Economics on Supply and Demand Equilibrium
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Questions and Answers

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?

  • 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?

  • 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?

    <p>Increases the demand because total costs decrease</p> Signup and view all the answers

    What would lead to a decrease in both the equilibrium price and quantity in the market?

    <p>A decrease in demand for the good</p> Signup and view all the answers

    What is the primary focus of economics?

    <p>How agents allocate scarce resources</p> Signup and view all the answers

    Which of the following is true about demand?

    <p>Effective demand requires the ability to pay</p> Signup and view all the answers

    How does supply change in relation to price?

    <p>Supply increases as prices rise</p> Signup and view all the answers

    What differentiates goods from services?

    <p>Goods can be stored, while services cannot</p> Signup and view all the answers

    What does the demand curve illustrate?

    <p>How much consumers want to buy at different prices</p> Signup and view all the answers

    What does a shift in the demand curve indicate?

    <p>Changes in consumer preferences or income</p> Signup and view all the answers

    Which statement about market prices in a competitive market is correct?

    <p>The interaction between buyers and sellers determines prices</p> Signup and view all the answers

    What factor primarily affects the shape of a demand curve?

    <p>The availability of substitutes</p> Signup and view all the answers

    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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    Related Documents

    Unit 1 - Supply Demand Equilibrium PDF

    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.

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