Economics - Demand, Supply, and Equilibrium

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Questions and Answers

What does demand mean in economics?

Desire backed by purchasing power and willingness to pay the price.

Explain the Law of Demand.

It states that when all other factors remain constant, if the price of a good rises, the quantity demanded decreases, and if the price falls, the quantity demanded increases.

What does a Demand Schedule show?

It shows the various quantities of goods demanded at different price levels.

What are the two types of Demand Schedules?

<ol> <li>Individual Demand Schedule 2. Market Demand Schedule</li> </ol> Signup and view all the answers

What is the key concept behind the Law of Supply?

It states that as the price of a good increases, the quantity supplied also increases, and vice versa, assuming all other factors remain constant. Signup and view all the answers

Define Equilibrium in economics.

It is the point where the quantity demanded equals the quantity supplied, resulting in a stable market price. Signup and view all the answers

Explain the concept of demand elasticity.

Demand elasticity refers to how sensitive the quantity demanded of a good is to a change in its price. If demand is elastic, a small price change leads to a large change in quantity demanded; if demand is inelastic, quantity demanded changes little with a price change. Signup and view all the answers

What are the exceptions to the Law of Demand?

There are certain situations where the Law of Demand does not hold true. For example, Veblen goods, Giffen goods, and products with snob appeal may see an increase in demand when prices rise. Signup and view all the answers

Define the Law of Supply.

The Law of Supply states that, all else being equal, as the price of a good rises, the quantity supplied increases; and as the price falls, the quantity supplied decreases. Signup and view all the answers

What causes a change in quantity demanded?

A change in quantity demanded is caused solely by a change in the price of the good or service, assuming all other factors remain constant. Signup and view all the answers

Explain the concept of market equilibrium.

Market equilibrium is a state where the supply of a product matches the demand for it. At this point, the price at which the quantity demanded equals the quantity supplied. Signup and view all the answers

What factors determine the elasticity of supply?

The elasticity of supply is determined by factors such as production time, storage capacity, ease of shifting resources, and the existence of excess capacity. Signup and view all the answers

How does a change in the price of a good affect the quantity supplied?

An increase in price leads to an increase in the quantity supplied, while a decrease in price results in a decrease in the quantity supplied. Signup and view all the answers