Microeconomics Demand Curve Quiz
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Questions and Answers

What happens to the demand curve when there is an increase in demand?

  • It becomes steeper.
  • It shifts leftward.
  • It remains unchanged.
  • It shifts rightward. (correct)

Which factor is NOT a main reason for change in demand?

  • Expected future prices
  • Population
  • Availability of Resources (correct)
  • Income

If the price of Coca Cola rises, what will likely occur to the demand for its substitute, Pepsi Cola?

  • Demand for Pepsi Cola will remain unchanged.
  • Demand for Pepsi Cola will increase. (correct)
  • Demand for Pepsi Cola will become unpredictable.
  • Demand for Pepsi Cola will decrease.

How does a decrease in demand manifest on a demand curve?

<p>The curve shifts to the left. (A)</p> Signup and view all the answers

What is the relationship between the price of a substitute good and the demand for another good?

<p>They have a positive relationship. (C)</p> Signup and view all the answers

Which of the following is an example of a complement?

<p>Coffee and sugar (B)</p> Signup and view all the answers

Which of the following factors would NOT influence expected future prices?

<p>Consumer preferences (C)</p> Signup and view all the answers

To which of the following does the term 'individual demand' refer?

<p>The demand of one specific consumer for a good. (B)</p> Signup and view all the answers

What can be inferred from a rise in price on the demand curve?

<p>Quantity demanded decreases. (C)</p> Signup and view all the answers

How does the demand curve function in terms of willingness to pay?

<p>The demand curve illustrates the relationship between quantity available and price willing to pay. (D)</p> Signup and view all the answers

What distinguishes individual demand from market demand?

<p>Individual demand pertains to the demand of one consumer. (A)</p> Signup and view all the answers

Which statement accurately describes movement along the demand curve?

<p>Movement down the curve indicates an increase in quantity demanded. (A)</p> Signup and view all the answers

What effect does a decrease in price have on quantity demanded?

<p>It increases quantity demanded and causes movement down along the demand curve. (C)</p> Signup and view all the answers

What does the law of demand primarily imply?

<p>As price increases, quantity demanded decreases. (C)</p> Signup and view all the answers

In the context of the demand curve, what is marginal benefit?

<p>The amount a consumer is willing to pay for an additional unit. (B)</p> Signup and view all the answers

If the market demand increases, what can be inferred about individual consumer demands?

<p>At least one individual's demand must have increased. (A)</p> Signup and view all the answers

What best describes a competitive market?

<p>A market with many buyers and many sellers where no single entity can influence prices (B)</p> Signup and view all the answers

Which factor is most likely to cause a change in demand rather than a change in quantity demanded?

<p>A change in consumer preferences away from the product (B)</p> Signup and view all the answers

Which of the following statements about producer surplus is accurate?

<p>It represents the difference between the total revenue and total cost for producers (D)</p> Signup and view all the answers

How is absolute price distinguished from relative price in economics?

<p>Absolute price represents a single good's price, while relative price reflects the price in comparison to another good (C)</p> Signup and view all the answers

What happens to market supply when the number of producers decreases?

<p>Market supply decreases (C)</p> Signup and view all the answers

What is the primary outcome when both the demand and supply curves shift to the right?

<p>Market equilibrium price increases and equilibrium quantity increases (D)</p> Signup and view all the answers

How does a reduction in corporate tax rates affect the supply of goods?

<p>Supply will increase (B)</p> Signup and view all the answers

What determines the structure of the market for a specific good?

<p>The relationship between the number of buyers and sellers in the market (A)</p> Signup and view all the answers

Which of the following accurately represents what happens when the supply curve shifts leftward?

<p>Equilibrium price increases while equilibrium quantity decreases (A)</p> Signup and view all the answers

What effect do advances in technology generally have on supply?

<p>They increase supply and shift the supply curve rightward (A)</p> Signup and view all the answers

Which of the following accurately describes a supply shock?

<p>A event that greatly decreases supply, like bad weather (A)</p> Signup and view all the answers

Which situation would likely cause a decrease in the quantity supplied of a good?

<p>An increase in production costs (B)</p> Signup and view all the answers

What primarily causes a change in the quantity supplied of a good?

