Demand and Supply Interaction

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Questions and Answers

If the cost of factors of production for product B increases, and products A and B are related, what happens to the supply of product B?

  • The supply curve of product B shifts to the right.
  • The supply curve of product A shifts to the right.
  • The supply curve of product B shifts to the left. (correct)
  • The supply curve of product A shifts to the left.

Referring to the provided market schedule for fishball, at what price does the market reach equilibrium?

  • 2
  • 4
  • 5
  • 3 (correct)

Referring to the provided market schedule for fishball, what is the quantity of fishball that both consumers and producers agree upon at equilibrium?

  • 50
  • 30 (correct)
  • 60
  • 40

Based on the market schedule provided, what market condition exists when the price is ₱2.00?

<p>Shortage (C)</p> Signup and view all the answers

According to the provided market schedule, at which price will a surplus occur in the market?

<p>5 (B)</p> Signup and view all the answers

Based on a price of ₱1.00 per piece of fishball, what is the shortage?

<p>-40 (A)</p> Signup and view all the answers

Assuming the supply curve shifts to the right while the demand curve remains unchanged, what will likely happen in the market?

<p>Equilibrium price will decrease, and equilibrium quantity will increase. (A)</p> Signup and view all the answers

If the demand curve shifts to the left while the supply curve remains constant, what is the resulting impact on the market?

<p>Equilibrium price will decrease, and equilibrium quantity will decrease. (D)</p> Signup and view all the answers

If supply decreases while demand remains constant, what market outcome is MOST likely?

<p>Equilibrium price will increase, and equilibrium quantity will decrease. (A)</p> Signup and view all the answers

What is the MOST likely outcome if both the demand and supply curves shift rightward simultaneously?

<p>There will be no change in equilibrium quantity. (A)</p> Signup and view all the answers

According to the provided text, what kind of relationship exists between price and the quantity demanded?

<p>Inverse (A)</p> Signup and view all the answers

Compared to demand, how does supply relate to price?

<p>Directly, as price increases supply increases (A)</p> Signup and view all the answers

What is the condition in a market when the quantity demanded is equal to the quantity supplied?

<p>Equilibrium (D)</p> Signup and view all the answers

What market condition arises when the quantity demanded is less than the quantity supplied at a given price?

<p>Surplus (D)</p> Signup and view all the answers

When the quantity demanded is greater than the quantity supplied, this is an example of what market condition?

<p>Shortage (D)</p> Signup and view all the answers

In mathematical terms, what does 'a' represent in both the demand and supply functions?

<p>Intercept (D)</p> Signup and view all the answers

In the context of demand and supply functions, what does '$\Delta$' signify?

<p>Change (B)</p> Signup and view all the answers

If the supply of a product increases significantly while demand remains constant, what typically occurs?

<p>Prices fall. (C)</p> Signup and view all the answers

How does a plant using advanced machinery resulting in increased production capacity impact the market if demand remains constant?

<p>It increases supply, leading to a potential fall in prices. (C)</p> Signup and view all the answers

Considering the dynamics of demand and supply, what market outcome is expected if a typhoon damages the maize crop in Central Luzon, assuming demand for maize stays constant?

<p>An increase in the price of maize (A)</p> Signup and view all the answers

How would an increased demand for fireworks before New Year's Day, without any change in supply, affect the market for fireworks?

<p>It would cause prices of fireworks to increase. (D)</p> Signup and view all the answers

If a certain style of clothing becomes unfashionable causing demand to decrease while supply remains unchanged, what is the MOST likely outcome?

<p>The price of the clothing will decrease. (C)</p> Signup and view all the answers

What is the effect on the equilibrium price if demand and supply both increase, and the increase in demand is equal to the increase in supply?

<p>The equilibrium price will not change. (A)</p> Signup and view all the answers

How is equilibrium achieved in a market?

<p>Through negotiations until an agreed price is reached. (D)</p> Signup and view all the answers

What role does equilibrium serve in a market?

<p>It provides a guide for producers and consumers. (B)</p> Signup and view all the answers

A new health protocol says everyone should wear facemasks. What happens in the market?

<p>Demand of the facemasks increase, and supply increases (D)</p> Signup and view all the answers

What happens when the quantity demanded is not equal to quantity supplied?

<p>There is disequilibrium (A)</p> Signup and view all the answers

During an economic boom the supply stays constant, but demand grows- what is the impact?

<p>Producer income increase. (C)</p> Signup and view all the answers

What represents a disequilibrium in a market?

<p>A surplus. (C)</p> Signup and view all the answers

What happens to profit during a pandemic?

