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Questions and Answers
What happens when slopes are the same in terms of opportunity costs?
What happens when slopes are the same in terms of opportunity costs?
What is the effect of falling interest rates on the housing market?
What is the effect of falling interest rates on the housing market?
What occurs when prices change along the demand curve?
What occurs when prices change along the demand curve?
What characterizes substitute goods?
What characterizes substitute goods?
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When the demand for a product increases due to a decrease in its complementary good's price, what happens?
When the demand for a product increases due to a decrease in its complementary good's price, what happens?
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What is a 'loss leader' strategy?
What is a 'loss leader' strategy?
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What does the quantity supplied represent?
What does the quantity supplied represent?
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What are complementary goods?
What are complementary goods?
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What is the term for the amount of a good that buyers are willing to purchase at a given price during a specified period?
What is the term for the amount of a good that buyers are willing to purchase at a given price during a specified period?
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Which of the following correctly describes the relationship between price and quantity demanded?
Which of the following correctly describes the relationship between price and quantity demanded?
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What happens to the demand curve when a non-price determinant shifts?
What happens to the demand curve when a non-price determinant shifts?
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In a competitive market, what role do buyers and sellers play concerning prices?
In a competitive market, what role do buyers and sellers play concerning prices?
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What occurs when there is an increase in supply while demand decreases?
What occurs when there is an increase in supply while demand decreases?
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Which of the following is NOT a non-price determinant of demand?
Which of the following is NOT a non-price determinant of demand?
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What is indicated by the market equilibrium?
What is indicated by the market equilibrium?
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When the price of a substitute good rises, what generally happens to the demand for its counterpart?
When the price of a substitute good rises, what generally happens to the demand for its counterpart?
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What is a characteristic feature of a standardized good in a competitive market?
What is a characteristic feature of a standardized good in a competitive market?
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If an increase in the number of sellers occurs, what effect does it have on the supply curve?
If an increase in the number of sellers occurs, what effect does it have on the supply curve?
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What will happen if the production costs increase for a given product?
What will happen if the production costs increase for a given product?
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If there is a surplus in the market, what occurs as a result?
If there is a surplus in the market, what occurs as a result?
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What impact does a shift to the right of the demand curve indicate?
What impact does a shift to the right of the demand curve indicate?
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Which of the following is NOT a non-price determinant of supply?
Which of the following is NOT a non-price determinant of supply?
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In a situation where quantity demanded is less than quantity supplied, this is referred to as:
In a situation where quantity demanded is less than quantity supplied, this is referred to as:
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What effect does an increase in demand have on the equilibrium price?
What effect does an increase in demand have on the equilibrium price?
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When a supply curve shifts to the left, this indicates:
When a supply curve shifts to the left, this indicates:
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If both supply and demand increase, what can be confidently predicted?
If both supply and demand increase, what can be confidently predicted?
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What characterizes a complementary good?
What characterizes a complementary good?
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An increase in the number of sellers in the market would likely result in:
An increase in the number of sellers in the market would likely result in:
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If the quantity supplied decreases while demand remains constant, what occurs in the market?
If the quantity supplied decreases while demand remains constant, what occurs in the market?
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If two goods are substitutes, a rise in the price of one will lead to:
If two goods are substitutes, a rise in the price of one will lead to:
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What happens to the supply curve when there is an improvement in production technology?
What happens to the supply curve when there is an improvement in production technology?
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When supply increases more than demand, we can expect to see:
When supply increases more than demand, we can expect to see:
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Study Notes
Supply and Demand
- Demand: Represents consumer choices and behavior regarding a good or service. It's a relationship between price and quantity demanded.
- Demand Curve: A graph plotting price-quantity combinations, with a negative slope (price and quantity demanded are inversely related).
- Law of Demand: As price increases, quantity demanded decreases (and vice-versa).
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Shift vs. Movement Along the Demand Curve:
- Shift: Caused by non-price determinants (e.g., income, prices of related goods, tastes/preferences). Entire curve moves.
- Movement: Caused by a change in price; movement along the existing curve.
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Demand Determinants (Non-Price Factors):
- Prices of related goods (substitutes and complements).
- Consumer income.
- Consumer tastes and preferences.
- Consumer expectations.
- Number of buyers.
- Seasonality.
- Advertising.
- Supply: Represents producer choices and behavior. It's a relationship between price and quantity supplied.
- Supply Curve: A graph plotting price-quantity supply combinations, with a positive slope. (price and quantity supplied are directly related).
- Law of Supply: As price increases, quantity supplied increases; as price decreases, quantity supplied decreases.
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Supply Determinants (Non-Price Factors):
- Prices of inputs (resources).
- Technology.
- Number of sellers.
- Producer expectations.
- Government policies (taxes, subsidies).
- Natural disasters.
Market Equilibrium
- Equilibrium Price: The price where quantity demanded equals quantity supplied, established by the intersection of the supply and demand curves.
- Equilibrium Quantity: The quantity of a good or service exchanged at the equilibrium price.
- Surplus: When quantity supplied exceeds quantity demanded (price above equilibrium); a downward pressure on price.
- Shortage: When quantity demanded exceeds quantity supplied (price below equilibrium); an upward pressure on price.
- Market Clearing: Equilibrium in a market situation where supply equals demand.
- Competitive Market: Buyers and sellers act as price takers meaning neither group can single-handedly influence the price of a good or service.
- Substitutes: If the price of one good rises and demand for another good increases, then the two goods are substitutes.
- Complements: If the price of one good rises and demand for a related good decreases, then the two goods are complements.
Types of Goods
- Normal Goods: Demand increases as income increases.
- Inferior Goods: Demand decreases as income increases; example: bus rides, ramen noodles
- Substitutes: Goods used in place of one another (e.g., butter and margarine).
- Complements: Goods used together (e.g., printers and ink cartridges).
Shifts vs. Movements
- Shifts - cause a movement of the entire curve, caused by a cahnge in non-price determinants
- Movements - cause a movement along the curve and caused by a change in price
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Description
Test your understanding of key concepts in supply and demand. This quiz covers the demand curve, law of demand, and factors affecting consumer behavior. Dive into determinants and relationships that shape the market dynamics.
