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Questions and Answers
What determines the demand for a good in a market?
What determines the demand for a good in a market?
When the cost of producing a good changes due to a new technology, what occurs in the supply curve?
When the cost of producing a good changes due to a new technology, what occurs in the supply curve?
Market equilibrium occurs when:
Market equilibrium occurs when:
What causes a movement along the supply curve for a good?
What causes a movement along the supply curve for a good?
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If the price of a good decreases and quantity supplied decreases as well, what has occurred?
If the price of a good decreases and quantity supplied decreases as well, what has occurred?
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Which factor does NOT influence market equilibrium?
Which factor does NOT influence market equilibrium?
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What will happen if there is excess demand in a market?
What will happen if there is excess demand in a market?
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'What is determined by the intersection of supply and demand curves?'
'What is determined by the intersection of supply and demand curves?'
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If there is an increase in production costs for a good, what is likely to happen to its market equilibrium price?
If there is an increase in production costs for a good, what is likely to happen to its market equilibrium price?
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What happens to market equilibrium when both demand and supply decrease?
What happens to market equilibrium when both demand and supply decrease?
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Study Notes
Demand Factors
- Consumer preferences
- Consumer incomes
- Prices of related goods
- Number of buyers in the market
- Expectations about future prices
Supply Factors
- Technology
- Cost of resources
- Government policies
- Number of sellers in the market
- Expectations about future prices
Supply Curve Shift
- A new technology that reduces costs, shifts the supply curve to the right, leading to a higher quantity supplied at each price.
Market Equilibrium
- Occurs when the quantity supplied equals the quantity demanded at a given price.
Movement Along the Supply Curve
- A change in price causes a movement along the supply curve.
Decreasing Price and Supply
- A decrease in price and a decrease in quantity supplied suggests a shift in the supply curve to the left.
Non-Influential Factor
- Consumer tastes do not affect market equilibrium.
Excess Demand
- Excess demand causes a shortage - the price of the good will increase until the quantity demanded equals the quantity supplied.
Equilibrium Determination
- The market equilibrium price and quantity are determined by the intersection of the supply and demand curves.
Increase in Production Costs
- An increase in production costs would likely lead to an increase in the market equilibrium price.
Decreasing Supply and Demand
- If both supply and demand decrease, the impact on the equilibrium price is uncertain, but quantity is sure to decrease.
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Description
Test your understanding of the principles of demand, supply, and market equilibrium as outlined in Chapter 3 of the twelfth edition of Principles of Microeconomics. Questions cover topics such as the law of demand and supply, determinants of demand and supply, demand and supply graphs, and how equilibrium price and quantity are determined.
