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Questions and Answers
What does relative price represent?
What does relative price represent?
How is relative price calculated?
How is relative price calculated?
What is the law of demand?
What is the law of demand?
Which of the following best describes quantity demanded?
Which of the following best describes quantity demanded?
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What does ceteris paribus mean in economics?
What does ceteris paribus mean in economics?
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What represents a demand schedule?
What represents a demand schedule?
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If the price of a good decreases, what typically happens to the quantity demanded?
If the price of a good decreases, what typically happens to the quantity demanded?
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Which of the following statements about demand is true?
Which of the following statements about demand is true?
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What does a demand curve illustrate when other factors remain constant?
What does a demand curve illustrate when other factors remain constant?
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What occurs when the price of a good rises, holding all other factors the same?
What occurs when the price of a good rises, holding all other factors the same?
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How is individual demand defined in economic terms?
How is individual demand defined in economic terms?
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What does the concept of willingness to pay correspond to in terms of demand curves?
What does the concept of willingness to pay correspond to in terms of demand curves?
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In a demand curve, how does the quantity demanded change as prices decrease?
In a demand curve, how does the quantity demanded change as prices decrease?
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What is meant by market demand?
What is meant by market demand?
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What effect does an increase in the number of producers in the market have on supply?
What effect does an increase in the number of producers in the market have on supply?
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What happens to the price someone is willing to pay as the quantity of a good decreases?
What happens to the price someone is willing to pay as the quantity of a good decreases?
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Which of the following describes the law of demand?
Which of the following describes the law of demand?
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How does a decrease in corporate tax rates affect the supply of goods?
How does a decrease in corporate tax rates affect the supply of goods?
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What impact do advances in technology have on the supply curve?
What impact do advances in technology have on the supply curve?
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Which of the following describes a situation that shifts the supply curve leftward?
Which of the following describes a situation that shifts the supply curve leftward?
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What is the only factor that can cause a direct change in the quantity supplied of a good?
What is the only factor that can cause a direct change in the quantity supplied of a good?
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What role do subsidies play in the market supply?
What role do subsidies play in the market supply?
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What does a supply shock refer to?
What does a supply shock refer to?
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Which statement is true regarding a movement along the supply curve?
Which statement is true regarding a movement along the supply curve?
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What happens to the demand for one complementary good when the price of the other good decreases?
What happens to the demand for one complementary good when the price of the other good decreases?
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How does an expected increase in the price of a good affect current demand for that good?
How does an expected increase in the price of a good affect current demand for that good?
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Which of the following best describes a normal good?
Which of the following best describes a normal good?
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What is the effect on demand for an inferior good when income rises?
What is the effect on demand for an inferior good when income rises?
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If consumers expect their incomes to increase in the future, what is likely to happen to current demand for goods?
If consumers expect their incomes to increase in the future, what is likely to happen to current demand for goods?
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What typically occurs when the price of a good is expected to decrease in the future?
What typically occurs when the price of a good is expected to decrease in the future?
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What is the relationship between the price of one complementary good (Px) and the quantity demanded of another good (Qy)?
What is the relationship between the price of one complementary good (Px) and the quantity demanded of another good (Qy)?
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Which scenario would likely shift the demand curve for a good to the left?
Which scenario would likely shift the demand curve for a good to the left?
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What is the effect on equilibrium quantity when both demand and supply decrease?
What is the effect on equilibrium quantity when both demand and supply decrease?
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What happens to the equilibrium price when demand increases while supply remains unchanged?
What happens to the equilibrium price when demand increases while supply remains unchanged?
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What happens to the equilibrium price when demand decreases while supply increases?
What happens to the equilibrium price when demand decreases while supply increases?
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When there is an increase in demand and a decrease in supply, what is the expected change in equilibrium price?
When there is an increase in demand and a decrease in supply, what is the expected change in equilibrium price?
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What is the effect on equilibrium quantity when supply decreases without a change in demand?
What is the effect on equilibrium quantity when supply decreases without a change in demand?
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How is the change in equilibrium quantity determined when demand decreases and supply decreases?
How is the change in equilibrium quantity determined when demand decreases and supply decreases?
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How does an increase in both demand and supply affect the equilibrium quantity?
How does an increase in both demand and supply affect the equilibrium quantity?
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If demand decreases, what impact does this have on equilibrium price?
If demand decreases, what impact does this have on equilibrium price?
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What outcome occurs when demand decreases while supply remains the same?
What outcome occurs when demand decreases while supply remains the same?
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Which scenario results in a fall in equilibrium price?
Which scenario results in a fall in equilibrium price?
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In a scenario where demand increases and supply decreases, what effect does this have on equilibrium quantity?
