Economics Demand and Supply Quiz
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Questions and Answers

What does the law of demand state about the relationship between price and quantity demanded?

  • They remain constant.
  • They are dependent on consumer preferences.
  • They are inversely related. (correct)
  • They are directly proportional.

    • What does the equation Qd = a - bP represent?

  • The demand function relating quantity demanded to price. (correct)
  • The relationship between quantity demanded and consumer income.
  • The cost of production based on output levels.
  • A formula for calculating total revenue from sales.

    • In the demand function Qd = a - bP, what does 'b' represent?

  • The total quantity demanded at a given price.
  • The effect of consumer income on demand.
  • The slope of the demand curve. (correct)
  • The price of substitutes in the market.

    • Using the example Qd = 20 - 2P, what is the quantity demanded when the price is $5?

    <p>10 units (A)</p> Signup and view all the answers

    What does the term 'ceteris paribus' refer to in economic analysis?

    <p>Assuming all factors remain unchanged. (A)</p> Signup and view all the answers

    What is the equilibrium price when Qd equals Qs?

    <p>$3.00 (C)</p> Signup and view all the answers

    If the price increases from $5 to $8, what happens to the quantity demanded according to the law of demand?

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

    How is the equilibrium quantity calculated from the demand and supply equations?

    <p>By setting Qd equal to Qs. (D)</p> Signup and view all the answers

    In the demand equation Qd = 20 - 2P, what does 'a' typically represent?

    <p>The base quantity demanded when the price is zero. (D)</p> Signup and view all the answers

    If the demand function shifts to Qd = 30 - 3P, what can be inferred about consumer behavior?

    <p>Consumers are now willing to buy more at any price. (A)</p> Signup and view all the answers

    What does the equation Qs = 8 + 2P indicate about supply?

    <p>Higher prices lead to higher quantities supplied. (A)</p> Signup and view all the answers

    From the demand and supply equations, what is the equation used to find equilibrium quantity?

    <p>10 - 0.5Qd = 0.5Qs - 4 (B)</p> Signup and view all the answers

    What is the equilibrium quantity determined by the equations Qd and Qs?

    <p>14 units (B)</p> Signup and view all the answers

    Which method can be used to find the equilibrium price and quantity from the equations?

    <p>Solving for price first then substituting back for quantity. (A)</p> Signup and view all the answers

    What is the result of substituting P = 3 into the Qd equation?

    <p>Qd = 14 (D)</p> Signup and view all the answers

    What happens to the consumption of goods or services when an individual's income increases?

    <p>Consumption of goods or services increases. (C)</p> Signup and view all the answers

    When the price of a substitute good increases, what is the expected effect on the demand for the identified good?

    <p>Demand for the identified good increases. (C)</p> Signup and view all the answers

    What occurs when an individual's income decreases regarding their consumption of normal goods?

    <p>They consume less of the normal goods. (B)</p> Signup and view all the answers

    If a student receives an increase in 'baon', what is a direct effect on their ability to consume food?

    <p>They can afford to buy more of the same snacks. (C)</p> Signup and view all the answers

    Which of the following reflects a positive relationship between demand and income for a normal good?

    <p>When income increases, demand increases. (C)</p> Signup and view all the answers

    What will likely happen if the price of a substitute good decreases?

    <p>Demand for the original good will decrease. (D)</p> Signup and view all the answers

    How does purchasing power relate to income adjustments?

    <p>Purchasing power directly correlates to income level. (D)</p> Signup and view all the answers

    In the context of normal goods, what would happen if a consumer's budget constraint is negatively impacted?

    <p>The consumer would purchase less of the goods. (B)</p> Signup and view all the answers

    How does an increase in the price of inputs impact the supply of goods?

    <p>It decreases the supply of goods. (A)</p> Signup and view all the answers

    What is the relationship between the price of substitute goods and the supply of those goods?

    <p>An increase in substitute prices leads to an increase in supply. (A)</p> Signup and view all the answers

    How does a decrease in the price of factors of production affect producers?

    <p>It increases their purchasing power for inputs. (A)</p> Signup and view all the answers

    What is a non-price determinant of supply?

    <p>Price of related commodities (A)</p> Signup and view all the answers

    Why might producers not be able to easily increase their budget for production?

    <p>Investors and banks may not provide funding easily. (C)</p> Signup and view all the answers

    If a producer has a fixed budget, what does it imply when input prices rise?

    <p>They must reduce the number of inputs purchased. (A)</p> Signup and view all the answers

    What happens when the price of related commodities decreases?

    <p>The supply of the related commodities may increase. (B)</p> Signup and view all the answers

    Which factor primarily limits producers from increasing their budget for production spontaneously?

    <p>Investors' reluctance to commit funds. (D)</p> Signup and view all the answers

    What is the quantity demanded when the price is set to P = 8?

