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Questions and Answers
What happens to the quantity demanded when the price rises, assuming all other factors remain constant?
What happens to the quantity demanded when the price rises, assuming all other factors remain constant?
- It remains the same
- It decreases (correct)
- It becomes zero
- It increases
What is a change in demand caused by?
What is a change in demand caused by?
- A change in any other factor apart from the price of the goods (correct)
- A change in the price of the goods
- A change in the quantity of goods
- A change in the supply of goods
What type of goods will see an increase in demand when income increases?
What type of goods will see an increase in demand when income increases?
- Inferior goods
- Substitutes
- Complements
- Normal goods (correct)
What is the term for goods that can be used in place of each other?
What is the term for goods that can be used in place of each other?
What is the result of a change in any factor apart from the price of the goods?
What is the result of a change in any factor apart from the price of the goods?
What is an example of a factor that can influence the quantity of goods consumers plan to purchase?
What is an example of a factor that can influence the quantity of goods consumers plan to purchase?
What is the consequence of a binding price ceiling?
What is the consequence of a binding price ceiling?
What is the purpose of setting a price floor?
What is the purpose of setting a price floor?
What happens to production when a binding price ceiling is set?
What happens to production when a binding price ceiling is set?
What is an unintended consequence of a binding price ceiling?
What is an unintended consequence of a binding price ceiling?
What is the result of a binding price floor?
What is the result of a binding price floor?
Why does a binding price ceiling lead to a permanent shortage?
Why does a binding price ceiling lead to a permanent shortage?
What is another term for a price ceiling?
What is another term for a price ceiling?
What is an example of a commodity that may have a price floor?
What is an example of a commodity that may have a price floor?
What is the direction of the movement from point A to B on the supply curve?
What is the direction of the movement from point A to B on the supply curve?
What is the reason for a shift in the supply curve from S1 to S3?
What is the reason for a shift in the supply curve from S1 to S3?
What is the condition for market equilibrium?
What is the condition for market equilibrium?
What is the role of prices in a market with shortages or surpluses?
What is the role of prices in a market with shortages or surpluses?
What is the effect of an increase in the price of a good from P1 to P2?
What is the effect of an increase in the price of a good from P1 to P2?
What is the name of the point where the supply curve intersects the demand curve?
What is the name of the point where the supply curve intersects the demand curve?
What is the reason for a change in the quantity supplied from Q1 to Q2?
What is the reason for a change in the quantity supplied from Q1 to Q2?
What are the factors that affect the supply of a good, except for the price of the goods?
What are the factors that affect the supply of a good, except for the price of the goods?
What happens when there is a simultaneous increase in both demand and supply?
What happens when there is a simultaneous increase in both demand and supply?
What is the effect of an increase in demand on equilibrium price and quantity?
What is the effect of an increase in demand on equilibrium price and quantity?
What is the effect of an increase in supply on equilibrium price and quantity?
What is the effect of an increase in supply on equilibrium price and quantity?
What determines the overall impact on equilibrium price and quantity when there is a simultaneous change in demand and supply?
What determines the overall impact on equilibrium price and quantity when there is a simultaneous change in demand and supply?
What happens to the equilibrium point when there is a simultaneous increase in demand and supply, and the increase in demand is larger than the increase in supply?
What happens to the equilibrium point when there is a simultaneous increase in demand and supply, and the increase in demand is larger than the increase in supply?
What is the relationship between the increase in demand and the increase in supply in the scenario described?
What is the relationship between the increase in demand and the increase in supply in the scenario described?
What is the result of a simultaneous increase in both demand and supply, assuming the increase in demand is larger than the increase in supply?
What is the result of a simultaneous increase in both demand and supply, assuming the increase in demand is larger than the increase in supply?
What is the graphical representation of a simultaneous increase in both demand and supply?
What is the graphical representation of a simultaneous increase in both demand and supply?
What is the first step in analyzing the effect of an event on the market?
What is the first step in analyzing the effect of an event on the market?
What happens to the demand curve when there is an increase in demand?
What happens to the demand curve when there is an increase in demand?
What is the result of a shortage in the market?
What is the result of a shortage in the market?
What happens to the quantity supplied when the price rises, assuming all other factors remain constant?
What happens to the quantity supplied when the price rises, assuming all other factors remain constant?
What is the role of prices in the adjustment process?
What is the role of prices in the adjustment process?
What is the outcome of the adjustment process in the market?
What is the outcome of the adjustment process in the market?
What happens to the quantity demanded when the price rises, assuming there is an increase in demand?
What happens to the quantity demanded when the price rises, assuming there is an increase in demand?
What is the relationship between the price and quantity supplied, assuming all other factors remain constant?
What is the relationship between the price and quantity supplied, assuming all other factors remain constant?
Study Notes
Demand Curve
- A rise in price from P1 to P2 reduces quantity demanded from Q1 to Q2, followed by movement along the same demand curve from point A to B.
Factors Influencing Demand
- Apart from the price of the goods, other factors that influence the quantity of goods consumers plan to purchase at each price include: • Tastes and preferences • Number and prices of related goods (substitutes and complements) • Income (normal goods and inferior goods) • Distribution of income • Expectations of future prices
Change in Demand
- A change in any other factor apart from the price of the goods will lead to a change in demand, shifting the entire demand curve.
Consequences of a Binding Price Ceiling
- A permanent shortage becomes inevitable, leading to: • Queuing and waiting • Discrimination by sellers • Rationing • Black or underground market • Worsening scarcity of commodities
Setting a Maximum Price (or Price Floor)
- A price floor is the minimum price legally enforced by the government to: • Prevent prices of certain commodities from falling below a certain level • Safeguard the economic interests or incomes of producers • Create a surplus (e.g., grains, corn, or wheat) for possible future shortages
Change in Quantity Supplied
- Reflected by a movement along the same supply curve.
Change in Supply
- Reflected by a shift in the entire supply curve.
Market Equilibrium
- The decisions of buyers and sellers interact to determine the equilibrium price and quantity.
- At the equilibrium level, quantity demanded equals quantity supplied.
Market Disequilibrium
- Shortages or surpluses appear in a market, and prices function as allocative mechanisms.
A Change in Demand
- An increase in demand shifts the demand curve rightward, creating a market shortage, pushing up the price, and increasing quantity supplied.
A Change in Both Demand and Supply
- A simultaneous increase in both demand and supply shifts both curves rightward, making the impact on equilibrium price and quantity ambiguous, depending on the relative magnitude of the change in demand and supply.
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Description
This quiz covers the concept of demand curve, focusing on how a change in price affects the quantity demanded. It explains the movement along the demand curve and the resulting change in quantity demanded.
