Microeconomics Overview and Supply-Demand Law
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Questions and Answers

What is the primary influence on market equilibrium according to the law of supply and demand?

  • The number of sellers in the market compared to buyers
  • The willingness of suppliers to increase production during high demand
  • The balance between the quantity consumers are willing to purchase and the price set by sellers (correct)
  • The regulatory policies affecting pricing and supply

According to the law of demand, what happens to consumer behavior as prices decrease?

  • Overall market supply decreases
  • Demand for the product increases (correct)
  • Consumers will purchase the same amount regardless of price
  • Consumers are less willing to purchase the product

Which condition can lead to a shift in the supply or demand curve?

  • A change in consumer income levels (correct)
  • A contract signed by suppliers to hold prices stable
  • The introduction of a new competitor with identical products
  • A natural disaster affecting producer resources

What typically happens at a price point where supply exceeds demand?

<p>There will be a surplus of goods leading to price reductions (C)</p> Signup and view all the answers

How does the concept of sustainability influence resource allocation decisions in organizations?

<p>It considers the long-term impact on all stakeholders while using resources (D)</p> Signup and view all the answers

What situation is described when both supply and demand are equal at a price point?

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

Why would an organization increase supply as the price of its product rises?

<p>Because it becomes more profitable to produce more at higher prices (D)</p> Signup and view all the answers

What is a likely outcome when there is an excess demand in the market?

<p>Prices will rise to encourage more supply (B)</p> Signup and view all the answers

What occurs when there is a reduction in the quantity of a product supplied?

<p>A shift to the left in the supply curve (A)</p> Signup and view all the answers

Which factor is least likely to shift the demand curve?

<p>The availability of raw materials (B)</p> Signup and view all the answers

What effect does an increase in the price of an elastic product typically have on consumer behavior?

<p>Consumers tend to stop buying as much of the product. (B)</p> Signup and view all the answers

Inelastic products are characterized by which of the following?

<p>Consumers buying fixed amounts regardless of price (A)</p> Signup and view all the answers

What would likely cause a shift in the demand curve to the left?

<p>A significant rise in the price of complementary goods (C)</p> Signup and view all the answers

Which factor does NOT impact the elasticity of a product?

<p>The popularity of the brand. (D)</p> Signup and view all the answers

What defines a change in supply?

<p>A shift in the whole price-quantity relationship (D)</p> Signup and view all the answers

What happens when supply outstrips demand in the market?

<p>Companies may withdraw from the market or refocus their products. (C)</p> Signup and view all the answers

In a perfect competition market, why would suppliers refrain from raising prices?

<p>Other suppliers offer identical products at lower prices. (A)</p> Signup and view all the answers

Which scenario illustrates a shift to the right in the supply curve?

<p>New technology allows for cheaper production of goods (B)</p> Signup and view all the answers

Which of the following describes an elastic product?

<p>A luxury item whose demand greatly fluctuates with price (D)</p> Signup and view all the answers

What implication does a growing population have on product demand?

<p>It tends to increase demand for various products and services. (A)</p> Signup and view all the answers

What is the primary feature of an imperfect competition market?

<p>Variability in product quality and pricing. (D)</p> Signup and view all the answers

If the demand for a product is high yet consumer sentiment shifts negatively, what is the likely result?

<p>The price will decrease due to falling demand (A)</p> Signup and view all the answers

What does the term 'equilibrium' refer to in a marketplace?

<p>The state where supply meets demand, balancing price and quantity. (B)</p> Signup and view all the answers

Which of the following is NOT a characteristic of perfect competition?

<p>Monopolistic power exerted by large firms. (D)</p> Signup and view all the answers

What is a primary focus of social sustainability in organizations?

<p>Considering the needs of wider stakeholders (A)</p> Signup and view all the answers

Which aspect of sustainability is primarily concerned with ensuring profitability?

<p>Economic sustainability (A)</p> Signup and view all the answers

What do the terms 'planet, people, and profit' informally represent?

<p>The three aspects of sustainability (C)</p> Signup and view all the answers

How should organizations manage their resources according to sustainable development?

<p>Manage resources for long-term sustainability (B)</p> Signup and view all the answers

What should a sustainable organization consider beyond its own operations?

<p>The sustainability of its supply chain (B)</p> Signup and view all the answers

Which of the following is NOT an aspect of sustainable workforce policies?

