1. Shift in Supply and Demand

Question 1

Where does demand/supply shift when it increases?

Answer 1

It shifts right

Question 2

What are the 4 types of goods?

Answer 2

Normal Goods
Inferior Goods
Complementary Goods
Substitute Goods

Question 2

What are 2 types of changes in demand?

Answer 2

• A movement along the curve – caused by a change in price of the good itself.
• A shift in the entire curve – cause by a non-price factor

Question 3

What are the causes of shifts in demand?

Answer 3

• Change in consumer income for a normal good
• Change in consumer income for an inferior good
• Change in the price of a complementary good
• Change in the price of a substitute good
• Change in tastes and preferences
• Change in the expectation of the future price of the good.
• Change in the number of consumers in the market

Question 4

What are inferior goods and example

Answer 4

Inferior Good – Have an inverse relationship between income and demand. Example – Home brand food or generic clothing

Question 4

What are normal goods and example

Answer 4

Normal Good – Have a direct relationship between income and demand. Example - Clothing

Question 5

What are substitute goods and example

Answer 5

Substitute Good – Are bought instead of another good. Example – Butter and margarine

Question 6

What are complementary goods and example

Answer 6

Complementary Good – Are used or bought with other goods. Example – Cereal and milk

Question 7

There is 2 types of changes in supply

Answer 7

• A movement along the curve – caused by a change in price of the good itself.
• A shift in the entire curve – cause by a non-price factor

Question 8

Causes of shifts in supply

Answer 8

• Change in technology
• Change in production costs (input costs)
• Change in the expectation of future prices
• Change in the number of producers in the market