    <p>4 (C)</p> Signup and view all the answers

    According to the law of demand, what happens to the quantity demanded when the price decreases?

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

    Which of the following represents a demand schedule?

    <p>A tabular representation of quantity demanded at various price levels. (D)</p> Signup and view all the answers

    If the price is $3, what is the corresponding quantity demanded from the demand schedule?

    <p>14 (B)</p> Signup and view all the answers

    What is the impact of a price set to P = 4 on the quantity demanded?

    <p>12 units (A)</p> Signup and view all the answers

    How does the quantity demanded change when the price drops from P = 5 to P = 2?

    <p>It increases by 6. (B)</p> Signup and view all the answers

    If a consumer's willingness to purchase is represented at a price of $1, how many units would they demand?

    <p>18 (A)</p> Signup and view all the answers

    What is the correct interpretation of a demand curve that slopes downward from left to right?

    <p>It shows that higher prices result in lower quantity demanded. (A)</p> Signup and view all the answers

    What happens to the supply of Jollibee when the price at McDonald's increases?

    <p>Jollibee will decrease its supply. (D)</p> Signup and view all the answers

    If the price of a substitute good, like McDonald's, decreases, what is the likely effect on the supply of Jollibee?

    <p>Jollibee will decrease its supply. (D)</p> Signup and view all the answers

    When the price of the PlayStation increases, what effect does this have on the games produced for it?

    <p>The supply of games will increase. (B)</p> Signup and view all the answers

    What is the impact of a price decrease at McDonald's on its supply?

    <p>McDonald's will decrease its supply. (A)</p> Signup and view all the answers

    How does the price change of complementary goods affect the supply of the specified product?

    <p>Both will increase if one increases in price. (C)</p> Signup and view all the answers

    Why might Jollibee decrease its supply when McDonald's prices increase?

    <p>To avoid excess stock and losses. (B)</p> Signup and view all the answers

    What can be concluded if an increase in McDonald's price leads to more profit for it?

    <p>McDonald's will likely increase its supply. (A)</p> Signup and view all the answers

    In a scenario where both the PlayStation and its games are produced, what is the effect of a price change in the PlayStation?

    <p>The supply of both the PlayStation and its games will increase. (D)</p> Signup and view all the answers

    Study Notes

    Demand and Supply

    • Black Friday sales are a notable example of market forces at play
    • Consumer interest and competitor responses affect market prices
    • The relationship between price and quantity is crucial in economics
    • Demand and supply underpin market price determination

    Law of Demand

    • As prices rise, quantity demanded falls (inverse relationship)
    • Factors other than price affect demand (income, fashion)
    • The demand function mathematically expresses this inverse relationship (Qd = a - bP)
    • The demand curve graphically illustrates this relationship, sloping downward

    Demand Schedule

    • A table showing quantity demanded at various prices
    • Illustrates the inverse relationship between price and quantity

    Demand Curve

    • A graph of the relationship between price and quantity demanded
    • Demonstrates the law of demand visually

    Supply

    • The producers' willingness to supply goods and services
    • Higher prices usually lead to greater quantity supplied (positive relationship)

    Supply Function

    • Mathematically expresses supply, showing the positive relationship between price (P) and quantity supplied (Qs) (Qs = c + dP)
    • The supply curve displays this on a graph and slopes upward

    Supply Schedule

    • A table displaying quantity supplied at various prices
    • Shows the positive relationship between price and quantity supplied

    Supply Curve

    • A graph illustrating the relationship between price and quantity supplied
    • Shows the positive relationship on a graph

    Market Equilibrium

    • The point where demand and supply curves intersect
    • Equilibrium price is where the quantity demanded equals quantity supplied
    • Equilibrium quantity is the corresponding quantity at the equilibrium price

    Factors Affecting Demand

    • Consumer income
    • Prices of related goods (substitutes and complements)
    • Consumer tastes and preferences
    • Consumer expectations
    • Number of consumers
    • External factors (population, climate, etc.)
    • Government regulations and policies

    Factors Affecting Supply

    • Input prices
    • Technology
    • Number of producers
    • Producer expectations
    • Government regulations and subsidies
    • Natural disasters etc

    Shifts in Demand and Supply

    • Changes in non-price factors shift the entire demand or supply curve, not just a point on the curve
    • Shifts in the curves cause changes in both equilibrium price and equilibrium quantity

    Price Ceiling

    • An artificially imposed maximum price on a good
    • Can lead to shortages

    Price Floor

    • An artificially imposed minimum price on a good
    • Can lead to surpluses

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    Demand and Supply (2024-2025) PDF

    Description

    Test your understanding of the law of demand and supply equations with this quiz. Explore concepts such as equilibrium price, quantity demanded, and shifts in demand functions. Perfect for students studying introductory economics.

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