<p>High employee turnover strategies (D)</p> Signup and view all the answers

Which characteristic distinguishes monopolistic competition from perfect competition?

<p>Competition based on brand and features. (D)</p> Signup and view all the answers

Which resource is classified under 'Materials' in the context of a sustainable organization?

<p>Raw materials and resources (B)</p> Signup and view all the answers

What is the effect of applying a sustainable development approach on short-term profit decisions?

<p>It can lead to decisions that yield less profit short-term (C)</p> Signup and view all the answers

What defines an oligopoly in terms of supplier behavior?

<p>Prices set by one supplier influence the pricing decisions of others. (A)</p> Signup and view all the answers

Which of the following is NOT a feature of imperfect competition?

<p>Numerous buyers with full market information. (B)</p> Signup and view all the answers

How does a monopoly impact pricing compared to competitive markets?

<p>Monopolies can set prices freely but may face uncertain demand. (D)</p> Signup and view all the answers

What role do barriers to entry play in imperfect competition?

<p>They restrict potential new sellers from accessing the market. (B)</p> Signup and view all the answers

Which industry is the best example of monopolistic competition?

<p>Fast food restaurants. (D)</p> Signup and view all the answers

What is the primary focus of environmental sustainability for organizations?

<p>Adopting practices that reduce their carbon footprint. (D)</p> Signup and view all the answers

In the context of different market structures, how is perfect competition characterized?

<p>Limited product differentiation among suppliers. (A)</p> Signup and view all the answers

Flashcards

Microeconomics

The study of how individuals and organizations use limited resources.

Law of Supply and Demand

Describes the relationship between buyers and sellers of a ressource, and how price affects it.

Equilibrium

The point where supply and demand meet, where both buyers and sellers are satisfied with the price.

Excess Demand

When demand is greater than supply at a particular price.

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Excess Supply

When supply is greater than demand at a particular price.

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Law of Demand

Consumers buy more of a product as the price decreases.

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Law of Supply

Producers supply more of a product as the price increases.

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Shifts in Supply/Demand Curves

Changes in the entire supply or demand curve due to factors other than price, leading to market imbalances.

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Supply Curve Shift Left

A decrease in supply, causing the entire supply curve to move to the left.

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Supply Curve Shift Right

An increase in supply, causing the entire supply curve to move to the right.

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Demand Curve Shift Left

A decrease in demand, causing the entire demand curve to move to the left.

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Demand Curve Shift Right

An increase in demand, causing the entire demand curve to move to the right.

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Change in Supply

An increase or decrease in the quantity supplied, resulting in a higher or lower supply price.

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Inelastic Product

A product people want to buy in fixed amounts, usually necessities.

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Elastic Product

A product, often a luxury, where demand changes significantly in response to price changes.

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Factors Shifting Supply

Factors affecting the overall supply, such as raw material prices, technology, and efficiency.

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Elasticity

The degree to which the quantity demanded of a product changes in response to price changes.

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Factors affecting elasticity

Factors that influence how much the quantity demanded of a product changes in response to price changes.

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Price reduction strategy

A strategy to increase sales by lowering prices when supply outstrips demand.

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Market withdrawal

Companies may withdraw from a market when prices fall to unsustainable levels.

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Equilibrium point

The point where supply and demand meet, with sufficient supply to meet demand and a mutually agreeable price.

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Population growth impact

An increase in population can increase demand for products and services.

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Perfect competition

A theoretical market where there are no barriers to entry, equal market share for all suppliers, and prices are set by supply and demand.

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Imperfect competition

A market where there are barriers to entry, unequal market share, and prices may not be solely set by supply and demand.

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Social Sustainability

Focuses on meeting the needs of the organization's wider stakeholders, including the community. This involves providing local jobs, minimizing environmental impact, and supporting community initiatives.

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Economic Sustainability

Ensures an organization's long-term financial health through profitability. It aims to generate profits without compromising social or environmental aspects.

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Sustainable Resource Management

Involves optimizing the use of resources, like raw materials, money, human resources, and machines, for long-term viability.

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Sustainable Development Approach

Prioritizes long-term objectives over short-term gains, even if it means sacrificing immediate profits.

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Sustainable Supply Chain

Ensures that all organizations involved in the production and delivery of goods and services are sustainable, from raw materials to final product.

