Understanding Supply and Demand

What is the law of demand?

• As the price of a good decreases, the quantity demanded increases.

• Demand remains constant regardless of price changes.

• As the price of a good increases, the quantity demanded decreases.

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

How does an increase in price affect demand?

• Demand remains unchanged regardless of price changes.

• An increase in price generally leads to a decrease in demand.

• An increase in price leads to an increase in demand.

• Higher prices attract more consumers to the product.

What is the law of supply?

• The law of supply indicates that price and quantity supplied are directly related.

• The law of supply indicates that higher prices lead to lower quantity supplied.

• The law of supply suggests that supply is constant regardless of price changes.

• The law of supply states that price and quantity supplied are inversely related.

How does a decrease in production costs affect supply?

• An increase in supply.

• A decrease in supply.

• An increase in production costs.

• No change in supply.

What is market equilibrium?

• Market equilibrium is when supply exceeds demand.

• Market equilibrium is the point where supply equals demand.

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

• Market equilibrium is the point where demand exceeds supply.

What happens when there is a surplus in the market?

• Sellers hold prices steady regardless of surplus.

• Prices tend to decrease as sellers lower prices to eliminate the surplus.

• Surplus leads to higher production costs.

• Prices increase as demand rises.

What is a shortage in economic terms?

• A shortage occurs when supply exceeds demand at a given price.

• A shortage is when demand exceeds supply at a given price.

• A shortage is when there is an equal amount of supply and demand.

• A shortage refers to a situation where prices are too high for consumers.

How do consumer preferences affect demand?

• Consumer preferences are irrelevant to market trends.

• Consumer preferences only affect supply, not demand.

• Consumer preferences have no impact on demand.

• Consumer preferences affect demand by increasing or decreasing the desire for specific products.

What role do substitutes play in demand?

• Substitutes only affect supply, not demand.

• Substitutes increase demand for each other when the price of one rises.

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

• Substitutes decrease demand for each other when the price of one rises.

How does government intervention affect supply and demand?

• Government intervention eliminates the need for competition.

• Government intervention always increases supply and demand.

• Government intervention has no impact on market prices.

• Government intervention can distort supply and demand by creating price controls, taxes, subsidies, and regulations.