Economics Chapter on Supply and Demand

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Questions and Answers

What does a demand schedule represent?

The amount of product a household is willing to buy at various prices (correct)

The total sales revenue at different prices

The production costs associated with different quantities

The supply curve for a specific good

How is a demand curve typically obtained?

From a demand schedule (correct)

From market equilibrium data

From a supply schedule

By calculating total demand across all households

What does a demand curve illustrate?

How demand would change if income levels change

How much supply would exceed demand at all prices

Relationship between prices and production levels

The quantity of a product a household would buy at different prices (correct)

What kind of data would you expect to find in a demand schedule?

Quantity of a product a household would buy at specific prices Signup and view all the answers

Which of the following statements about the law of demand is true?

Higher prices lead to lower quantity demanded Signup and view all the answers

What condition exists when quantity supplied exceeds quantity demanded at the current price?

Excess supply Signup and view all the answers

What typically happens to price when there is excess supply?

Price tends to fall Signup and view all the answers

Higher demand generally leads to which of the following outcomes?

Higher equilibrium price and quantity Signup and view all the answers

What is the result of lower demand, according to the principles of economics?

Lower price and lower quantity exchanged Signup and view all the answers

How do relative magnitudes of change in supply and demand affect market equilibrium?

They determine the outcome of market equilibrium Signup and view all the answers

What occurs when both supply and demand increase?

Quantity increases, price may go up or down Signup and view all the answers

What is a likely consequence of lower supply in the market?

Higher equilibrium price and lower quantity exchanged Signup and view all the answers

In a scenario of excess supply, what is the likely market reaction?

Prices will drop until equilibrium is restored Signup and view all the answers

What leads to a change in quantity supplied?

Change in price of a good or service Signup and view all the answers

What causes a shift in the supply curve?

Change in costs or input prices Signup and view all the answers

How is market supply defined?

The sum of all individual firms' supplied quantities Signup and view all the answers

What does market equilibrium indicate?

No change in market price is expected Signup and view all the answers

Which statement about individual supply curves is correct?

They are summed horizontally to determine market supply. Signup and view all the answers

What happens if there is a change in consumer preferences?

It causes a change in the supply curve. Signup and view all the answers

What does a rightward shift of the supply curve indicate?

Increase in supply Signup and view all the answers

Which of the following does NOT affect the supply of a good?

Consumer incomes Signup and view all the answers

What causes a movement along the supply curve?

An increase in price Signup and view all the answers

What occurs when supply changes due to factors other than price?

A shift of the supply curve Signup and view all the answers

Which of the following best describes the effect of a technological change in production?

Supply increases at every price level Signup and view all the answers

What does a shift from supply curve S_A to S_B indicate?

An increase in supply Signup and view all the answers

Which of the following scenarios would NOT result in a shift of the supply curve?

A change in the price of the good Signup and view all the answers

What would likely happen to the supply curve if new seeds that increase soybean yield are introduced?

The supply curve shifts to the right Signup and view all the answers

What is a result of a higher price in relation to the supply curve?

Increase in quantity supplied Signup and view all the answers

Which of the following factors causes an entirely new supply curve to be established?

Technological advancements in production Signup and view all the answers

What does the law of supply state about the relationship between price and quantity supplied?

There is a positive relationship between price and quantity supplied. Signup and view all the answers

What is the typical shape of a supply curve?

Positive slope Signup and view all the answers

Which factor does NOT influence the cost of producing a good?

Consumer demand for the product Signup and view all the answers

What type of relationship between price and quantity supplied is represented by supply curves?

Direct relationship Signup and view all the answers

Which of the following is considered a determinant of supply?

Cost of inputs Signup and view all the answers

What typically happens to the quantity supplied as the price increases?

Quantity supplied increases Signup and view all the answers

Which of the following statements is true regarding supply curves?

They usually have a positive slope. Signup and view all the answers

What effect does technology have on the supply of a product?

It can lower production costs. Signup and view all the answers

Study Notes

Excess Supply/Surplus

Occurs when the quantity supplied of a good exceeds the quantity demanded at the current price.
When this happens, the price tends to fall until equilibrium is restored.

Changes in Equilibrium

Higher Demand: Leads to higher equilibrium price and quantity.
Higher Supply: Leads to lower equilibrium price, but higher equilibrium quantity.
Lower Demand: Leads to lower equilibrium price and quantity.
Lower Supply: Leads to higher equilibrium price and lower equilibrium quantity.

Relative Magnitudes of Change in Supply and Demand

The relative magnitudes of change in supply and demand determine the outcome of market equilibrium.
When supply and demand both increase, quantity will increase, but price may go up or down.

Price and Quantity Demanded: The Law of Demand

A demand schedule is a table showing how much of a given product a household would be willing to buy at different prices.
Demand curves, usually derived from demand schedules, show how much of a product a household would be willing to buy at different prices.

Price and Quantity Supplied: The Law of Supply

A supply curve shows how much of a product a firm will supply per period of time at different prices.
The law of supply states that there is a positive relationship between price and quantity of a good supplied. This means supply curves typically have a positive slope.

Other Determinants of Supply

The price of the good or service.
The cost of producing the good, which depends on:
- The price of required inputs (labor, capital, and land).
- The technologies that can be used to produce the product.
The prices of related products.

Shift of Supply Versus Movement Along a Supply Curve

A higher price causes higher quantity supplied, resulting in a movement along the supply curve.
A change in determinants of supply other than price causes an increase in supply, or a shift of the entire supply curve.

Market Supply

Market supply is the sum of all the quantities of a good or service supplied per period by all the firms selling in the market for that good or service.
Market supply is the horizontal summation of individual firms' supply curves.

Market Equilibrium

Market equilibrium occurs when quantity supplied and quantity demanded are equal.
At equilibrium, there is no tendency for the market price to change.

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Description

This quiz focuses on the concepts of excess supply, changes in equilibrium, and the law of demand. Understand how different factors affecting supply and demand influence market prices and quantities. Test your knowledge on equilibrium restoration and the effects of demand schedules.