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Questions and Answers
What happens to the equilibrium price and quantity when there is an increase in demand?
What happens to the equilibrium price and quantity when there is an increase in demand?
- Equilibrium price increases, quantity decreases
- Equilibrium price increases, quantity increases (correct)
- Equilibrium price decreases, quantity increases
- Equilibrium price remains the same, quantity decreases
Which scenario describes excess demand in the market?
Which scenario describes excess demand in the market?
- Sellers are willing to supply more than buyers want at equilibrium price
- Buyers reduce their demand as prices increase
- Buyers demand more at a price lower than the equilibrium price (correct)
- Sellers reduce their supply due to high prices
What occurs when there is a decrease in supply in the market?
What occurs when there is a decrease in supply in the market?
- Equilibrium price increases, quantity decreases (correct)
- Equilibrium price remains the same, quantity decreases
- Equilibrium price decreases, quantity increases
- Equilibrium price increases, quantity remains the same
How does a decrease in the price of complements affect the demand for a good or service?
How does a decrease in the price of complements affect the demand for a good or service?
What would lead to a decrease in both the equilibrium price and quantity in the market?
What would lead to a decrease in both the equilibrium price and quantity in the market?
What is the primary focus of economics?
What is the primary focus of economics?
Which of the following is true about demand?
Which of the following is true about demand?
How does supply change in relation to price?
How does supply change in relation to price?
What differentiates goods from services?
What differentiates goods from services?
What does the demand curve illustrate?
What does the demand curve illustrate?
What does a shift in the demand curve indicate?
What does a shift in the demand curve indicate?
Which statement about market prices in a competitive market is correct?
Which statement about market prices in a competitive market is correct?
What factor primarily affects the shape of a demand curve?
What factor primarily affects the shape of a demand curve?
Flashcards
Economic Agent
Economic Agent
An individual or group that makes economic choices.
Demand
Demand
The amount of a good or service consumers want and can buy at a certain price.
Supply
Supply
The amount of a good or service sellers are willing to offer at different prices.
Market Equilibrium
Market Equilibrium
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Goods
Goods
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Services
Services
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Demand Curve
Demand Curve
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Supply Curve
Supply Curve
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Demand Curve Slope
Demand Curve Slope
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Excess Demand
Excess Demand
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Excess Supply
Excess Supply
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Equilibrium Price
Equilibrium Price
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Increased Demand Effect
Increased Demand Effect
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Study Notes
Supply and Demand Equilibrium
- Economics studies human behavior, decisions like buying a car, saving money, or investing.
- Economic outcomes result from individual or group choices (consumers, universities, army, government).
- Economics studies how agents allocate scarce resources and how these choices affect society.
- Demand and supply are fundamental market factors.
- Goods are tangible items (appliances, clothes, cars), while services are intangible (haircuts, repairs).
- Supply is the amount of goods/services sellers are willing to provide at different prices; supply increases with price.
Goods and Services
- Goods are physical items (tangible), while services are actions (intangible).
Supply
- Supply shows the relationship between price and the amount sellers are willing to produce.
- The supply curve slopes upward. Higher prices lead to higher quantities supplied.
Demand
- Demand shows the relationship between price and the quantity consumers are willing to buy.
- The demand curve slopes downward. Higher prices lead to lower quantities demanded.
Demand and Supply Equilibrium
- Equilibrium is where supply and demand curves intersect.
- At this point, the quantity supplied equals the quantity demanded and both buyers and sellers are satisfied.
- Excess demand (Shortage): price is lower than equilibrium price, quantity demanded exceeds quantity supplied.
- Excess supply (Surplus): price is higher than equilibrium price, quantity supplied exceeds quantity demanded
Factors Affecting Demand
- Price of complements/substitutes
- Consumer income
- Consumer preferences (trends)
- Population changes
Factors Affecting Supply
- Input costs (materials, labor)
- Technology advancements
- Government regulations
- Number of sellers
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Description
This quiz explores the fundamental concepts of supply and demand in economics. It examines how individual and group choices influence market outcomes and the relationship between price and quantity supplied or demanded. Test your understanding of goods, services, and their significance in economic decision-making.
