The Theory of Demand in Consumer Behavior Quiz

Relationship Between Demand and Supply

• Demand and supply are fundamental concepts in economics that describe how prices and quantities of goods are determined in a market.
• The interaction between demand and supply affects market equilibrium, where the quantity demanded equals the quantity supplied.

Demand and Supply Curves

• The demand curve illustrates the relationship between the price of a good and the quantity demanded by consumers, typically sloping downward.
• The supply curve represents the relationship between the price of a good and the quantity supplied by producers, usually sloping upward.

Impact of Price Decrease on Quantity Demanded

• When the price of a good or service decreases, the quantity demanded generally increases, reflecting the law of demand.
• Consumers tend to buy more of a product as it becomes more affordable.

Role of Supply in Overall Demand

• Supply influences overall demand by determining the availability of goods in the market.
• An increase in supply can lead to lower prices, which may encourage higher demand from consumers.

Market Equilibrium and Intersection of Curves

• The point where the demand and supply curves intersect is known as the market equilibrium.
• At this point, the market is in balance, as the quantity of goods demanded equals the quantity of goods supplied, resulting in a stable market price.