Economics Supply Quiz
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Questions and Answers

What happens to the supply curve when there is a decrease in supply?

  • It remains unchanged.
  • It becomes horizontal.
  • It shifts leftward from S0 to S1. (correct)
  • It shifts rightward from S0 to S2.

Which of the following is NOT an influence on selling plans that can change supply?

  • Expected future prices
  • Number of sellers
  • Consumer preferences (correct)
  • Prices of resources and other inputs

What occurs when the price of a complement in production rises?

  • The supply of the complement remains unchanged.
  • The supply of the complement itself decreases.
  • The supply of the related good decreases. (correct)
  • The supply of the related good increases.

How do expectations about future prices influence supply?

<p>They can either increase or decrease supply depending on the context. (B)</p> Signup and view all the answers

What impact would an increase in productivity have on the supply of a good?

<p>It would decrease costs and increase supply. (A)</p> Signup and view all the answers

How does the number of sellers in a market affect supply?

<p>More sellers increase supply. (B)</p> Signup and view all the answers

What happens to supply when the price of a substitute in production falls?

<p>Supply increases for the original good. (D)</p> Signup and view all the answers

Which of the following correctly describes the movement of the supply curve during an increase in supply?

<p>It shifts rightward. (A)</p> Signup and view all the answers

What results in a change in quantity supplied?

<p>A change in the price of the good (D)</p> Signup and view all the answers

What is meant by a surplus in the market?

<p>When the quantity supplied exceeds the quantity demanded (D)</p> Signup and view all the answers

At the market equilibrium, what is correct regarding buyers and sellers?

<p>Buyers’ and sellers’ plans are consistent (D)</p> Signup and view all the answers

If the price of a bottle is set at $1.50 and there are 11 million bottles supplied, what will happen in the market?

<p>There will be a surplus of 2 million bottles (C)</p> Signup and view all the answers

What occurs when there is a shortage in the market?

<p>Prices rise (A)</p> Signup and view all the answers

Which of the following influences supply other than price?

<p>Improvements in production efficiency (C)</p> Signup and view all the answers

Which of the following correctly defines equilibrium price?

<p>The price at which quantity demanded equals quantity supplied (A)</p> Signup and view all the answers

What happens to the price when there is a surplus in the market?

<p>It falls (D)</p> Signup and view all the answers

What happens to the supply curve of bottled water when there are more suppliers?

<p>It shifts rightward. (C)</p> Signup and view all the answers

How does an increase in supply affect the equilibrium price and quantity?

<p>Equilibrium price falls, equilibrium quantity increases. (A)</p> Signup and view all the answers

What is the outcome of a drought affecting the supply of bottled water?

<p>The supply of bottled water decreases. (C)</p> Signup and view all the answers

What happens to equilibrium quantity after a decrease in supply?

<p>Equilibrium quantity decreases. (D)</p> Signup and view all the answers

What effect does an increase in both demand and supply have on equilibrium price?

<p>Equilibrium price might rise, fall, or remain unchanged. (C)</p> Signup and view all the answers

Which statement best describes the relationship between supply changes and equilibrium price?

<p>Equilibrium price changes in the opposite direction to the change in supply. (D)</p> Signup and view all the answers

What happens when there is a surplus at $1 a bottle?

<p>The price will likely fall. (A)</p> Signup and view all the answers

How does an increase in demand affect the demand curve?

<p>It shifts rightward. (B)</p> Signup and view all the answers

What happens to the equilibrium quantity when both demand and supply increase?

<p>It increases. (D)</p> Signup and view all the answers

What is the effect on equilibrium price when both demand and supply decrease?

<p>It may rise, fall or remain unchanged. (D)</p> Signup and view all the answers

If demand decreases and supply increases, what is the impact on equilibrium price?

<p>It decreases. (D)</p> Signup and view all the answers

In a scenario where demand increases but supply decreases, what can be stated about the equilibrium quantity?

<p>It may increase, decrease or remain unchanged. (B)</p> Signup and view all the answers

What is the likely effect on the equilibrium price when both demand and supply increase simultaneously?

