Unit 2: Understanding Markets Test

A factor other than price that affects demand:

• Determinant of supply

• Income effect

• Determinant of demand

• Diminishing marginal utility

A product used instead of another when prices rise:

• Complementary good

• Substitute good

• Related good

• Substitution effect

When a small price change causes a big change in quantity demanded:

• Inelastic demand

• Elastic demand

• Inelastic supply

• Elastic supply

Government payment to fund public services:

• Subsidy

• Regulation

• Salary

• Tax

Government payment to businesses to encourage production:

• Subsidy

• Tax

• Salary

• Regulation

Additional output from adding one more unit of input:

• Marginal product

• Total product

• Actual product

• Total cost

Costs that do not change with production level:

• Fixed costs

• Variable costs

• Total costs

• Marginal costs

According to the law of supply, when price increases, producers will:

• Supply more

• Supply less

• Lower the price

• Stop production

When quantity supplied is more than quantity demanded:

• Surplus

• Shortage

• Market failure

• Market equilibrium

When quantity demanded exceeds quantity supplied:

• Surplus

• Shortage

• Market failure

• Market equilibrium