Questions and Answers
What does the supply curve show the relationship between?
What does the upward slope of the supply curve reflect?
Law of supply
Why does the quantity demanded of a good increase when its price falls?
Lower price increases the real incomes of buyers, enabling them to buy more.
What does it mean when economists say the demand for a product has increased?
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What does the rationing function of prices refer to?
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What is presumed to be the most important variable in determining the quantity demanded?
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When is a product market in equilibrium?
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What happens to quantity demanded when product price increases?
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What does an effective price floor result in?
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What are digital cameras and memory cards considered?
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Study Notes
Supply and Demand Concepts
- The supply curve illustrates the correlation between price and the quantity supplied.
- The upward slope of the supply curve is indicative of the law of supply, which states that as prices rise, the quantity supplied increases.
Pricing and Demand
- A decrease in the price of a good typically leads to an increase in quantity demanded, as lower prices enhance consumers' real incomes.
- An increase in demand means consumers are inclined to purchase more at every price point.
Market Dynamics
- Prices function to equalize quantity demanded and quantity supplied in a competitive market, known as the rationing function of prices.
- The demand curve primarily depends on the product's price as the crucial variable influencing the quantity demanded.
Equilibrium State
- Market equilibrium occurs where the demand and supply curves intersect, indicating a balance between quantity demanded and supplied.
Price Impact
- An increase in the product price generally results in a decrease in quantity demanded due to the inverse relationship between price and demand.
- Implementing an effective price floor can create a surplus of products as it sets a minimum price above equilibrium.
Product Relationships
- Digital cameras and memory cards are classified as complementary goods, suggesting they are typically bought together and their demand is interconnected.
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Description
Test your understanding of key concepts in Microeconomics Chapter 3. This quiz covers important terms such as the supply curve, law of supply, and the relationship between price and quantity supplied. Ideal for students looking to reinforce their knowledge in economics.