In a scenario where demand increases and supply decreases, what effect does this have on equilibrium quantity?
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What is the result when both demand and supply decrease simultaneously?
What is the result when both demand and supply decrease simultaneously?
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What is true about the change in equilibrium price when there is an increase in demand and a simultaneous decrease in supply?
What is true about the change in equilibrium price when there is an increase in demand and a simultaneous decrease in supply?
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If supply increases and demand decreases at the same time, what can be concluded about the equilibrium price?
If supply increases and demand decreases at the same time, what can be concluded about the equilibrium price?
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What happens to equilibrium quantity when supply increases alongside a demand decrease?
What happens to equilibrium quantity when supply increases alongside a demand decrease?
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What happens to the equilibrium quantity when supply remains constant and demand decreases?
What happens to the equilibrium quantity when supply remains constant and demand decreases?
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Study Notes
Introduction to Economics
- Course name: Principle of Economics
- Instructor: Noor Sa'adah Sabudin
- Subject: SEFB
Chapter 3: Demand, Supply, and Market Equilibrium
- Topics covered: Law of Demand, Demand Curve, Changes in Quantity Demanded, Changes in Demand, Individual and Market Demand, Law of Supply, Supply Curve, Change in Quantity Supplied, Changes in Supply, Individual and Market Supply, Market Equilibrium, Changes in Market Equilibrium, Consumer and producer surplus
- Learning Objectives:
- Explain the concept of demand and the law of demand
- Differentiate the concept of change in quantity demanded and the change in demand
- Identify factors that determine the demand
- Differentiate individual and market demand
- Explain the concept of supply and the law of supply
- Differentiate the concept of change in quantity supplied and the change in supply
- Identify factors that determine the supply
- Differentiate individual and market supply
- Explain how equilibrium price and quantity are determined in the market
- Explain the effect of demand and supply curve shifts on price and quantity equilibrium
- Explain the factors that cause changes in the market equilibrium
- Identify the area of consumer and producer surplus
Markets
- Definition: Any arrangement that enables buyers and sellers to get information and do business with each other
- Alternative Definition: Any place people come together to trade
- Types: Physical and virtual (online) markets
- Competitive Market: A market with many buyers and many sellers, so no single buyer or seller can influence the price.
Price
- Absolute Price: Price of a good in monetary terms (e.g., RM30,000 for a car)
- Relative Price (Opportunity Cost): Price of a good in terms of another good (e.g., 30 computers for a car)
- Relative price is calculated by dividing the actual price of an item with the actual price of other goods
Demand
- Definition: The willingness and ability of buyers to purchase different quantities of a good at different prices during a specific time period.
- Quantity Demanded: The number of units of a good that individuals are willing and able to buy at a particular price during a time period.
- Law of Demand: As the price of a good rises, the quantity demanded of the good falls, and as the price of a good falls, the quantity demanded of the good rises (other things being equal).
Supply
- Definition: The willingness and ability of sellers to produce and offer to sell different quantities of a good at different prices during a specific time period.
- Quantity Supplied: The amount that producers plan to sell during a given time period at a particular price.
- Law of Supply: As the price of a good rises, the quantity supplied of the good rises, and as the price of a good falls, the quantity supplied of the good falls (other things being equal).
- Supply Schedule: Numerical tabulation of the quantity supplied of a good at different prices
- Supply Curve: Graphical representation of the law of supply: Shows the relationship between the quantity supplied of a good and its price when all other factors remain the same
Market Equilibrium
- Equilibrium: The price-quantity combination where there is no tendency for price or quantity to change
- Equilibrium Price: Price at which quantity demanded equals quantity supplied
- Equilibrium Quantity: Quantity bought and sold at the equilibrium price
Price Adjustments
- At prices above equilibrium, a surplus forces the price down
- At prices below equilibrium, a shortage forces the price up
Changes in Equilibrium
- Changes to equilibrium (price and quantity) when one or more determinants of demand or supply change
Determinants of Demand
- Prices of related goods
- Expected future prices
- Income
- Expected future income and credit
- Preferences
- Population
Determinants of Supply
- Prices of relevant resources
- Technology
- Prices of other goods
- Number of sellers
- Expectations of future prices
- Taxes and subsidies
- Government restrictions
- State of nature (supply shock)
Changes in Quantity Supplied vs. Shifts in Supply
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Change in quantity supplied: Movement along the supply curve due to a change in the good's own price. Holding all other factors constant
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Shift in supply: Change in the supply curve when a non-price factor changes.
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Description
Test your knowledge on fundamental concepts of demand in economics with this quiz. Explore topics such as relative prices, demand curves, and the law of demand. Perfect for students looking to solidify their understanding of market dynamics.
