially in the Midwest

• A stable equilibrium price for natural gas

• Decreased consumer interest in natural gas

According to Friedrich Hayek, what is not necessary for someone to know in a free market?

• How to produce a good

• Why the price of something changed

• The law of supply and demand

• How to market a product

What did Adam Smith say regulates the market price of every particular commodity?

• The cost of production

• The proportion between the quantity brought to the market and the demand

• The government's intervention

• The number of competitors in the market