Economics: Supply and Demand Basics

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Questions and Answers

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?

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?

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?

The relationship between price and quantity demanded. Signup and view all the answers

What does a leftward shift in the supply curve indicate?

A decrease in supply due to higher input prices. Signup and view all the answers

In competitive markets, how is equilibrium price defined?

The price at which quantity demanded equals quantity supplied. Signup and view all the answers

What could cause a movement along the demand curve?

A change in the price of the good itself. Signup and view all the answers

What defines a supply schedule?

A table indicating the various quantities a supplier is willing to sell at different prices. Signup and view all the answers

What happens to the supply curve when the price of an input, such as sugar, increases?

The supply curve shifts to the left. Signup and view all the answers

What does the demand curve represent?

The quantity of a good demanded at each price Signup and view all the answers

How is the market demand curve constructed?

By adding the quantities demanded by each individual at each price Signup and view all the answers

What is the equilibrium price determined by in a competitive market?

The point where supply equals demand. Signup and view all the answers

What happens to the demand curve if consumer income rises for a normal good?

The demand curve shifts to the right Signup and view all the answers

If Americans become more health conscious resulting in fewer candy bars consumed, what occurs to the demand curve?

The demand curve shifts to the left. Signup and view all the answers

At what price does Roger and Jane collectively demand 20 candy bars?

$0.75 Signup and view all the answers

In a demand schedule, which statement is true?

It indicates quantities demanded at various prices. Signup and view all the answers

If the price of candy bars increases, what is the expected effect on the demand curve?

The quantity demanded will decrease along the curve Signup and view all the answers

What effect does a leftward shift in the supply curve typically have on price and quantity?

Higher price and lower quantity. Signup and view all the answers

Which of the following best describes the concept of demand?

The desire and ability of consumers to purchase a good Signup and view all the answers

What concept describes the tendency of the market to return to equilibrium when disrupted?

Law of supply and demand. Signup and view all the answers

What is primarily illustrated by a demand schedule?

The quantity of a good demanded at different prices Signup and view all the answers

Which of the following correctly defines elasticity of demand?

The percentage change in quantity consumed due to a price change. Signup and view all the answers

Which factor would cause a leftward shift in the demand curve for candy bars?

A rise in the price of complementary goods Signup and view all the answers

Which factor is most likely to cause a rightward shift in the demand curve?

An increase in consumer income. Signup and view all the answers

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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Description

Test your understanding of the fundamental concepts of supply and demand in economics. This quiz covers important elements like the supply and demand curves, equilibrium price, and factors that influence both supply and demand. Perfect for students studying introductory economics or business.