Exploring Supply and Demand Dynamics

What determines the price of goods and services?

• Consumer's income

• The producer's preferences

• Supply and demand

• The government

What does the law of demand state?

• Price increases when demand increases

• Supply has no effect on demand

• Consumers buy more when prices are lower

• Demand decreases when supply increases

What is the substitution effect?

• Ignoring price changes

• Switching to a similar product when another becomes too expensive

• Substituting goods for services

• Buying less due to increased prices

What happens according to the income effect when prices rise?

• Consumers feel wealthier

• Consumers purchase more luxury goods

• Income increases to match price rises

• Consumers cut back on purchases

What does the law of supply state?

• Supply decreases as demand decreases

• Producers offer more at higher prices

• Supply is unrelated to price

• Consumers control the supply

What motivates a pizza shop to make more pizza?

• Higher demand for pizza

• Lower prices of pizza

• Decreased cost of production

• Higher potential revenues from sales

What is a supply schedule?

• A government regulation on supply

• A list of prices and the corresponding quantity supplied

• A plan for reducing supply

• A consumer's purchasing plan

What is market equilibrium?

• When the government sets prices

• When quantity demanded equals quantity supplied

• When demand exceeds supply

• When supply exceeds demand

What causes prices to change in a market?

• Fixed supply schedules

• Unchanging supply curves

• Shifts in supply and demand

• Constant demand curves

How do supply and demand curves help in understanding the market?

• They predict government policies

• They show the relationship between price and quantity

• They determine consumer income

• They fix the price of goods and services