24 Questions
What is the direction of the supply curve?
Upward to the right
Which of the following is a non-price determinant of supply?
Producer's expectation
What happens to the demand curve when there is an increase in income?
It shifts to the right
What is the relationship between the price of complementary goods and their demand?
When the price of one good increases, the demand for the other good decreases
What is the Law of Supply?
The higher the price, the higher the quantity supplied
Which of the following is an example of complementary goods?
Key and lock
What is the primary consideration for a seller when determining profitability?
The price of the good
What is the effect of an increase in taxes on the supply of a good?
It decreases the supply of the good
What happens to the supply of goods when there is a tax increase?
The supply decreases
What is the effect of good weather on the supply of goods?
There is an abundance of supply
What is the primary purpose of a subsidy?
To assist an industry or business to keep prices low
What happens to the supply of goods when there is an expectation of a price increase in the future?
The supply decreases temporarily
What is the effect of an increase in the number of sellers or producers on the supply of goods?
The supply increases
What is the role of technology in the supply of goods?
It helps to increase the supply
What is the effect of a charitable institution on the supply of services?
The supply of services increases
What determines the supply of goods and services?
The price of the good and other relevant factors
What is the most important determinant of demand?
Price
What happens to the demand curve when there is a decrease in quantity?
It shifts to the left
What is an example of a non-price determinant of demand?
All of the above
What type of goods are considered alternatives to each other?
Substitute goods
What happens to the quantity demanded when there is an increase in consumer income?
It increases
What is the relationship between the price of a good and the quantity demanded?
Inverse
What is an example of a determinant of demand that is related to the consumer's expectations?
Price/consumer expectation
What type of goods are considered to be used together?
Complementary goods
Study Notes
Complementary Goods
- A complementary good is a product that works or partners with another good.
- If one of the two products undergoes a price increase, both products' demands will decrease.
- Examples of complementary goods include key and lock, or printer and ink.
Income and Demand
- An increase in income will shift the demand curve to the right.
- Determinants of demand include price, income, taste and preferences, population, price/consumer expectation, and price of related goods.
Law of Supply
- There is a direct relationship between price and quantity supplied.
- The supply curve slopes upward to the right.
- As price increases, supply will also increase.
Determinants of Supply
- Price is considered first to determine profitability.
- Non-price determinants include:
- Taxes: An increase in taxes will decrease supply.
- Subsidy: A government grant to assist an industry or business.
- Weather: Good weather can increase supply, while bad weather can lead to shortages.
- Technology: Upgrading technology can increase supply.
- Producer's expectation: Expecting higher prices in the future may lead to hoarding products.
- Price of related goods: Similar to the demand.
- Number of sellers or producers: An increase in sellers or producers can lead to a profit.
Taxes
- Taxes are a government revenue that comes from households and firms.
- Types of taxes include:
- Tax stamp (Buwis): Found in cigarettes, alcohol, etc.
- Donor's tax: A tax on a donation or gift.
Subsidy
- A subsidy is a sum of money granted to assist an industry or business.
- Subsidy can help keep prices low or competitive.
Technology
- Technology can help produce more goods and services.
- It is used for marketing, advertisements, feedback, and producing more services.
Changes in Demand
- A shift to the right on the demand curve indicates an increase in quantity.
- A shift to the left on the demand curve indicates a decrease in quantity.
- Y-axis represents price, while X-axis represents quantity.
Learn about complementary goods, how they affect demand, and the factors that influence demand in microeconomics.
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