Economics Demand Quiz
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Questions and Answers

What occurs when there is a decrease in demand?

  • The demand curve remains unchanged
  • The demand curve shifts rightward
  • The demand curve shifts leftward (correct)
  • The demand curve shifts upward

    • How does the price of a substitute good impact demand?

  • Demand increases if the price of the substitute rises (correct)
  • Demand decreases if the price of the substitute rises
  • Demand increases if the price of the substitute falls
  • Demand decreases if the price of the substitute falls

    • What is the relationship between income and normal goods?

  • Demand for normal goods remains constant regardless of income
  • Demand for normal goods increases when income increases (correct)
  • Demand for normal goods decreases when income increases
  • Demand for normal goods is unaffected by income levels

    • What happens to current demand if the expected future price of a good falls?

    <p>Current demand decreases</p> Signup and view all the answers

    Which of the following influences can lead to an increase in demand for a good?

    <p>A rise in expected future prices</p> Signup and view all the answers

    What characterizes an inferior good?

    <p>Its demand decreases as consumer income rises</p> Signup and view all the answers

    How does the price of a complement good affect the demand for another good?

    <p>Demand increases if the price of the complement falls</p> Signup and view all the answers

    What impact does easy access to credit have on demand?

    <p>It can increase demand for certain goods</p> Signup and view all the answers

    What happens to the supply curve when supply decreases?

    <p>It shifts leftward.</p> Signup and view all the answers

    Which factor influences the change in supply due to resource prices?

    <p>Cost of production</p> Signup and view all the answers

    What is a result of an increase in the number of sellers in a market?

    <p>Increase in overall market supply</p> Signup and view all the answers

    How does an expectation of rising future prices affect current supply?

    <p>Decreases current supply</p> Signup and view all the answers

    What effect does a rise in the price of a substitute in production have on supply?

    <p>Decreases supply of the original good</p> Signup and view all the answers

    What is the primary influence of productivity on supply?

    <p>Impacts the cost of production</p> Signup and view all the answers

    Which of the following actions would likely cause a decrease in supply?

    <p>A rise in resource prices</p> Signup and view all the answers

    What distinguishes a change in supply from a change in quantity supplied?

    <p>Change in price of the good</p> Signup and view all the answers

    What occurs at market equilibrium?

    <p>Quantity demanded equals quantity supplied.</p> Signup and view all the answers

    How does a surplus affect market prices?

    <p>Prices fall until the surplus is eliminated.</p> Signup and view all the answers

    What happens when the quantity demanded exceeds the quantity supplied?

    <p>A shortage is created.</p> Signup and view all the answers

    Which of the following describes a change in supply?

    <p>A change in selling plans due to an external influence.</p> Signup and view all the answers

    What impact does lowering the price to $0.75 have if the quantity demanded rises to 11 million bottles?

    <p>Causes a shortage of bottles.</p> Signup and view all the answers

    What is the equilibrium price in the given example?

    <p>$1.00 a bottle.</p> Signup and view all the answers

    In response to an event affecting supply, which factor is used to determine changes in equilibrium price?

    <p>New quantity demanded and supplied.</p> Signup and view all the answers

    If the quantity supplied is 11 million bottles and the quantity demanded is 9 million bottles at a price of $1.50, what type of market condition is present?

    <p>Surplus.</p> Signup and view all the answers

    What is the difference between quantity demanded and demand?

    <p>Quantity demanded is the amount consumers are willing to buy at different prices, while demand is a relationship between price and quantity.</p> Signup and view all the answers

    Which statement accurately reflects the Law of Demand?

    <p>An increase in price decreases quantity demanded.</p> Signup and view all the answers

    What does a demand schedule represent?

    <p>A list of quantities demanded at various prices with all other influences constant.</p> Signup and view all the answers

    What is the characteristic of a competitive market?

    <p>No single buyer or seller can influence the market price.</p> Signup and view all the answers

    How is market demand calculated?

    <p>By adding the demands of all individual buyers at each price level.</p> Signup and view all the answers

    In terms of demand curves, what does a downward slope indicate?

    <p>As price decreases, the quantity demanded increases.</p> Signup and view all the answers

    What does the phrase 'other things remaining the same' in relation to demand imply?

    <p>Only the price is considered while all other variables are held constant.</p> Signup and view all the answers

    What occurs in a market when demand increases, assuming supply remains unchanged?

    <p>Prices will rise.</p> Signup and view all the answers

    What primarily influences the demand for big ticket items such as homes and cars?

    <p>Changes in expected future income and credit availability</p> Signup and view all the answers

    Which factor does NOT lead to a change in demand for a good?