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Sustainable Workforce Policies

Policies designed to support employees' well-being and balance work with personal life, promoting long-term engagement and retention.

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Sustainable Products and Services

Products and services that are designed and produced in a way that minimizes environmental impact and promotes social equity.

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Long-term vs. Short-term Policies

Sustainable organizations prioritize long-term policies that promote long-term sustainability, while short-term policies focus on immediate gains and may have detrimental long-term consequences.

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Barriers to Entry

Obstacles that make it difficult for new sellers to enter a market. These can include legal requirements, expensive setup costs, or knowledge needed.

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Monopoly

A market with only one seller, allowing them to set prices independently. However, success isn't guaranteed as consumer demand is uncertain.

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Oligopoly

A market with a few dominant sellers, where their pricing decisions impact each other. A price increase by one supplier could lead to market share gains for competitors.

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Monopolistic Competition

A market where sellers offer similar products but differentiate through branding or features, competing on non-price factors.

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Sustainability

Meeting the needs of the present generation without compromising the ability of future generations to meet their own needs. This includes economic, social, and environmental factors.

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Environmental Sustainability

The practice of using resources and managing environmental impacts in a way that minimizes harm to the environment and ensures long-term ecological balance.

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Study Notes

Microeconomics

  • Microeconomics studies the behaviour of individuals and organizations within an economy.
  • Resources are limited, impacting how individuals and organizations allocate them.
  • Competition among organizations also affects the marketplace.
  • Sustainability is important because resources are becoming scarcer.
  • Global trends prioritize the needs of all stakeholders, not just shareholders.

Law of Supply and Demand

  • The law of supply and demand explains the relationship between buyers and sellers of a resource.
  • Equilibrium is the point where supply and demand meet, with both buyers and sellers satisfied.
  • At a price where quantity supplied is less than quantity demanded, demand exceeds supply, resulting in increased prices until equilibrium is met.
  • When quantity supplied exceeds quantity demanded, prices fall until equilibrium is reached.

Shifts in Supply and Demand Curves

  • Shifts in supply and demand curves represent changes in the entire relationship between price and quantity, not just movement along the existing curve.
  • Supply curve shifts are caused by factors like raw material prices, technology, and efficiency.
  • Demand curve shifts are affected by consumer spending, trends, attitudes, and expectations.

Law of Demand

  • As prices decrease, demand for a product increases.

Law of Supply

  • As prices increase, the quantity of a product supplied increases.

Supply Curve Shifts

  • A leftward shift in the supply curve indicates a decrease in supply.
  • A rightward shift in the supply curve indicates an increase in supply.

Demand Curve Shifts

  • A leftward shift in the demand curve indicates a decrease in demand.
  • A rightward shift in the demand curve indicates an increase in demand.

Factors Affecting Elasticity

  • Whether a product is a luxury or necessity affects its elasticity.
  • The availability of substitutes impacts elasticity.
  • The proportion of income spent on a product affects its elasticity.
  • How addictive a product is affects elasticity.

Perfect Competition

  • Perfect competition is a theoretical marketplace where there are numerous small sellers and no barriers to entry.
  • In perfect competition, prices are determined by supply and demand.
  • No single supplier can significantly affect the market price.

Imperfect Competition

  • In imperfect competition, there are multiple sellers with differing features and barriers to entry.
  • Various types of imperfect competition include monopolies and oligopolies.

Monopolistic Competition

  • Monopolistic competition exists where sellers offer similar products but differentiate based on aspects like branding or expertise.
  • Car manufacturers, airlines, and restaurants are examples of monopolistic competition.

Sustainability

  • Definition: Sustainability considers the needs of present generations without compromising future generations.
  • Three aspects:
    • Environmental: Reducing carbon footprint, waste, and implementing sustainable policies.
    • Social: Meeting community needs and promoting charitable or supportive acts.
    • Economic: Ensuring profit isn't at the expense of environmental or social concerns.

Human Resources

  • Human resources include people and their labor.
  • Machines are tools and equipment.
  • Management involves how resources are used.
  • Applying sustainable management means focusing on long-term, not short-term solutions.

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Description

This quiz explores the fundamentals of microeconomics, including the behavior of individuals and organizations, resource allocation, and the critical role of sustainability. It also delves into the law of supply and demand, examining how equilibrium is achieved in the marketplace. Test your understanding of these key concepts and their implications for economic interactions.

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