Understanding Supply and Demand

What is the law of demand?

• The law of demand suggests that higher prices lead to higher demand.

• The law of demand indicates that quantity supplied increases as price decreases.

• The law of demand indicates that price and quantity demanded are inversely related.

• The law of demand states that price and quantity demanded are directly related.

How does an increase in price affect quantity demanded?

• An increase in price causes quantity demanded to remain constant.

• An increase in price has no effect on quantity demanded.

• An increase in price leads to an increase in quantity demanded.

• An increase in price leads to a decrease in quantity demanded.

Define supply in economic terms.

• Supply is the quantity of goods that consumers are willing to buy at various prices.

• Supply refers to the total demand for a product in the market.

• Supply is the amount of money consumers are willing to spend on goods.

• Supply is the total quantity of a good or service that producers are willing to sell at different prices.

What is the relationship between price and quantity supplied?

• There is a direct relationship; as price increases, quantity supplied increases.

• As price decreases, quantity supplied decreases.

• There is no relationship between price and quantity supplied.

• As price increases, quantity supplied remains constant.

Explain what a market equilibrium is.

• Market equilibrium is the point where supply equals demand.

• Market equilibrium is the point where demand exceeds supply.

• Market equilibrium is when supply is greater than demand.

• Market equilibrium occurs when prices are set by government regulations.

What happens to equilibrium price when demand increases?

• Equilibrium price fluctuates randomly.

• Equilibrium price remains the same.

• Equilibrium price increases.

• Equilibrium price decreases.

What is a shift in the demand curve?

• A shift in the demand curve refers to a change in supply.

• A shift in the demand curve is a change in demand at all price levels.

• A shift in the demand curve is an increase in price only.

• A shift in the demand curve indicates a decrease in quantity demanded.

How do substitutes affect demand?

• Substitutes have no effect on demand regardless of price changes.

• Substitutes decrease demand for alternatives when their prices rise.

• Substitutes increase demand for alternatives when their prices rise.

• Substitutes only affect supply, not demand.

What factors can cause a shift in the supply curve?

• Factors that can cause a shift in the supply curve include changes in production costs, technology, number of suppliers, government policies, and future price expectations.

• Seasonal weather patterns

• Changes in consumer preferences

• Global trade agreements

Describe the concept of price elasticity of demand.

• Price elasticity of demand measures consumer income levels.

• Price elasticity of demand is a measure of how much the quantity demanded of a good changes in response to a change in its price.

• Price elasticity of demand is the total revenue generated by a product.

• Price elasticity of demand refers to the supply changes in response to demand.