<p>The effect is uncertain. (B)</p> Signup and view all the answers

When demand decreases and supply decreases, what happens to the equilibrium quantity?

<p>It decreases. (D)</p> Signup and view all the answers

What is the outcome on equilibrium price when an increase in demand occurs alongside a decrease in supply?

<p>It increases. (A)</p> Signup and view all the answers

How does an increase in supply influence equilibrium price assuming demand remains constant?

<p>It lowers the price. (D)</p> Signup and view all the answers

What does a leftward shift of the demand curve indicate?

<p>A decrease in demand (A)</p> Signup and view all the answers

How does the demand for a substitute good change if the price of that substitute rises?

<p>It increases (A)</p> Signup and view all the answers

What happens to demand for a good if its price is expected to fall in the future?

<p>Demand decreases today (C)</p> Signup and view all the answers

What is the relationship between income and the demand for normal goods?

<p>Demand decreases when income decreases (B)</p> Signup and view all the answers

How do the availability of credit and future income expectations influence demand?

<p>Increased future income expectations lead to higher demand (A)</p> Signup and view all the answers

When the price of one of the complements falls, what effect does it have on the demand for the related good?

<p>Demand for the related good increases (B)</p> Signup and view all the answers

What defines an inferior good in terms of income effect?

<p>Demand decreases when income increases (C)</p> Signup and view all the answers

Which of the following factors is NOT an influence on changes in demand?

<p>Government regulations (A)</p> Signup and view all the answers

What primarily influences demand for big ticket items like homes and cars?

<p>Changes in expected future income (C)</p> Signup and view all the answers

How does the number of buyers in a market affect demand?

<p>Increases demand for goods (B)</p> Signup and view all the answers

What constitutes a change in the quantity demanded?

<p>A change in the price of the good itself (D)</p> Signup and view all the answers

Which statement accurately distinguishes between a change in demand and a change in quantity demanded?

<p>Change in demand occurs due to non-price influences; change in quantity demanded occurs due to price changes. (D)</p> Signup and view all the answers

What does the Law of Supply state regarding price and quantity supplied?

<p>Quantity supplied increases as price rises (A)</p> Signup and view all the answers

What is the relationship illustrated by a supply curve?

<p>Relationship between the quantity supplied and the price of the good (D)</p> Signup and view all the answers

How is market supply defined?

<p>The sum of the supplies of all sellers in a market (A)</p> Signup and view all the answers

What does a supply schedule represent?

<p>Quantities supplied at different prices when other influences remain constant (D)</p> Signup and view all the answers

Flashcards

Change in Quantity Supplied

A change in the amount of a good suppliers want to sell due to a price change of that good.

Change in Supply

A change in the total amount supplied of a good, not related to the current price.

Market Equilibrium

When quantity demanded equals quantity supplied, resulting in a stable market price.

Equilibrium Price

The price where quantity demanded and quantity supplied meet, creating balance in the market.

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Equilibrium Quantity

The amount of a good bought and sold at the equilibrium price.

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Shortage

When quantity demanded is higher than quantity supplied at a given price.

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Surplus

When quantity supplied is greater than quantity demanded at a given price.

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Law of Market Forces

The tendency of price to rise when a shortage exists and fall when a surplus exists, driving the market towards equilibrium.

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Change in Supply

A change in the quantity suppliers plan to sell, influenced by factors other than price.

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Supply Curve Shift Left

A decrease in supply; the curve moves to the left on a graph.

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Supply Curve Shift Right

An increase in supply; the curve moves to the right on a graph.

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Substitute in Production

A good that can be produced instead of another.

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Complement in Production

A good produced alongside another.

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Resource/Input Prices

Costs of producing a good; higher costs mean less supply.

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Number of Sellers

More sellers means greater overall market supply.

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Productivity

Output per unit of input (e.g., how much is produced with a given amount of resources).

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Supply increase bottled water

More suppliers of bottled water enter the market, causing the supply curve to shift rightward.

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Supply decrease bottled water

A decrease in bottled water suppliers, leading to a leftward shift in the supply curve.