<p>Changes in the price of the good itself (B)</p> Signup and view all the answers

What impact does the removal of a subsidy have on the supply curve of a specific product?

<p>It causes the supply curve to shift leftward (C)</p> Signup and view all the answers

What best describes the relationship between the number of suppliers in a market and overall supply?

<p>An increase in suppliers increases supply (C)</p> Signup and view all the answers

What is the consequence of a natural disaster on supply?

<p>It decreases supply and shifts the supply curve leftward (C)</p> Signup and view all the answers

What effect does a rightward shift of the demand curve indicate?

<p>An increase in preference for the good (A)</p> Signup and view all the answers

Which of the following factors could lead to a decrease in the number of buyers in a market?

<p>Increased death rate (A)</p> Signup and view all the answers

How do different preferences among consumers with the same income impact demand?

<p>They result in varying quantities demanded at the same price (D)</p> Signup and view all the answers

What is the main concept behind the definition of supply?

<p>The willingness of sellers to provide various quantities during a specific period (D)</p> Signup and view all the answers

What occurs when there is a significant migration away from a region?

<p>A rise in demand in the migration destination (D)</p> Signup and view all the answers

What is the effect of a change in consumer preferences away from a product?

<p>The demand curve shifts leftward (C)</p> Signup and view all the answers

Which of the following describes a change in quantity demanded?

<p>A shift in the demand curve due to price changes (D)</p> Signup and view all the answers

What typically causes fluctuations in the quantifiable demand for a good?

<p>Seasonal changes affecting buyer preferences (D)</p> Signup and view all the answers

What condition occurs when quantity demanded is greater than quantity supplied?

<p>Shortage (B)</p> Signup and view all the answers

At what price do the quantity supplied and demanded equal each other?

<p>$1.50 (B)</p> Signup and view all the answers

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

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

What triggers a change in equilibrium price and quantity?

<p>Changes in demand or supply determinants (C)</p> Signup and view all the answers

If there is an increase in demand, what is the immediate effect on the price?

<p>Price will increase. (D)</p> Signup and view all the answers

When there is an increase in supply, what occurs at the original price level?

<p>A surplus is created. (C)</p> Signup and view all the answers

What is the term used for the price at which the market clears?

<p>Equilibrium Price (A)</p> Signup and view all the answers

Which of the following most accurately describes the relationship between price and quantity supplied above the equilibrium price?

<p>Surpluses will occur, forcing prices down. (C)</p> Signup and view all the answers

Flashcards

Law of Demand

The concept that as the price of a good increases, the quantity demanded of that good decreases, all other factors being constant.

Demand Curve

A graphical representation of the relationship between the price of a good and the quantity demanded at each price.

Change in Quantity Demanded

Movement along the demand curve due to a change in the price of the good.

Change in Demand

A shift in the demand curve caused by factors other than price.

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Market Demand

The total quantity demanded by all consumers in a market at a given price.

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Competitive Market

A market with many buyers and sellers, so no single participant can influence the price.

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Absolute Price

The price of a good expressed in monetary terms, like dollars or euros, or the price of a new car.

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Relative Price

The price of a good relative to the prices of other goods.

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Demand Schedule

A table that lists the quantity demanded of a good at different prices, assuming all other factors remain constant.

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Willingness to Pay

The maximum price a consumer is willing and able to pay for an additional unit of a good.

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Individual Demand

The demand of an individual consumer for a good or service.

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What causes a change in demand?

A change in demand occurs when factors other than the price of the good influence buying plans, resulting in a shift in the demand curve.

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What is a substitute good?

A substitute good is a product that can be used in place of another good. For example, Coca-Cola and Pepsi-Cola.

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How does the price of a substitute good affect demand for the original good?

When the price of a substitute good increases, the demand for the original good increases because people switch to the cheaper option. Conversely, if the price of the substitute decreases, demand for the original good decreases.

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What is a complement good?

A complement good is a product that is used in conjunction with another good. For example, peanut butter and jelly.

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How does the price of a complement good affect demand for the original good?

When the price of a complement good increases, the demand for the original good decreases as people buy less of the complement, thus reducing their need for the original good. Conversely, if the price of the complement decreases, demand for the original good increases.