    <p>An increase in the price of the good</p> Signup and view all the answers

    What is the main distinction between a change in the quantity demanded and a change in demand?

    <p>Quantity demanded changes due to price; demand changes due to other influences.</p> Signup and view all the answers

    According to the Law of Supply, what happens if the price of a good rises?

    <p>The quantity supplied of the good increases.</p> Signup and view all the answers

    What does a supply schedule illustrate?

    <p>The quantities supplied at different price levels when all other factors remain constant.</p> Signup and view all the answers

    What is market supply a summation of?

    <p>The supplies of all sellers in a market.</p> Signup and view all the answers

    Which of the following represents a change in supply?

    <p>An increase in the quantity supplied due to lower production costs.</p> Signup and view all the answers

    How is a supply curve represented graphically?

    <p>As a plot showing the relationship between quantity supplied and price.</p> Signup and view all the answers

    How does a decrease in supply affect the equilibrium price of bottled water?

    <p>The equilibrium price increases.</p> Signup and view all the answers

    What is the expected outcome of a drought affecting the supply of bottled water?

    <p>Supply decreases and equilibrium quantity decreases.</p> Signup and view all the answers

    When both demand and supply increase simultaneously, what can be said about the equilibrium quantity?

    <p>Equilibrium quantity increases.</p> Signup and view all the answers

    Which statement best describes the relationship between equilibrium price and changes in supply?

    <p>Equilibrium price changes in the opposite direction to supply.</p> Signup and view all the answers

    What occurs when there is both a decrease in demand and a decrease in supply?

    <p>Equilibrium price might rise, fall, or remain unchanged; quantity decreases.</p> Signup and view all the answers

    Which of the following statements is incorrect regarding equilibrium changes?

    <p>An increase in supply results in a rise in equilibrium price.</p> Signup and view all the answers

    What does an increase in both demand and supply lead to regarding equilibrium price?

    <p>Equilibrium price could either rise, fall, or stay the same.</p> Signup and view all the answers

    If a market experiences a shortage at a price of $1.00 per bottle, what will most likely happen to the equilibrium price?

    <p>It will increase above $1.00.</p> Signup and view all the answers

    Study Notes

    Essential Foundations of Economics

    • This is the ninth edition of the textbook "Essential Foundations of Economics" by Bade and Parkin.
    • The book covers fundamental economic principles.

    Avocado Price Fluctuations

    • Avocado prices fluctuate due to supply changes.
    • Harvest seasons and the availability of Mexican avocados affect cost.

    Demand and Supply

    • Chapter 4 focuses on distinguishing quantity demanded from demand, and quantity supplied from supply.
    • It explains factors that determine demand and supply.
    • The chapter discusses how these concepts determine price and quantity in a market.
    • It also explores the impact of demand and supply changes.

    Competitive Markets

    • A market gathers buyers and sellers.
    • This can be a physical space or a global network of buyers and sellers.
    • The defined market studied in the chapter includes many buyers and sellers.
    • Individual buyers or sellers do not control the price.

    Demand Definition

    • Quantity demanded is the amount of a good, service, or resource people intend to buy for specified price and time period (e.g., daily or monthly).

    Law of Demand

    • Other factors remaining constant:
      • If price rises, quantity demanded falls.
      • If price falls, quantity demanded rises.

    Demand Schedule and Curve

    • Demand shows the relationship between quantity demanded and price of a good while other buying factors remain the same.
    • A demand schedule displays quantities demanded at each price.
    • A demand curve graphs the demand schedule.

    Demand Schedule and Curve Details

    • Demand schedule details quantities demanded for each price point, when other factors impacting purchasing remain the same.
    • Demand curve shows the relationship between quantity demanded and price, with other purchasing factors remaining constant.

    Individual and Market Demand

    • Market demand is the overall demand for a product by all buyers in the market.
    • It's calculated as the horizontal sum of all individual demand curves present.

    Changes in Demand

    • A change in demand is a shift in buying plans caused by factors other than the good's price.
    • A new demand schedule and demand curve results from a change in demand.

    Influences on Demand

    • Prices of related goods (substitutes and complements)
    • Expected future prices
    • Income (normal and inferior goods)
    • Expected future income and credit availability
    • Number of buyers
    • Preferences
    • Substitutes (goods that can replace each other)
      • Increased price of a substitute leads to increased demand for the good.
      • Decreased price of a substitute leads to decreased demand for the good.
    • Complements (goods consumed together)
      • Decreased price of a complement leads to increased demand for the good.
      • Increased price of a complement leads to decreased demand for the good.

