Economics: Law of Supply

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What is the result of a minimum price fixed above the equilibrium price in an agricultural market?

Increase in the demand for the product

Surplus in the market (correct)

No change in the market equilibrium

Shortage in the market

In a free-market economy, what is one of the advantages?

State ownership of businesses

Reduction in consumer prices

Incentives to be efficient (correct)

Monopolistic practices

What is one of the problems of a free-market economy?

Reduced environmental pollution

High unemployment

Lack of government intervention

Increased inequality (correct)

What is a type of intervention in a mixed economy?

Use of taxes, subsidies and benefits Signup and view all the answers

What is the name of the economy that combines elements of free-market and government intervention?

Mixed economy Signup and view all the answers

What is the purpose of a price ceiling?

To limit the price a seller can charge for a good Signup and view all the answers

What happens to the demand curve when there is an increase in consumer income if the good is normal?

It shifts to the right Signup and view all the answers

What is the effect of a minimum wage on the labor market?

It decreases the quantity supplied of labor Signup and view all the answers

What is the result of a market equilibrium?

The quantity demanded equals the quantity supplied Signup and view all the answers

What is the difference between a movement along a supply curve and a shift of the supply curve?

A movement along the supply curve is a change in quantity supplied, while a shift of the supply curve is a change in price Signup and view all the answers

What is the purpose of a price floor?

To limit the price a buyer can pay for a good Signup and view all the answers

What happens to the quantity supplied when the price of a good increases, according to the law of supply?

It increases Signup and view all the answers

What is the term for the study of the change in competitive equilibrium when one of the variables affecting demand or supply changes?

Comparative statics Signup and view all the answers

What is the result of an increase in supply?

An increase in quantity supplied at each price Signup and view all the answers

What is the term for the point at which the quantity supplied equals the quantity demanded?

Market equilibrium Signup and view all the answers

What is the purpose of the price mechanism in a free market?

To act as a signal and incentive, and as a rationing device Signup and view all the answers

What happens to the price in a free market when there is a surplus?

It falls Signup and view all the answers

What is the term for a situation in which the quantity supplied is greater than the quantity demanded?

Excess supply Signup and view all the answers

What happens to the price in a free market when there is a shortage?

It rises Signup and view all the answers

What is the graph that shows the relationship between the price of a good and the quantity supplied?

Supply curve Signup and view all the answers

What is the term for a change in the quantity supplied in response to a change in price?

Movement along the supply curve Signup and view all the answers