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How does income affect demand?

Income refers to the amount of money people have available to spend. When income increases, people typically buy more goods and services, including products that might have been previously considered luxuries. This leads to increased demand.

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How do expected future prices affect demand?

Expected future prices refer to people's anticipation of future price changes for a particular good. If you expect the price of a good to increase in the future, you might buy more of it now to avoid the higher price later, leading to increased demand in the present.

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How do preferences affect demand?

When people's preferences change, it can affect the demand for goods and services. If a product becomes more popular or trendy, demand will increase. Conversely, if a product loses popularity, demand will decline.

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Population and Demand

The total number of buyers in a market. It's the driving force behind demand, affecting how much of a good people are willing to buy.

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Preferences and Demand

The individual preferences of consumers for different goods. These choices influence demand.

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Definition of Supply

The willingness and ability of producers to sell different quantities of a good at different prices. It's about how much they're willing to offer and how much they can produce.

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Quantity Supplied

The amount of goods a producer plans to sell at a specific time and price.

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Change in Quantity Supplied

A change in the quantity supplied due to a change in the price of the good.

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Change in Supply

A shift in the entire supply curve, indicating a change in the quantity supplied at every price.

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Market Supply

The total amount of a good that all producers in the market are willing and able to supply at different prices.

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How Does Number of Suppliers Affect Supply?

An increase in the number of producers in a market leads to an increase in the market supply. Conversely, a decrease in the number of producers leads to a decrease in market supply.

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Government Policy's Impact on Supply

Policies such as taxes and subsidies influence the production and supply of goods. Higher taxes discourage production, while subsidies encourage it.

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Technology's Impact on Supply

Technological advancements improve production methods and reduce costs, leading to an increase in supply.

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Natural Events Impacting Supply

Natural events, such as weather disasters, can disrupt production and decrease supply.

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Supply Shock

A supply shock is a sudden and unexpected event that disrupts the market for a good. It can be positive or negative, causing a significant change in supply and price.

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Shortage (Excess Demand)

A situation where the quantity demanded of a good exceeds the quantity supplied at a given price. This happens when the price is below the equilibrium price.

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Surplus

A situation where the quantity supplied of a good exceeds the quantity demanded at a given price. This occurs when the price is above the equilibrium price.

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Equilibrium Price

The price at which the quantity demanded of a good equals the quantity supplied. At this price, there is no shortage or surplus.

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Price Adjustments

The principle stating that prices tend to adjust towards equilibrium. When the price is above equilibrium, a surplus leads to price decreases. When the price is below equilibrium, a shortage leads to price increases.

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Equilibrium Quantity

The quantity of a good that is bought and sold at the equilibrium price. It represents the balance between what consumers want and what producers can offer.

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Market Equilibrium

The point at which a market reaches a stable state, with no tendency for the price or quantity to change unless there are shifts in demand or supply.

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Determinants of Demand and Supply

Any factor that causes a change in either the demand or supply curve. These changes inevitably lead to a new equilibrium price and quantity.

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Effects of an Increase in Demand

An increase in demand shifts the demand curve to the right, creating a shortage at the original price. This leads to a higher equilibrium price and quantity.

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Study Notes

Introduction

  • Course title: Principles of Economics
  • Instructor: Noor Sa'adah Sabudin
  • Identifier: SEFB

Chapter 3: Demand, Supply, and Market Equilibrium

  • Demand:

    • Law of Demand: As price increases, quantity demanded decreases (inverse relationship).
    • Demand Curve: Graphical representation of the law of demand. Shows the relationship between price and quantity demanded, holding other factors constant.
    • Changes in Quantity Demanded: Movement along the demand curve in response to a price change.
    • Changes in Demand: Shift of the entire demand curve due to factors other than price (e.g., income, tastes).
    • Individual Demand: Demand of an individual consumer.
    • Market Demand: Sum of all individual demands in a market.

  • Supply:

    • Law of Supply: As price increases, quantity supplied increases (direct relationship).
    • Supply Curve: Graphical representation of the law of supply.
    • Changes in Quantity Supplied: Movement along the supply curve in response to a price change.
    • Changes in Supply: Shift of the entire supply curve due to factors other than price (e.g., input costs, technology).
    • Individual Supply: Supply of an individual producer.
    • Market Supply: Sum of all individual supplies in a market.

