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Questions and Answers
An expected increase in income leads to a decrease in current demand for normal goods.
False
According to the law of supply, an increase in the price of a good results in a decrease in the quantity supplied.
False
An increase in price will decrease the quantity of goods supplied.
False
Market supply is the sum of the individual supply from all sellers in the market.
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Market supply is the aggregate of individual supply curves for a good or service.
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If the price of Starbucks coffee increases, Peet’s Coffee will also likely increase its quantity supplied due to the substitution effect.
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Substitute goods are those that increase in demand when prices for another good fall.
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Inferior goods are goods for which demand increases as consumer income rises.
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Normal goods are those for which demand decreases as income increases.
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A movement along the supply curve indicates a change in supply due to changes in factors other than price.
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An increase in price leads to an increase in the quantity demanded.
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Market demand is the sum of individual demands for a good or service.
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Normal goods experience an increase in demand when consumer income decreases.
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Substitute goods can have a positive relationship in demand where an increase in the price of one leads to an increase in demand for the other.
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The law of supply states that an increase in price usually results in a decrease in the quantity supplied.
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Market supply is determined by the total supply from all individual suppliers in a market.
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Demand determinants include factors such as consumer preferences, income levels, and prices of related goods.
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If the price of muffins increases, parent demand for muffins will likely remain unchanged.
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Study Notes
Supply
- The quantity supplied is the amount of a good sellers are willing and able to sell
- The Law of Supply: If the price of a good rises, the quantity supplied of the good also rises, and vice versa
- Supply is the relationship between the price and the quantity supplied, demonstrated through a table or graph
- Market Supply is the sum of the supplies of all sellers for a good or service
- The market supply curve is the sum of individual supply curves
- Market Supply is the relationship between the price and the total quantity supplied, holding other factors constant
Changes in Supply
- Changes in supply are due to changes in price, which result in a movement along the supply curve
- Changes in supply can also occur due to factors that are not price related, such as a change in the cost of production or technology
- These factors result in a shift of the supply curve
Demand
- Market Demand is the sum of all individual demands for a good or service
- The market demand curve is the sum of the individual demand curves
- Market Demand is the relationship between the price and the total quantity demanded, holding constant all other factors
- Changes in demand are due to changes in price, which result in a movement along the demand curve.
- Changes in demand can also occur due to factors that are not price-related, such as changes in income, tastes, or the prices of related goods. These factors result in a shift of the demand curve
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