Market Forces and Elasticity Quiz

Market Forces/ Elasticity

• Market Equilibrium: Equilibrium occurs when quantity demanded equals quantity supplied (Qd = Qs).
• Surplus: When quantity supplied exceeds quantity demanded at a price above equilibrium, a surplus exists.
• Shortage: When quantity demanded exceeds quantity supplied at a price below equilibrium, a shortage occurs.
• Shifts in Demand Curve: Changes in factors other than price (e.g., income, consumer tastes) cause shifts in the demand curve, affecting both equilibrium price and quantity.
• Demand Curve Shifts: An outward shift in the demand curve increases both equilibrium price and quantity. Conversely, an inward shift decreases both.

Demand and Supply Equilibrium

• Changes in Demand: A shift in demand (not a movement along the demand curve, which is just a change in quantity demanded) affects equilibrium price and quantity.
• Changes in Supply: Changes in the determinants of supply (price of inputs, technology, etc.) will cause shifts in the supply curve and consequently impact equilibrium price and quantity.
• Increase in Demand: The equilibrium price and quantity increase as demand increases.
• Decrease in Demand: The equilibrium price and quantity decrease as demand decreases.
• Increase in Supply: The equilibrium price decreases, and quantity increases when supply increases.
• Decrease in Supply: The equilibrium price increases, and quantity decreases when supply decreases.

Elasticity of Demand

• Price Elasticity of Demand: Measures the responsiveness of quantity demanded to a change in price.
• Income Elasticity of Demand: Measures how responsive quantity demanded is to changes in consumer income.
• Cross-Price Elasticity: Measures how the quantity demanded of one good responds to a change in the price of another good.
• Degree of Elasticity: Determines the sensitivity of quantity demanded to a change in one of those factors.

Test your knowledge on market equilibrium, surplus, and shortage with this quiz. Understand how shifts in demand and supply curves affect the market dynamics. Perfect for students studying economics and market forces.