E4P - L3 - Lesson 1

What is discussed under "Predicting Market Changes"?

• Shortage and Surplus

• Shifting demand and supply

• Market Organization

• Supply equals Demand

Answer explanation

'Predicting Market Changes' focuses on how shifts in demand and supply affect market dynamics. Understanding these shifts helps anticipate price changes and market behavior, making 'Shifting demand and supply' the correct choice.

What happens to the quantity supplied as the price rises?

• It falls

• It stays the same

• It rises

• It disappears

Answer explanation

As the price rises, suppliers are incentivized to produce more goods to maximize profits, leading to an increase in the quantity supplied. Therefore, the correct answer is that it rises.

What does Qd equal when the price stops falling?

• Qs

• Qd

• Qp

• Qr

Answer explanation

When the price stops falling, quantity demanded (Qd) equals quantity supplied (Qs) at equilibrium. Thus, Qd equals Qs, making 'Qs' the correct answer.

What does a decrease in demand cause in both equilibrium price and quantity?

• A decrease

• An increase

• No change

• A doubling

Answer explanation

A decrease in demand leads to a surplus of goods, causing sellers to lower prices. This results in both equilibrium price and quantity decreasing, making 'A decrease' the correct answer.

What does the market supply curve summarize?

• Current selling plans

• Future selling plans

• Past selling plans

• Imaginary selling plans

Answer explanation

The market supply curve summarizes current selling plans by showing the quantity of goods that producers are willing to sell at various prices. It reflects real-time decisions rather than future or past plans.

Which of the following is NOT a supply shifter?

• Change in price

• Productivity and technology

• Expectations about the future

• The type and number of sellers

Answer explanation

A change in price affects the quantity supplied but does not shift the supply curve itself. The other options—productivity, future expectations, and the number of sellers—are factors that can shift the supply curve.

What is NOT considered a supply shifter?

• Change in price

• Other opportunities

• Input prices

• Productivity

Answer explanation

A change in price affects the quantity supplied but does not shift the supply curve itself. Supply shifters include factors like input prices, productivity, and other opportunities that can change supply.

What happens to the price when there is a surplus due to increased supply?

• The price goes up.

• The price stays the same.

• The price goes down.

• The price disappears.

Answer explanation

When there is a surplus due to increased supply, the market has more goods than consumers want to buy. This excess supply typically leads to a decrease in price as sellers lower prices to attract buyers.

What is the result of an increase in supply according to the summary?

• Increase in price and decrease in quantity.

• Decrease in price and increase in quantity.

• Increase in both price and quantity.

• Decrease in both price and quantity.

Answer explanation

An increase in supply typically leads to a decrease in price due to excess availability of goods, while quantity sold increases as more products are offered to consumers. Thus, the correct answer is a decrease in price and an increase in quantity.

What does an increase in supply cause the supply curve to do?

• Shift left.

• Shift right.

• Stay the same.

• Disappear.

Answer explanation

An increase in supply means more goods are available at each price level, causing the supply curve to shift right. This indicates that suppliers are willing to sell more at the same prices.