6 Questions
Match the following actions with the corresponding price signals:
Shop at a different location = Price of something goes up Find a suitable substitute = Price of something goes up Stop producing other items = Product with a higher price Increase production of a product = Product with a higher price
Match the following resources with the ones that may be freed up by a firm:
Labor = Increase production of a product Capital = Stop producing other items Machinery = Stop producing other items
Match the following terms with their meanings:
Incentives = Encouragements Price signals = Signals we get from prices Substitute = Suitable alternative Production = Manufacturing or creation
What is market equilibrium?
Market equilibrium is the state where the quantity of a product demanded by consumers is equal to the quantity supplied by producers.
Define equilibrium price.
Equilibrium price is the price at which the quantity of a product demanded by consumers is equal to the quantity supplied by producers, resulting in no shortage or surplus.
What is a shortage and a surplus in the context of market equilibrium?
A shortage occurs when the quantity of a product demanded exceeds the quantity supplied, while a surplus occurs when the quantity supplied exceeds the quantity demanded.
Test your understanding of how price signals in economics act as incentives to drive consumer and producer behavior. Explore the impact of price changes on consumption choices and production decisions.
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