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Questions and Answers
What does a normal upward sloping supply curve indicate about the quantity of a good supplied?
What does a normal upward sloping supply curve indicate about the quantity of a good supplied?
- Greater quantity is supplied at higher prices. (correct)
- Constant quantity is supplied regardless of price.
- Quantity supplied decreases as price increases.
- Less quantity is supplied at higher prices.
What happens when the price of a good is above the equilibrium price?
What happens when the price of a good is above the equilibrium price?
- The market experiences excess supply. (correct)
- The demand curve shifts leftward.
- Demand becomes perfectly inelastic.
- Excess demand creates shortages.
Which factor is likely to shift the demand curve to the right?
Which factor is likely to shift the demand curve to the right?
- A decrease in consumer incomes.
- A rise in taste for the good. (correct)
- An increase in the price of substitutes.
- An increase in the price of the good itself.
What is the primary relationship illustrated by a demand curve?
What is the primary relationship illustrated by a demand curve?
What does a leftward shift in the supply curve indicate?
What does a leftward shift in the supply curve indicate?
In competitive markets, how is equilibrium price defined?
In competitive markets, how is equilibrium price defined?
What could cause a movement along the demand curve?
What could cause a movement along the demand curve?
What defines a supply schedule?
What defines a supply schedule?
What happens to the supply curve when the price of an input, such as sugar, increases?
What happens to the supply curve when the price of an input, such as sugar, increases?
What does the demand curve represent?
What does the demand curve represent?
How is the market demand curve constructed?
How is the market demand curve constructed?
What is the equilibrium price determined by in a competitive market?
What is the equilibrium price determined by in a competitive market?
What happens to the demand curve if consumer income rises for a normal good?
What happens to the demand curve if consumer income rises for a normal good?
If Americans become more health conscious resulting in fewer candy bars consumed, what occurs to the demand curve?
If Americans become more health conscious resulting in fewer candy bars consumed, what occurs to the demand curve?
At what price does Roger and Jane collectively demand 20 candy bars?
At what price does Roger and Jane collectively demand 20 candy bars?
In a demand schedule, which statement is true?
In a demand schedule, which statement is true?
If the price of candy bars increases, what is the expected effect on the demand curve?
If the price of candy bars increases, what is the expected effect on the demand curve?
What effect does a leftward shift in the supply curve typically have on price and quantity?
What effect does a leftward shift in the supply curve typically have on price and quantity?
Which of the following best describes the concept of demand?
Which of the following best describes the concept of demand?
What concept describes the tendency of the market to return to equilibrium when disrupted?
What concept describes the tendency of the market to return to equilibrium when disrupted?
What is primarily illustrated by a demand schedule?
What is primarily illustrated by a demand schedule?
Which of the following correctly defines elasticity of demand?
Which of the following correctly defines elasticity of demand?
Which factor would cause a leftward shift in the demand curve for candy bars?
Which factor would cause a leftward shift in the demand curve for candy bars?
Which factor is most likely to cause a rightward shift in the demand curve?
Which factor is most likely to cause a rightward shift in the demand curve?
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Study Notes
The Law of Supply and Demand
- Supply Curve: Firms supply a greater quantity when prices are higher and a lesser quantity when prices are lower.
- Market Supply Curve: This represents the total quantity of a good all firms in the economy are willing to produce at each price. As the price rises, supply increases because individual firms supply more and new firms enter the market.
- Equilibrium Price: The price at which quantity demanded equals quantity supplied in a competitive market.
- Equilibrium Point: The intersection of the demand and supply curves.
- Demand Curve: Shows the relationship between the quantity demanded of a good and its price.
- Factors Influencing Demand: Changes in:
- Tastes
- Demographics
- Income
- Prices of other goods
- Information
- Credit availability
- Expectations
- Supply Curve: Shows the relationship between quantity supplied of a good and its price.
- Factors Influencing Supply: Changes in:
- Technology
- Prices of inputs
- Natural environment
- Expectations
- Credit availability
Market Demand Curve
- How to Construct: Add up the quantities demanded by each individual in the market at each price.
- Example: In a market with Roger and Jane, their individual demand curves are added horizontally to obtain the market demand curve.
Equilibrium
- No Incentive to Change: At equilibrium, no buyer or seller has incentive to change the price or quantity.
- Market Adjustment: Markets tend to adjust toward equilibrium when the price is not at the intersection of the demand and supply curves.
- Law of Supply and Demand: This law states that in competitive markets, prices tend to be at the equilibrium point. It doesn't mean that prices are always precisely at equilibrium, but rather that forces exist to move the market towards that point.
Using Demand and Supply Curves
- Shifting Demand Curve: A shift in demand can be caused by factors like increased health consciousness which would decrease the demand for candy bars.
- Shifting Supply Curve: A shift in supply can be caused by factors like increased sugar prices, which would reduce the amount of candy firms are willing to supply.
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