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Equilibrium price change (supply)

The equilibrium price moves in the opposite direction of the supply change.

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Equilibrium quantity change (supply)

Equilibrium quantity changes in the same direction as the supply change.

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Demand curve shift (supply change)

A change in supply does not shift the demand curve, only the quantity demanded changes.

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Shortage in bottled water

When quantity demanded exceeds quantity supplied at a given price, resulting in a shortage.

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Surplus in bottled water

When quantity supplied exceeds quantity demanded at a given price, resulting in a surplus.

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Simultaneous changes in demand and supply

When both demand and supply change simultaneously, the effect on equilibrium price is uncertain, while equilibrium quantity always increases if both demand and supply increase.

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Increase in demand and supply

Equilibrium quantity increases, but equilibrium price change is uncertain.

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Decrease in demand and supply

Equilibrium quantity decreases, but equilibrium price change is uncertain.

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Decrease in demand and increase in supply

Equilibrium price decreases, but equilibrium quantity change is uncertain.

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Increase in demand and decrease in supply

Equilibrium price increases, but equilibrium quantity change is uncertain.

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Equilibrium quantity

The quantity of a good or service where supply and demand meet.

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Equilibrium price

The price at which supply and demand are equal.

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Avocado crop cycle

The change in avocado production from California to Mexico during the year.

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Market equilibrium

The state where market supply and demand balance each other.

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Demand for big ticket items

Demand for items like homes and cars is greatly affected by expected future income and credit availability.

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Number of buyers

More buyers in a market increase demand for any good.

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Preferences change

Changes in preferences cause higher demand for some items and lower demand for others.

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Change in Demand

A shift in the quantity demanded of a good when influenced by factors other than its price.

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Change in quantity demanded

Change in the quantity of a good people want to buy because its price changes.

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Demand Curve Shift Left

When the overall demand for a good decreases, and the demand curve moves to the left on a graph.

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Change in demand

Change in the quantity people are planning to buy due to influences other than price.

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Demand Curve Shift Right

When the overall demand for a good increases, and the demand curve moves to the right on a graph.

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Quantity supplied

The amount of a good sellers are willing and able to sell at a particular price and time.

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Law of Supply

When price increases, the amount supplied increases; when price decreases, the amount supplied decreases.

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Substitute Goods

Goods that can be used in place of each other; if the price of one increases, demand for the other increases.

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Complementary Goods

Goods that are consumed together; if the price of one falls, demand for the other increases.

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Market supply

The sum of the supplies of all sellers in a market.

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Future Price Expectations

If people believe a good will be more expensive in the future, they will demand more of it now.

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Income Effect on Demand

The impact of income changes on the demand for goods or services.

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Normal Good

A good where demand increases when income increases, and decreases when income decreases.

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Study Notes

Essential Foundations of Economics

  • Ninth Edition, Bade | Parkin

Avocado Price Fluctuations

  • Avocado prices fluctuate due to changes in supply.
  • The California crop typically ends in August, followed by the Mexican crop.
  • If Mexican production is not sufficient to replace the California crop, avocado prices increase.
  • Supply changes, not demand, are a key factor.

Demand and Supply

  • Chapter Checklist:
    • Distinguish quantity demanded from demand, and determine demand factors.
    • Distinguish quantity supplied from supply, and determine supply factors.
    • Explain how demand and supply interact to determine price and quantity.
    • Explain the impact of changes in demand and supply.

Competitive Markets

  • A market is any arrangement that brings buyers and sellers together.
  • Markets can be physical or a group of buyers/sellers globally.
  • Competitive markets have many buyers and sellers, none influencing the price.
  • Examples: Markets for shoes, coffee, bagels, and airline travel.

Demand

  • Quantity Demanded: The amount of a good, service, or resource people are willing and able to buy at a specific price during a specified period (e.g., per day or month).
  • Law of Demand: Other things being equal, the higher the price of a good, the smaller the quantity demanded; and the lower the price of a good, the greater the quantity demanded.
  • Demand: The relationship between the quantity demanded and the price of a good, holding all other influences on buying plans constant.
  • Demand Schedule: A table showing the quantities demanded at each price.
  • Demand Curve: A graph of the relationship between the quantity demanded and the price. The curve slopes downward.
  • Market Demand: The sum of individual demands in the market.
  • Changes in Demand: Shifts in the entire demand curve due to factors other than price (e.g., prices of related goods, expected future prices, income, expected future income and credit, number of buyers, preferences).