  • Market Equilibrium:

    • Equilibrium: Intersection of supply and demand curves.
    • Equilibrium Price: Price where quantity demanded equals quantity supplied.
    • Equilibrium Quantity: Quantity bought and sold at the equilibrium price.
    • Changes in Market Equilibrium: Shifts in either the supply or demand curves will affect the equilibrium price and quantity.
    • Consumer Surplus: The difference between the price a consumer is willing to pay and the actual price they pay.
    • Producer Surplus: The difference between the price a producer receives and the minimum price they are willing to accept.

Learning Objectives (Chapter 3)

  • Explain demand and the law of demand.

  • Differentiate changes in quantity demanded from changes in demand.

  • Identify factors influencing demand.

  • Differentiate individual and market demand.

  • Explain supply and the law of supply.

  • Differentiate changes in quantity supplied from changes in supply.

  • Identify factors influencing supply.

  • Differentiate individual and market supply.

  • Explain how equilibrium price and quantity are determined in the market.

  • Explain the effect of demand and supply curve shifts on equilibrium.

  • Explain factors causing changes in market equilibrium.

  • Identify consumer and producer surplus.

  • Market:

    • Definition: Any arrangement that enables buyers and sellers to exchange information and conduct business.
    • Types
      • Competitive Market: Many buyers and sellers, no single entity can influence price.

  • Prices:

    • Absolute Price: Price of a good in monetary terms (e.g., RM30,000 for a car).
    • Relative Price: Price of a good in terms of another good (e.g., 30 computers for a car).

  • Concepts of Demand

    • Definition: Willingness and ability of buyers to purchase various quantities of a good at different prices during a specified time period.
    • Quantity Demanded: Number of units consumers are willing and able to buy at a particular price.

  • The Law of Demand:

    • Negative relationship between price and quantity demanded, ceteris paribus (all other factors remaining constant).

  • Demand Schedule/Demand Curve:

    • Demand Schedule: Numerical tabulation of quantity demanded at various prices.
    • Demand Curve: Graphical representation of demand schedule and demand law.

  • Movement Along/Shift of the Demand Curve

    • Movement along the demand curve: Change in quantity demanded due to a price change
    • Shift of the demand curve: Change in demand due to factors other than price.

  • Factors that Determine Demand:

    • Prices of related goods (substitutes, complements)
    • Expected future prices
    • Income
      • Normal goods: Demand increases with income.
      • Inferior goods: Demand decreases with income.
    • Preferences
    • Population
    • Credit

  • Factors that Determine Supply:

    • Input prices
    • Technology
    • Expectations of market conditions
    • Prices of related goods (substitutes, complements in production)
    • Number of producers
    • Government policies (taxes, subsidies, regulations)
    • Natural forces (weather, disasters)

  • Concepts of Supply

    • Definition: Willingness and ability of sellers to produce and offer various amounts of a good at different prices in a specific time period.
    • Quantity Supplied: Amount of a good that producers are willing to sell at a given price.

  • Law of Supply:

    • Positive relationship between price and quantity supplied, ceteris paribus

  • Supply Schedule/Supply Curve:

    • Numerical tabulation of the quantity supplied at different prices.
    • Graphical representation of the law of supply.

  • Movements along/Shift of Supply Curve

    • Movements along supply curve: Change in quantity supplied due to a price change.
    • Shift of the supply curve: Change in supply due to factors other than price.

  • Market Equilibrium: Surplus and Shortage

    • Surplus (excess supply): Quantity supplied > quantity demanded at a given price.
    • Shortage (excess demand): Quantity demanded > quantity supplied at a given price.
    • Price adjustment mechanism: How prices adjust to eliminate surplus or shortages.

  • Changes in Equilibrium:

    • Shifts in supply or demand curves cause changes to equilibrium price and equilibrium quantity.

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Test your knowledge on the demand curve and its implications in microeconomics. This quiz covers factors affecting demand and the relationships between substitutes and complements. Understand how price changes influence individual and market demand through various scenarios.

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