Understanding Demand and Supply Quiz

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

The quantity demanded of a good or service is the amount that ---------------------

Firms are willing to sell during a given time period at a given price. (correct)

Is actually bought during a given time period at a given price.

Consumers plan to buy during a given time period at a given price.

A consumer would like to buy but might not be able to afford.

The law of demand states that the quantity of a good demanded varies ----------

Inversely with its price. (correct)

Inversely with the price of substitute goods.

Directly with population.

Directly with income.

The price of cereal rises. As a result, people have cereal for breakfast on fewer days and eat eggs instead. This behavior is an example of --------------

A decrease in the quantity supplied of cereal because of the substitution effect.

An increase in the quantity supplied of eggs because of the income effect.

A decrease in the quantity demanded of cereal because of the substitution effect. (correct)

An increase in the quantity demanded of eggs because of the income effect.

When the price of a good falls, the income effect for a normal good implies that people buy ----

More of that good because they can afford to buy more of all the things they previously bought. Signup and view all the answers

Each point on the demand curve reflects --------------------

The highest price consumers are willing and able to pay for that particular unit of a good. Signup and view all the answers

A substitute is a good -------------------

That can be used in place of another good. Signup and view all the answers

Which of the following pairs of goods are most likely substitutes?

Cola and lemon lime soda Signup and view all the answers

Cupcakes and granola bars are substitutes in consumption. The price of a granola bar increases so the demand for -------------------------

Cupcakes will increase, that is, the demand curve will shift rightward. Signup and view all the answers

An increase in the expected future price of a good ------------------------

Increases its demand. Signup and view all the answers

If consumers' incomes increase and the demand for bus rides decreases ---------

Bus rides are an inferior good. Signup and view all the answers

When income increases, the demand curve for X shifts rightward and the demand curve for Y shifts leftward. These shifts mean that ----------------------

X is a normal good and Y is an inferior good. Signup and view all the answers

An increase in the number of consumers ---------------

Shifts the demand curve rightward. Signup and view all the answers

In figure no.1, which movement reflects an increase in demand?

From point a to point b Signup and view all the answers

In figure no.1, which movement reflects a decrease in demand?

From point a to point c Signup and view all the answers

In figure no.1, which movement reflects a decrease in quantity demanded but NOT a decrease in demand?

From point a to point b Signup and view all the answers

Study Notes

Understanding Demand and Supply

Quantity Demanded: The amount of a good or service that consumers actually buy during a given time period at a given price.
Law of Demand: The quantity demanded of a good inversely varies with its price, meaning as price increases, quantity demanded decreases.
Substitution Effect: When the price of a good rises, consumers switch to a substitute good (similar but cheaper), leading to a decrease in the quantity demanded of the original good.
Income Effect: A decrease in the price of a good increases purchasing power (the real income effect), leading to an increase in the quantity demanded of that good (for normal goods) or a decrease (for inferior goods).
Demand Curve: A graph showing the relationship between the price of a good and the quantity demanded at each price. Each point on the curve shows the maximum price consumers are willing to pay for that specific unit of the good.
Substitutes: Goods that can be used in place of one another. Examples: cola and lemon lime soda, DVDs and streaming services.
Complements: Goods that are consumed together. Examples: peanut butter and jelly, cars and gasoline.
Shifts in Demand: The entire demand curve shifts due to changes in factors other than the price of the good.
- Increase in Demand: Demand curve shifts rightward, indicating consumers are willing to buy more at any given price. Factors that can cause an increase in demand:
  - Lower prices of complementary goods
  - Increased consumer income (for normal goods)
  - Favorable changes in consumer tastes
  - Expected future price increases
  - Increased number of consumers
- Decrease in Demand: Demand curve shifts leftward, indicating consumers want to buy less at any given price.
  - Higher prices of complementary goods
  - Decreased consumer income (for normal goods)
  - Unfavorable changes in consumer tastes
  - Expected future price decreases
  - Decreased number of consumers
Movement along the Demand Curve: A change in quantity demanded due to a change in the price of the good.

Visualizing Demand

In Figure no. 1:
- Movement from point a to e represents an increase in demand.
- Movement from point a to d represents a decrease in demand.
- Movement from point a to c represents a decrease in quantity demanded, but not a decrease in demand. This is because the price of the good has changed.
Decrease in quantity demanded reflects a movement along the demand curve, while a decrease in demand reflects the entire curve shifting leftward.

Studying That Suits You

Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

Description

Test your knowledge on the fundamental concepts of demand and supply, including quantity demanded, law of demand, and effects on purchasing power. This quiz will cover essential terms and relationships between price and demand. Ideal for students studying economics or related fields.