Economics Supply Concepts
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Questions and Answers

What is the relationship between the price of a good and the quantity supplied, according to the law of supply?

  • As price increases, quantity supplied increases. (correct)
  • As price decreases, quantity supplied increases.
  • As price increases, quantity supplied decreases.
  • As price decreases, quantity supplied decreases.

    • What does ceteris paribus mean in the context of a supply schedule?

  • The supply curve is always shifting.
  • All other factors are held constant. (correct)
  • Prices are constantly changing.
  • The quantity supplied is always increasing.

    • According to the market supply schedule for Gobstoppers, how many boxes would producers supply if the price was $1.50?

  • 200 (correct)
  • 100
  • 150
  • 250

    • What is the primary motive for producers to increase production levels according to the law of supply?

    <p>To maximize profit (B)</p> Signup and view all the answers

    What is the relationship between the supply curve and the law of supply?

    <p>The supply curve is a representation of the law of supply. (D)</p> Signup and view all the answers

    What causes the demand curve to shift to the right?

    <p>An increase in the number of consumers (A), A rise in consumer incomes (B)</p> Signup and view all the answers

    What is the primary effect of the Law of Diminishing Marginal Utility on consumer behavior?

    <p>Consumers experience less additional satisfaction with each additional unit consumed. (A)</p> Signup and view all the answers

    Which of the following correctly defines the law of diminishing marginal utility?

    <p>Utility decreases with increased consumption of the same good (D)</p> Signup and view all the answers

    What is the relationship between price changes and quantity demanded?

    <p>Price changes directly affect the quantity demanded along the demand curve (A)</p> Signup and view all the answers

    Which factor is NOT necessary for there to be demand for a product?

    <p>Availability of the product in stores (B)</p> Signup and view all the answers

    What does a downward sloping demand curve indicate?

    <p>Both B and C are correct. (B)</p> Signup and view all the answers

    Which factor contributes to the substitution effect?

    <p>An increase in the price of a good causing consumers to seek alternatives (B)</p> Signup and view all the answers

    What is the impact of falling prices on purchasing power?

    <p>It increases purchasing power (C)</p> Signup and view all the answers

    How does a Market Demand Schedule differ from an individual Demand Schedule?

    <p>It includes the total quantity demanded by all consumers at various prices. (D)</p> Signup and view all the answers

    What does 'Ceteris Paribus' primarily relate to in demand analysis?

    <p>Only changes in price impact the demand curve. (C)</p> Signup and view all the answers

    Flashcards

    What is Supply?

    The amount of goods available for sale.

    Law of Supply

    As price increases, the production of goods also increases.

    Quantity Supplied

    The specific amount of a good supplied at a particular price.

    Supply Schedule

    A table showing the relationship between price and quantity supplied.

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    Supply Curve

    A graphical representation showing how quantity supplied varies with price.

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    Demand Curve

    A graphical representation showing the relationship between price and quantity demanded.

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    Substitution Effect

    When consumers buy less of a more expensive item and more of a cheaper alternative.

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    Income Effect

    Changes in purchasing power due to price changes affecting demand.

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    Complementary Goods

    Products that are often consumed together, where demand for one affects the other.

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    Shifters of Demand

    Factors that move the entire demand curve, affecting demand at every price level.

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    Law of Diminishing Marginal Utility

    As consumption increases, additional satisfaction decreases.

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    Demand Schedule

    A table showing quantity demanded at various prices.

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    Market Demand Schedule

    Total quantity demanded at various prices by all customers.

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    Ceteris Paribus

    Means 'all other things held constant' in analysis.

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    Study Notes

    Supply

    • Supply is the amount of goods available
    • As price increases, so does product production
    • Quantity Supplied: How much of a good is supplied at a specific price
    • Firms changing production levels + Firms entering and exiting the market = Law of Supply
    • Profit is the motive for production
    • Supply Schedule: shows the relationship between the price of a good and the quantity supplied
      • The schedule's variables are Price and Quantity Supplied
      • It only considers price, not all possibilities
      • All other things are held constant, or ceteris parabus
    • Market Supply Schedules show the combined quantities supplied by all producers at different prices
    • Supply Curve: a graph of the supply schedule
      • Shows the relationship between price and quantity supplied
      • Price is on the y-axis, and Quantity Supplied is on the x-axis
      • The curve slopes upward because a higher price encourages firms to produce more of the good
    • In a supply curve, as price increases quantity supplied increases.

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    Description

    Test your knowledge on the fundamental concepts of supply in economics. This quiz covers key topics such as the law of supply, supply schedules, and the supply curve. Understand how price influences quantity supplied and the factors affecting production decisions.

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