<p>Demand curve shifts, but there is no change to supply (D)</p> Signup and view all the answers

In the supply and demand graph, what is the Y axis usually express?

<p>Price. (D)</p> Signup and view all the answers

When quantity demanded is 160, quantity supply is 40, where is it in the graph?

<p>Disequilibrium. (A)</p> Signup and view all the answers

Quantity demand is 50, quantity supply is 150, what will likely happen?

<p>A surplus. (D)</p> Signup and view all the answers

Flashcards

Interaksyon ng Demand at Supply

The interaction of demand and supply determines prices and quantities in the market.

Disequilibrium

When the quantity demanded equals the quantity supplied, leading to market equilibrium.

Shortage

More demand than supply, leading to higher prices.

Surplus

More supply than demand, leading to lower prices.

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Demand Curve

A graphical representation showing the relationship between price and quantity demanded.

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Supply Curve

A graphical representation showing the relationship between price and quantity supplied.

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Market Schedule

A table that shows the quantity demanded and quantity supplied at different price levels.

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Demand Function

An equation showing how quantity demanded relates to price.

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Supply Function

An equation showing how quantity supplied relates to price.

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Increase in Supply

When supply increases and the demand curve remains unchanged, it lead to new market situations

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Decrease in Supply

A decrease in supply while demand is unchanged.

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Increase in Demand

occurs when buyers' willingness to purchase increases, increasing demand without changes in supply

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Decreases in Demand

A decrease in demand influences prices and balances

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Simultaneous Shifts

Increase in demand equals increases in supply.

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Study Notes

Interaction of Demand and Supply

  • The module focuses on the interaction of demand and supply in relation to price levels, products, and the market

Learning Target

  • Explain how demand and supply interact to affect prices and the market

Demand and Supply in the Market

  • Price and Demand: Price has an inverse relationship with demand; high prices lead to low demand, and low prices lead to high demand
  • Price and Supply: Price has a direct relationship with supply; high prices encourage high supply, and low prices result in low supply

Determining Equilibrium

  • Equilibrium occurs where demand and supply meet
  • Three methods illustrate the interaction of demand and supply

Demand and Supply Curves

  • Demand Curve: Shows the quantity demanded at varying prices, with a downward slope, exemplifying the Law of Demand
  • Supply Curve: Shows the quantity supplied at different prices, with an upward slope, reflecting the Law of Supply
  • Equilibrium Point: Occurs where the demand and supply curves intersect, indicating the point where Quantity Demanded (Qd) equals Quantity Supplied (Qs)

Market Schedule

  • Equilibrium occurs where quantity demanded equals quantity supplied (Qd=Qs)
  • Surplus exists when Qd < Qs, leading to excess supply
  • Shortage exists when Qd > Qs, leading to a deficiency

Demand and Supply Function

  • Mathematical equations calculate equilibrium by determining the value of price (P) using demand and supply functions.
  • Value has to be substituted into demand and supply functions
  • Solutions corresponds to the equilibrium quantity.
  • Demand Function: Qd = a - bP, where 'a' is the intercept and 'b' is the slope.
  • Supply Function: Qs = a + bP, where 'a' is the intercept and 'b' is the slope.

Price Determination

  • Equilibrium determines the market price and quantity
  • An increase in supply, while demand remains constant, leads to surplus, decreasing prices
  • Reduced supply, with constant demand, results in shortages, increasing prices

Shifts in Supply

  • If a plant upgrades machinery, it can increase production i.e. supply even if it doesn't increase prices
  • If there is no shift in demand, there will be an excess in supply which lowers prices

Shifts in Demand

  • If demand increases and suplly does not, there will be shortage in supply which will increase prices

Simultaneous Shifts in Demand and Supply

  • When demand and supply increase proportionally, the equilibrium quantity changes, but the price remains stable
  • Price stability occurs because the change in demand is matched by the change in supply

Disequilibrium

  • Disequilibrium is described as a situation where demand and supply don't equate.

Shifts in the curves, prices and equilibriums

  • ↑D, S = ↑Ep, 个Eq = higher equilibrium price and quantity
  • ↓S, D = ↑Ep, ↓ Eq = higher equilibrium price and lower quantity
  • ↑S, D = ↓Ep, 个Eq = lower equilibrium price and higher quantity
  • ↓D, S = ↓Ep, ↓Eq = lower equilibrium price and quantity
  • ↑D, ↑S= Ep, 个Eq = Unchanged price and higher quantity
  • ↓D, ↓S= Ep, Eq= Unchanged price and lower quantity

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