Understanding Markets

A market is a place where:

• goods and services are bought and sold

• people gather to socialize

• animals are kept

• books are read

What happens in a voluntary exchange?

Fill in the blank: Supply and demand are two fundamental economic concepts that govern the behavior of buyers and sellers in a _______.

• market

• classroom

• laboratory

• workshop

What is the definition of demand in economics?

• The desire to own something and the ability to pay for it

• The amount of a good or service that producers are willing to sell

• The cost of a good or service

• The supply of a good or service

What happens to the quantity demanded when the price of a good or service increases?

• It increases

• It decreases

• It remains the same

• It doubles

Fill in the blank: As the price of a good or service decreases, the quantity demanded _________.

• increases

• decreases

• remains the same

• is unaffected

What does the demand curve represent?

• The relationship between price and quantity demanded

• The relationship between supply and demand

• The equilibrium price in a market

• The total revenue generated by sales

The demand curve illustrates the relationship between the price of a product or service and the _______ demanded by consumers in a particular market. (Fill in the blank)

• quantity

• price

• quality

• supply

Which of the following statements is true about the demand curve?

• A) It shows the relationship between price and supply.

• B) It shows the relationship between price and quantity demanded.

• C) It shows the relationship between supply and demand.

• D) It shows the relationship between quantity supplied and quantity demanded.

A Ceteris paribus assumption is a concept used in economics to isolate the effect of one variable by holding other relevant factors constant. What does this assumption imply?

• All other factors are considered

• All other factors are ignored

• All other factors are held constant

• All other factors are changed