Demand Curve Shifts

  • Decrease in Demand: Leftward shift of the demand curve (new demand curve to the left of original), due to factors other than price.
  • Increase in Demand: Rightward shift of the demand curve (new demand curve to the right of original), due to factors other than price.

Factors Influencing Demand

  • Prices of Related Goods: Substitute goods (e.g., apples and oranges). Complementary goods (e.g., ice cream and fudge sauce).
  • Expected Future Prices: Expected future price increases can increase current demand.
  • Income: Normal goods (demand increases with income). Inferior goods (demand decreases with income).
  • Expected Future Income and Credit: Expectations of increased future income or easy credit can boost demand.
  • Number of Buyers: More buyers generally mean higher market demand.
  • Preferences: Changes in tastes or preferences can shift demand.

Change in Quantity Demanded vs. Change in Demand

  • Change in Quantity Demanded: Movement along a demand curve; caused by a change in the good's price.
  • Change in Demand: Shift of the entire demand curve. A change in any factor other than the good's price.

Supply

  • Quantity Supplied: The amount of a good, service, or resource that people are willing and able to sell at a specific price during a specified period (e.g., per day or month).
  • Law of Supply: Other things being equal, the higher the price of a good, the greater the quantity supplied; and the lower the price of a good, the smaller the quantity supplied.
  • Supply: The relationship between the quantity supplied and the price of a good when all other influences on selling plans remain the same.
  • Supply Schedule: A table showing the quantities supplied at each price.
  • Supply Curve: A graph of the relationship between the quantity supplied and the price. The curve slopes upward.
  • Market Supply: The sum of individual supply curves in a market.

Factors Influencing Supply

  • Prices of Related Goods: Substitute in production vs. Complement in production.
  • Prices of Resources and Other Inputs: Higher input costs usually mean lower quantity supplied.
  • Expected Future Prices: Expectations of future price rises often lead to lower immediate supply to capitalize on future prices.
  • Number of Sellers: More sellers usually mean higher market supply.
  • Productivity: Improvements in technology or efficiency often lower production costs and increase supply. A disaster could decrease supply.

Change in Quantity Supplied vs. Change in Supply

  • Change in Quantity Supplied: Movement along a supply curve; caused by a change in the good's price.
  • Change in Supply: Shift of the entire supply curve. A change in any factor other than the good's price.

Market Equilibrium

  • Market Equilibrium: Quantity demanded equals the quantity supplied. Buyers and sellers plans are consistent.
  • Equilibrium Price: The price at which the quantity demanded equals the quantity supplied.
  • Equilibrium Quantity: The quantity bought and sold at the equilibrium price.

Price Changes (Market Forces)

  • Shortage: Quantity demanded exceeds quantity supplied (price rises).
  • Surplus: Quantity supplied exceeds quantity demanded (price falls).

Predicting Price Changes

  • Determine if an event affects demand or supply.
  • Figure out if the event increases or decreases demand or supply.
  • Analyse the new equilibrium price and quantity.

Effects of Changes in Demand / Supply

  • Demand Changes: Supply curve doesn't change, but quantity supplied changes (same direction as the change in demand)
  • Supply Changes: Demand curve doesn't change, but quantity demanded changes (opposite direction as the change in supply).

Changes in Both Demand and Supply

  • If both demand and supply increase, the equilibrium quantity increases but equilibrium price may increase, decrease or stay the same.
  • If both demand and supply decrease, the equilibrium quantity decreases but equilibrium price may increase, decrease or stay the same.

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Essential Foundations of Economics Textbook PDF

Description

Test your understanding of the supply curve and the factors that influence supply in the market. This quiz covers key concepts such as shifts in supply, market equilibrium, and the effects of price changes. Prepare to delve into the dynamics of supply and demand!

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