    Expected Future Prices

    • Expected future price rise increases current demand.
    • Expected future price fall decreases current demand.

    Income

    • Normal goods have demand increases with income.
    • Inferior goods have demand decreases with income.

    Expected Future Income and Credit Availability

    • Increased future income or easy credit may increase demand for goods.
    • Decreased future income or difficult credit access may decrease demand for goods.

    Number of Buyers

    • Increased number of buyers leads to increased demand.

    Preferences

    • Changing preferences may shift demand for/against specific goods, and hence a shift in demand.

    Change in Demand Versus Quantity Demanded

    • Change in the quantity demanded: a change in how much people intend to buy resulting from a good's price change.
    • Change in demand: a shift in buying plans due to factors other than price.

    Supply Definition

    • Quantity Supplied: The amount of a good, service, or resource suppliers are ready to offer in a given time frame and at a certain price.

    Law of Supply

    • Other factors remaining the same:
      • If price rises, quantity supplied rises.
      • If price falls, quantity supplied falls.

    Supply Schedule and Curve

    • Supply: The relationship between quantity supplied and price (other selling factors held constant).
    • Supply schedule demonstrates quantities supplied at each price point.
    • Supply curve visualizes the supply schedule.

    Supply Schedule and Curve Details

    • A supply schedule details the relationship between supplied quantities at each price, while other influencing factors are constant.
    • A supply curve displays this relationship graphically.

    Individual and Market Supply

    • Market supply is the sum of the supply curves of all producers in the market.

    Changes in Supply

    • Change in supply: a shift in supply plans due to factors other than price.
    • A new supply schedule and supply curve result when the factors change.

    Factors Influencing Supply

    • Prices of related goods (substitutes and complements in production)
    • Resource and input prices
    • Expected future prices
    • Number of sellers
    • Productivity
    • Substitutes in production: goods that can be created in place of one another.
      • Substitute in production price rises, leads to decrease in supply of the original good
      • Substitute in production price falls, leads to increase in supply of the original good.
    • Complements in production: goods produced together.
      • Complement in production price rise, leads to increase in supply of original good
      • Complement in production price falls, leads to decrease in supply of original good.

    Resource and Input Prices

    • Higher resource prices increase production costs and decrease supply.
    • Lower resource prices decrease production costs and increase supply.

    Expected Future Prices

    • Expectations of future price increases may decrease current supply.
    • Expectations of future price decreases may increase current supply.

    Number of Sellers

    • More sellers equal more supply.

    Productivity

    • Higher productivity lowers costs and increases supply.
    • Lower productivity increases costs and decreases supply.

    Change in Quantity Supplied Versus Change in Supply

    • Change in quantity supplied: a movement along the supply curve, responding to a price change.
    • Change in supply: a shift of the entire supply curve, caused by a factor other than price.

    Market Equilibrium

    • Market Equilibrium: The point where quantity demanded equals quantity supplied. It represents balance in the market.

      • Equilibrium price: The price at which quantity demanded equals quantity supplied.
      • Equilibrium quantity: The quantity bought and sold at the equilibrium price.

    Price: A Market's Automatic Regulator

    • Law of Market Forces: Shortages cause price increases, and surpluses cause price decreases.
    • Shortage: when QD exceeds QS
    • Surplus: when QS exceeds QD

    Predicting Price Changes

    • Three questions to analyze the effects of a market event:
      • Does the event affect demand or supply?
      • Does the event increase or decrease demand or supply?
      • What's the new equilibrium price and quantity, and how have they changed?

    Effects of Changes in Demand

    • Event: Study shows tap water unsafe.
    • Demand for bottled water increases, shifting the demand curve to the right.
    • New equilibrium price and quantity are higher.

    Effects of Changes in Supply

    • Event: European water bottlers establish plants in the U.S..
    • Supply of bottled water increases, shifting the supply curve to the right.
    • New equilibrium price and quantity are lower.

    Effects of Changes in Demand and Supply

    • Simultaneous changes in both demand and supply may cause equilibrium price to fall, rise, or stay unchanged.
    • The effect on equilibrium quantity is unambiguous by increasing the overall quantity.

    Decrease in Demand and Increase in Supply

    • Equilibrium price falls.
    • The quantity may increase, decrease, or stay the same, but the price decreases.

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    Essential Foundations of Economics Textbook PDF

    Description

    Test your knowledge on the factors affecting demand in economics. This quiz covers concepts such as the impact of substitute goods, income levels, and the relationship between credit access and demand. Perfect for students looking to deepen their understanding of consumer behavior!

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