Economics: Supply and Demand

What is the law of demand?

• The law of demand states that the price of a good or service has no impact on consumer demand.

• The law of demand suggests that as the price of a good or service increases, the quantity demanded also increases.

• The law of demand indicates that consumer preferences do not influence the quantity demanded of a good or service.

• The law of demand is an economic principle that describes the inverse relationship between the price of a good or service and the quantity demanded by consumers.

Explain the concept of price elasticity of demand.

• Price elasticity of demand is a concept that measures the responsiveness of the quantity demanded of a good to a change in its price.

• Price elasticity of demand measures the supply of a good in response to a change in its price.

• Price elasticity of demand is a concept related to the income level of consumers.

• Price elasticity of demand is only applicable to luxury goods.

What factors can cause a shift in the supply curve?

• Weather conditions

• Changes in production costs, technology, government policies, taxes, subsidies, and the number of suppliers.

• Global economic trends

• Changes in consumer preferences

Differentiate between a change in quantity supplied and a change in supply.

• A change in quantity supplied is a shift of the entire supply curve due to factors other than price. A change in supply is a movement along the supply curve due to a change in price.

• A change in quantity supplied is a movement along the supply curve due to factors other than price. A change in supply is a change in quantity demanded.

• A change in quantity supplied is a shift of the entire supply curve due to factors other than price. A change in supply is a change in price resulting in a different quantity supplied.

• A change in quantity supplied is a movement along the supply curve due to a change in price, resulting in a different quantity supplied. A change in supply is a shift of the entire supply curve due to factors other than price.

How does a surplus in the market affect prices?

• Surplus in the market leads to lower prices.

• Surplus in the market has no impact on prices.

• Surplus in the market leads to unstable prices.

• Surplus in the market leads to higher prices.

Define equilibrium price and quantity in the context of supply and demand.

• Equilibrium quantity is the quantity of a good or service bought and sold at a price higher than the equilibrium price.

• Equilibrium price is the price at which the quantity demanded exceeds the quantity supplied.

• Equilibrium price is the price at which the quantity demanded by consumers equals the quantity supplied by producers. Equilibrium quantity is the quantity of a good or service bought and sold at the equilibrium price.

• Equilibrium price is determined solely by consumer preferences.

Discuss the concept of a price ceiling and its impact on the market.

• A price ceiling is a voluntary agreement among firms to limit prices in a market.

• A price ceiling is a government-imposed limit on the maximum price that can be charged for a product or service, leading to various market impacts.

• A price ceiling results in an increase in supply due to higher prices.

• A price ceiling leads to a decrease in demand for goods and services.

What is the difference between a normal good and an inferior good?

• Normal goods have a decrease in demand as income rises

• Inferior goods have an increase in demand as income rises

• Normal goods are of lower quality compared to inferior goods

• Normal goods have an increase in demand as income rises, while inferior goods have a decrease in demand as income rises.

Explain the concept of a perfectly competitive market.

• A perfectly competitive market is a market structure where consumers have no influence on prices.

• A perfectly competitive market is a market structure where competition is at its greatest possible level.

• A perfectly competitive market is a market structure where only one company dominates.

• A perfectly competitive market is a market structure where prices are fixed by the government.

How does the concept of elasticity apply to both supply and demand?

• Elasticity applies to both supply and demand by measuring the responsiveness of quantity supplied or demanded to changes in price.

• Elasticity only applies to supply, not demand

• Elasticity measures the quantity supplied, not responsiveness to price changes

• Elasticity is irrelevant in analyzing supply and demand